Case Digest (MIDTERMS) - Transportation Law

DANIEL AND DOMINIC ONG ELECTION LAW CASES 2018 (OUTLINE OF ATTY.
GUJILDE)
COMMON CARRIERS
A. Concept, parties and perfection
1. Everett Steamship Corp. V CA
Stipulation that common carriers limits its liability is not valid. BUT stipulation that common carrier's liability is limited to the
value set by the shipper in the bill of lading is valid as long as it be reasonable and just under the circumstances, and has been
freely and fairly agreed upon.
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.
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 (Y100,000.00) 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.
> as long as the shipper 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.
When the consignee enforced the bill of lading (claiming reimbursement for the lost cargo), he cannot now reject or disregard the
carriers limited liability stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.
Facts:
Petitioner Everett Steamship Corporation seeks the reversal of the decision of the Court of Appeals, finding petitioner liable
to private respondent Hernandez Trading Co., Inc. for the value of the lost cargo.
Private respondent imported three crates of bus spare parts from Maruman Trading, a foreign corporation based in
Japan. Crates 12, 13, and 14 were shipped from Japan to Manila on board a vessel owned by petitioner’s principal, Everett Orient
Lines.
Upon arrival at the port of Manila, it was discovered that crate 14 was missing. Thereafter, a formal claim upon petitioner for
the value of the lost cargo amounting to 1,552,500.00 Yen. However, petitioner offered to pay only 100,000.00 Yen, pursuant to a
limited liability clause in the Bill of Lading.
Private respondent rejected the offer and instituted a suit for collection against petitioner before the RTC.
RTC Ruling – against petitioner
The trial court rendered judgment [2] in favor of private respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00
or its peso equivalent representing the actual value of the lost cargo and the material and packaging cost; (c) 10% of the total
amount as an award for and as contingent attorneys fees; and (d) to pay the cost of the suit.
CA Ruling – against petitioner
The Court of Appeals deleted the award of attorneys fees but affirmed the trial courts findings with the additional observation
that private respondent can not be bound by the terms and conditions of the bill of lading because it was not privy to the contract
of carriage.
Issues:
1) WON the limited liability clause in the bill of lading is valid
2) WON the bill of lading was invalid since the clause was written in small letters
3) WON private respondent is bound by the contract
DANIEL AND DOMINIC ONG ELECTION LAW CASES 2018 (OUTLINE OF ATTY. GUJILDE)
Ruling:
Limited Liability Clause in the Bill of Lading is valid
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:
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.
The bill of lading subject of the present controversy specifically provides, among others:
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 (Y100,000.00) 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 stipulations are reasonable and just. 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.
To defeat the carriers limited liability, the aforecited Clause 18 of the bill of lading requires that the shipper should
have declared in writing a higher valuation of its goods before receipt thereof by the carrier and insert the said declaration in
the bill of lading, with the extra freight paid. These requirements in the bill of lading were never complied with by the shipper,
hence, the liability of the carrier under the limited liability clause stands.
The bill of lading is valid; Contracts of Adhesion are not invalid per se
The trial courts ratiocination that private respondent could not have fairly and freely agreed to the limited liability clause in
the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid.
In a case, this Court held:
…contracts of adhesion wherein one party imposes a ready-made form of contract on the other…are contracts not
entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his
consent.
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion. Article 24 of the Civil Code
mandates when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental
weakness, tender age or other handicap, the courts must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be
ignorant of the business transactions it entered into involving the shipment of its goods to its customers.
Private respondent (consignee) is bound by the whole stipulations in the bill of lading and must respect the same.
The right of a party 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 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 (Phoenix Assurance Company vs. Macondray& Co., Inc., 64 SCRA 15) 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.
When private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case
against the latter based on the very same bill of lading, it (private respondent) accepted the provisions of the contract and
thereby made itself a party thereto, or at least has come to court to enforce it. [9] Thus, private respondent cannot now reject or
disregard the carriers limited liability stipulation in the bill of lading. In other words, private respondent is bound by the whole
stipulations in the bill of lading and must respect the same.
2. MOF Co. Inc.v Shin Yang Brokerage Corporation

Facts:
Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars and other articles. The bill of lading named
respondent Shin Yang Brokerage Corp. (Shin Yang) as the consignee and indicated that freight of P57,646.00 was to be paid by Shin Yang.
When the shipment arrived, petitioner MOF Company, Inc. (MOF), Hanjins exclusive general agent in the Philippines, repeatedly demanded
Shin Yang. The latter, however, failed and refused to pay contending that the ultimate consignee did not endorse in its favor the original bill of
lading and that the bill of lading was prepared without its consent. Claiming that it is merely a consolidator/forwarder and that the Bill of Lading
was not endorsed to it by the ultimate consignee, Shin Yang denied any involvement in shipping the goods or in promising to shoulder the
freightage.

MOF filed a case for sum of money before the MeTC.

Ruling of the MeTC and RTC – in favor of MOF
Shin Yang cannot disclaim being a party to the contract of affreightment because:

x xx it would appear that defendant has business transactions with plaintiff. This is evident from defendants letters where it
requested for the release of refund of container deposits. In the mind of the Court, by analogy, a written contract need not
be necessary; a mutual understanding would suffice. Further, plaintiff would have not included the name of the defendant
in the bill of lading, had there been no prior agreement to that effect.

In sum, plaintiff has sufficiently proved its cause of action against the defendant and the latter is obliged to honor
its agreement with plaintiff despite the absence of a written contract.[5]

Ruling of the Court of Appeals – against MOF

It opined that MOF failed to substantiate its claim that Shin Yang had a hand in the importation of the articles to the Philippines or that it gave
its consent to be a consignee of the subject goods. In its March 22, 2006 Decision,[8] the CA said:

Petitioner did not only refuse to accept the bill of lading, but it likewise disowned the shipment. Neither did it authorize
Halla Trading Company or anyone to ship or export the same on its behalf.

It is settled that a contract is upheld as long as there is proof of consent, subject matter and cause. In the case at bar, there is
not even any iota of evidence to show that petitioner had given its consent.

He who alleges a fact has the burden of proving it and a mere allegation is not evidence (Luxuria Homes
Inc. vs. CA, 302 SCRA 315).

For failure to substantiate its claim by preponderance of evidence, respondent has not established its case against
petitioner.[9]

Petitioners filed a motion for reconsideration but it was denied in a Resolution [10] dated May 25, 2006. Hence, this petition for review
on certiorari.

Issues:
1) WON a consignee, who is not a signatory to the bill of lading, is bound by the stipulations thereof.
2) WON respondent 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.
Ruling:
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 consignees favor, specifically the delivery of the goods/cargoes shipped.[16]

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.[17] 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.

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.
3. Dangwa Transpo Co. v CA

The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the
latter had supposedly not manifested his intention to board the same, does not merit consideration. A public utility bus, once it
stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the
bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same.
The premature acceleration of the bus in this case was a breach of such duty.
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent. It is not
negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly.
The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the rights
and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier passengers owes to
its patrons extends to persons boarding cars as well as to those alighting therefrom.
The passenger while boarding the bus, fell down when the bus operator starts moving while the passenger was still
seeking for a seat. The argument of the driver is that the passenger did not
Why would you link the commencement of the contract of carriage when in fact the passenger already boarded the
platform of the bus?
RE Grab, when does the contract is perfected? Upon booking or upon the driver arrives?
Who makes the offer?
Is the grab the common carrier? Is creating the application makes it a common carrier?
How about habalhabal? Does angkas have a permit from LTFRB?
Assuming there is no authorization, would the owner of the motorcycle be considered a common carrier?
Own opinion: Still liable, it is the principal business of the corporation regardless of the authorization.
>If you are already a "suki" of the habalhabal driver, such that you were the only customer of that habalhabal, does the
owner of the habalhabal considered a common carrier? Yes, as long as it helds himself out to the public, regardless of
the quantity of its clients.
Is it possible for the owner to become a private carrier? Yes, if it stops to advertise himself out to the public.
Facts: Private respondents filed a complaint for damages against petitioners for the death of PedritoCudiamat as a result of a
vehicular accident. It was alleged that while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to
petitioner corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to
persons and property, it ran over its passenger, PedritoCudiamat. However, instead of bringing Pedrito immediately to the
nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first brought his other
passengers and cargo to their respective destinations before banging said victim to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence required in
the operation of the transportation company and the supervision of the employees, even as they add that they are not absolute
insurers of the safety of the public at large. Further, it was alleged that it was the victim's own carelessness and negligence which
gave rise to the subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their favor by
way of a counterclaim.
RTC Ruling – in favor of Petitioner Dangwa
PedritoCudiamat was negligent, which negligence was the proximate cause of his death. Nonetheless, defendants in equity, are
hereby ordered to pay the heirs of PedritoCudiamat the sum of P10,000.00 which approximates the amount defendants initially
offered said heirs for the amicable settlement of the case. No costs.
CA Ruling – reversed RTC Ruling
Issue: WON the CA was correct
Ruling: CA was correct
The incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and in not
waiting for the passenger to first secure his seat. The defendants-appellees utterly failed to observe their duty and obligation as
common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them according to the circumstances of each case (Article 1733, New Civil Code).
The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the
latter had supposedly not manifested his intention to board the same, does not merit consideration. A public utility bus, once it
stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time
the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the
same. The premature acceleration of the bus in this case was a breach of such duty.
It is the duty of common carriers of passengers to stop their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the
sudden starting up or jerking of their conveyances while they are doing so.
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent. It is
not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly.
The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the
rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier passengers
owes to its patrons extends to persons boarding cars as well as to those alighting therefrom.
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordinary diligence for
the safety of the passengers transported by the according to all the circumstances of each case.
It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of
fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By
contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right
away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved,
and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733
and 1755 of the Civil Code.
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to
the hospital for medical treatment is a patent and incontrovertible proof of their negligence.
... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia
Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the
verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and
helpless husband.
4. Korean Airlines Co. v CA

The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the
passenger manifest of KAL for its flight. His clearance through immigration and customs clearly shows that he had indeed been
confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them when it failed
to bring Lapuz to his destination.
Facts:Sometime in 1980, Lapuz, an automotive electrician, was contracted for employment in Saudi Arabia by Pan Pacific
Recruiting Services. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was "wait-listed," which
meant that he could only be accommodated if any of the confirmed passengers failed to show up at the airport before departure.
When two of such passengers did not appear, Lapuz and another person by the name of Perico were given the two unclaimed
seats.
According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of KAL. He passed
through the customs and immigration sections for routine check-up and was cleared for departure as passenger of KAL. However,
when he was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He was thus
barred from taking the flight. Consequently, he was unable to report for his work and so lost his employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services coordinated with KAL for the departure
of 30 contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie
Joseph, after being informed that there was a possibility of having one or two seats becoming available, gave priority to Perico,
who was one of the supervisors of the hiring company in Saudi Arabia. The other seat was won through lottery by Lapuz.
However, only one seat became available and so, pursuant to the earlier agreement that Perico was to be given priority, he alone
was allowed to board.
Issues: WON there was a perfected contract of carriage despite Lapuz not having been boarded to the aircraft
Ruling: Yes.
The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the
passenger manifest of KAL for its flight. His clearance through immigration and customs clearly shows that he had indeed been
confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them when it
failed to bring Lapuz to his destination.
This Court has held that a contract to transport passengers is different in kind and degree from any other contractual
relation. 3 The business of the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and
advantages it offers. The contract of air carriage generates a relation attended with a public duty. Passengers have the right to be
treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected
against personal misconduct, injurious language, indignities and abuses from such employees. 4 So it is that any discourteous
conduct on the part of these employees toward a passenger gives the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his being a "wait-listed"
passenger, a KAL officer rudely shouted "Down! Down!" while pointing at him, thus causing him embarrassment and public
humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a chance
passenger in the passenger manifest nor the clearance from the Commission on Immigration and Deportation, because they are
merely means of facilitating the boarding of a chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed through customs and
immigration, boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already been loaded in
KAL's aircraft, to be flown with him to Jeddah. The contract of carriage between him and KAL had already been perfected when he
was summarily and insolently prevented from boarding the aircraft.
5. Cathay Pacific Airways v Reyes (DAN)

Respondents made a travel reservation with a travel agency for a family trip to Australia. The respondents were issued
Cathay Pacific round-trip airplane tickets. Respondents were able to fly from MNL-HK-Australia with no problem. On
their way back, respondents reconfirmed their return flight and received a positive feedback from cathay pacific officer.
However, upon check-in, they were refused to depart as they do not have a confirmed reservation nevertheless they
were allowed to board to HK (connecting flight) due to adamant request from respondents. When arrived in HK, they
were again informed of the same problem but this time they were not allowed to board because the flight was fully
booked. On the following day, the respondents were finally allowed to book the next flight bound for MNL. The problem
arises because the travel agency incorrectly inputed the ticket number of the passengers thus, in Cathay Pacific’s system,
there was an error found resuting to the problem.
A contract of carriage is defined as one whereby a certain person or association of persons obligate themselves to
transport persons, things, or news from one place to another for a fixed price. Under Article 1732 of the Civil Code, this
"persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public" is called a common carrier.
[RE: Relationship between Respondents and Cathay Pacific]
Respondents entered into a contract of carriage with Cathay Pacific. As far as respondents are concerned,
they were holding valid and confirmed airplane tickets. The ticket in itself is a valid written contract of carriage
whereby for a consideration, Cathay Pacific undertook to carry respondents in its airplane for a round-trip flight
from Manila to Adelaide, Australia and then back to Manila. The terms of the agreement of appellants and
appellee Cathay Pacific embodied in the tickets issued by the latter to the former are plain – appellee Cathay
Pacific will transport appellants to Adelaide, Australia from Manila via Hongkong on 12 April 1991 and back to
Manila from Adelaide, Australia also via Hongkong on 4 May 1997. In addition, the tickets reveal that all
appellants have confirmed bookings for their flight to Adelaide, Australia and back to Manila as manifested by
the words "Ok" indicated therein. Cathay Pacific breached its contract of carriage with respondents when it
disallowed them to board the plane in Hong Kong going to Manila on the date reflected on their tickets. Thus,
Cathay Pacific opened itself to claims for compensatory, actual, moral and exemplary damages,
attorney’s fees and costs of suit.
[RE: Relationship between Respondents and Sampaguita Travel]
In contrast, the contractual relation between Sampaguita Travel and respondents is a contract for services.
The object of the contract is arranging and facilitating the latter’s booking and ticketing. It was even
Sampaguita Travel which issued the tickets.
Since the contract between the parties is an ordinary one for services, the standard of care required of
respondent is that of a good father of a family under Article 1173 of the Civil Code. This connotes reasonable
care consistent with that which an ordinarily prudent person would have observed when confronted with a
similar situation. The test to determine whether negligence attended the performance of an obligation is: did
the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty of negligence.16
There was indeed failure on the part of Sampaguita Travel to exercise due diligence in performing its
obligations under the contract of services. It was established by Cathay Pacific, through the generation of the
PNRs, that Sampaguita Travel failed to input the correct ticket number for Wilfredo’s ticket. Cathay Pacific
even asserted that Sampaguita Travel made two fictitious bookings for Juanita and Michael.
The negligence of Sampaguita Travel renders it also liable for damages.
[RE: Damages]
For one to be entitled to actual damages, it is necessary to prove the actual amount of loss with a reasonable
degree of certainty, premised upon competent proof and the best evidence obtainable by the injured party.
RESPONDENTS FAILED TO PROVE.
An award of moral damages, in breaches of contract, is in order upon a showing that the defendant acted
fraudulently or in bad faith.
In the instant case, it was proven by Cathay Pacific that first, it extended all possible accommodations to
respondents. "what may be attributed to x x x Cathay Pacific is negligence concerning the lapses in their
process of confirming passenger bookings and reservations, done through travel agencies. But this negligence
is not so gross so as to amount to bad faith." Cathay Pacific was not motivated by malice or bad faith in
not allowing respondents to board on their return flight to Manila.
Likewise, Sampaguita Travel cannot be held liable for moral damages. True, Sampaguita Travel was negligent
in the conduct of its booking and ticketing which resulted in the cancellation of flights. But its actions were not
proven to have been tainted with malice or bad faith.
With respect to attorney’s fees, we uphold the appellate court’s finding on lack of factual and legal
justification to award attorney’s fees.
We however sustain the award of nominal damages in the amount of ₱25,000.00 to only three of the
four respondents who were aggrieved by the last-minute cancellation of their flights. Nominal damages
are recoverable where a legal right is technically violated and must be vindicated against an invasion that has
produced no actual present loss of any kind or where there has been a breach of contract and no substantial
injury or actual damages whatsoever have been or can be shown.
FACTS:
Sometime in March 1997, respondent Wilfredo Reyes (Wilfredo) made a travel reservation with
Sampaguita Travel for his family’s trip to Adelaide, Australia scheduled from 12 April 1997 to 4 May
1997. Upon booking and confirmation of their flight schedule, Wilfredo paid for the airfare and was
issued four (4) Cathay Pacific round-trip airplane tickets for Manila-HongKong-Adelaide-HongKong-
Manila
On 12 April 1997, Wilfredo, together with his wife Juanita Reyes (Juanita), son Michael Roy Reyes
(Michael) and mother-in-law Sixta Lapuz (Sixta), flew to Adelaide, Australia without a hitch.
One week before they were scheduled to fly back home, Wilfredo reconfirmed his family’s return
flight with the Cathay Pacific office in Adelaide. They were advised that the reservation was "still
okay as scheduled."
On the day of their scheduled departure from Adelaide, Wilfredo and his family arrived at the airport
on time. When the airport check-in counter opened, Wilfredo was informed by a staff from Cathay
Pacific that the Reyeses did not have confirmed reservations, and only Sixta’s flight booking was
confirmed. Nevertheless, they were allowed to board the flight to HongKong due to adamant pleas
from Wilfredo. When they arrived in HongKong, they were again informed of the same problem.
Unfortunately this time, the Reyeses were not allowed to board because the flight to Manila was
fully booked. Only Sixta was allowed to proceed to Manila from HongKong. On the following day,
the Reyeses were finally allowed to board the next flight bound for Manila.
Upon arriving in the Philippines, Wilfredo went to Sampaguita Travel to report the incident. He was
informed by Sampaguita Travel that it was actually Cathay Pacific which cancelled their bookings.
Argument of Cathay:
Its refusal to honor the return flight bookings of respondents was due to the cancellation of one
booking and the two other bookings were not reflected on its computerized booking system
because the said bookings were purportedly made under the names of respondents through two (2)
travel agencies, namely: Sampaguita Travel and Rajah Travel Corporation thus appearing to be
fictitious.
On the other hand, Sampaguita Travel, in its Answer, denied Cathay Pacific’s claim that it was the
cause of the cancellation of the bookings. Sampaguita Travel maintained that it made the
necessary reservation with Cathay Pacific for respondents’ trip to Adelaide. After getting confirmed
bookings with Cathay Pacific, Sampaguita Travel issued the corresponding tickets to respondents.
ISSUE:
What are the contracts entered between the parties, and the degree of care required?
Is the airline or/and the travel agency liable to pay damages?
RULING:
Respondents’ cause of action against Cathay Pacific stemmed from a breach of contract of
carriage. A contract of carriage is defined as one whereby a certain person or association of
persons obligate themselves to transport persons, things, or news from one place to another for a
fixed price.13 Under Article 1732 of the Civil Code, this "persons, corporations, firms, or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public" is called a common carrier.
[RE: Probative value of the ticket issued by Sampaguita Travel (Travel Agent)]
Respondents entered into a contract of carriage with Cathay Pacific. As far as respondents are
concerned, they were holding valid and confirmed airplane tickets. The ticket in itself is a valid
written contract of carriage whereby for a consideration, Cathay Pacific undertook to carry
respondents in its airplane for a round-trip flight from Manila to Adelaide, Australia and then back to
Manila. In fact, Wilfredo called the Cathay Pacific office in Adelaide one week before his return
flight to re-confirm his booking. He was even assured by a staff of Cathay Pacific that he does not
need to reconfirm his booking.
[RE: Effect/s of the misunderstanding of Cathay and Travel Agent]
In its defense, Cathay Pacific posits that Wilfredo’s booking was cancelled because a ticket number
was not inputted by Sampaguita Travel, while bookings of Juanita and Michael were not honored
for being fictitious. Cathay Pacific clearly blames Sampaguita Travel for not finalizing the bookings
for the respondents’ return flights. Respondents are not privy to whatever misunderstanding and
confusion that may have transpired in their bookings. On its face, the airplane ticket is a valid
written contract of carriage. This Court has held that when an airline issues a ticket to a passenger
confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger
has every right to expect that he would fly on that flight and on that date. If he does not, then the
carrier opens itself to a suit for breach of contract of carriage.
Cathay Pacific breached its contract of carriage with respondents when it disallowed them to board
the plane in Hong Kong going to Manila on the date reflected on their tickets. Thus, Cathay Pacific
opened itself to claims for compensatory, actual, moral and exemplary damages, attorney’s fees
and costs of suit.
[RE: Contract entered between Respondents and the Travel Agency]
In contrast, the contractual relation between Sampaguita Travel and respondents is a contract
for services. The object of the contract is arranging and facilitating the latter’s booking and
ticketing. It was even Sampaguita Travel which issued the tickets.
Since the contract between the parties is an ordinary one for services, the standard of care
required of respondent is that of a good father of a family under Article 1173 of the Civil Code.
This connotes reasonable care consistent with that which an ordinarily prudent person would have
observed when confronted with a similar situation. The test to determine whether negligence
attended the performance of an obligation is: did the defendant in doing the alleged negligent
act use that reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence.
There was indeed failure on the part of Sampaguita Travel to exercise due diligence in performing
its obligations under the contract of services. It was established by Cathay Pacific, through the
generation of the PNRs, that Sampaguita Travel failed to input the correct ticket number for
Wilfredo’s ticket. Cathay Pacific even asserted that Sampaguita Travel made two fictitious bookings
for Juanita and Michael.
The negligence of Sampaguita Travel renders it also liable for damages.
[Issues regarding damages]
For one to be entitled to actual damages, it is necessary to prove the actual amount of loss with a
reasonable degree of certainty, premised upon competent proof and the best evidence obtainable
by the injured party. Wilfredo initially testified that he personally incurred losses amounting to
₱300,000.00 which represents the amount of the contract that he was supposedly scheduled to
sign had his return trip not been cancelled. During the cross-examination however, it appears that
the supposed contract-signing was a mere formality and that an agreement had already been
hatched beforehand. Hence, we cannot fathom how said contract did not materialize because of
Wilfredo’s absence, and how Wilfredo incurred such losses when he himself admitted that he
entered into said contract on behalf of Parsons Engineering Consulting Firm, where he worked as
construction manager. Thus, if indeed there were losses, these were losses suffered by the
company and not by Wilfredo. Moreover, he did not present any documentary evidence, such as
the actual contract or affidavits from any of the parties to said contract, to substantiate his claim of
losses. With respect to the remaining passengers, they likewise failed to present proof of the actual
losses they suffered.
An award of moral damages, in breaches of contract, is in order upon a showing that the
defendant acted fraudulently or in bad faith.
In the instant case, it was proven by Cathay Pacific that first, it extended all possible
accommodations to respondents. "what may be attributed to x x x Cathay Pacific is negligence
concerning the lapses in their process of confirming passenger bookings and reservations, done
through travel agencies. But this negligence is not so gross so as to amount to bad faith." Cathay
Pacific was not motivated by malice or bad faith in not allowing respondents to board on
their return flight to Manila.
Likewise, Sampaguita Travel cannot be held liable for moral damages. True, Sampaguita Travel
was negligent in the conduct of its booking and ticketing which resulted in the cancellation of flights.
But its actions were not proven to have been tainted with malice or bad faith.
With respect to attorney’s fees, we uphold the appellate court’s finding on lack of factual and legal
justification to award attorney’s fees.
We however sustain the award of nominal damages in the amount of ₱25,000.00 to only three
of the four respondents who were aggrieved by the last-minute cancellation of their flights.
Nominal damages are recoverable where a legal right is technically violated and must be vindicated
against an invasion that has produced no actual present loss of any kind or where there has been a
breach of contract and no substantial injury or actual damages whatsoever have been or can be
shown.
6. >>>> LRTA v Navidad (DAN)
while the deceased might not have then as yet boarded the train, a contract of carriage theretofore
had already existed when the victim entered the place where passengers were supposed to be after
paying the fare and getting the corresponding token therefor.
This liability of the common carriers DOES NOT CEASE upon proof that they exercised all the diligence
of a good father of a family in the selection and supervision of their employees. ( there are 2 kinds of
liability here. What will cease in case of showing that you have exercised DGFF is only 1 of the 2 – not
sure)
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful
acts or negligence of other passengers or of strangers, if the common carriers employees through the
exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost diligence of very cautious
persons with due regard for all circumstances. Such duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of the trip but for so long as the passengers are
within its premises and where they ought to be in pursuance to the contract of carriage.
The statutory provisions render a common carrier liable for death of or injury to passengers
(a) through the negligence or wilful acts of its employees or
(b) on account of wilful acts or negligence of other passengers or of strangers if the common
carriers employees through the exercise of due diligence could have prevented or stopped the
act or omission.
[Security Guard’s liability]
If at all, that liability could only be for tort under the provisions of Article 2176 and related provisions, in
conjunction with Article 2180, of the Civil Code.
[Employer’s Liability]
The premise, however, for the employers liability is negligence or fault on the part of the employee. Once such
fault is established, the employer can then be made liable on the basis of the presumption juris tantum that the
employer failed to exercise diligentissimi patris families in the selection and supervision of its employees. The
liability is primary and can only be negated by showing due diligence in the selection and supervision
of the employee, a factual matter that has not been shown. Absent such a showing, one might ask further,
how then must the liability of the common carrier, on the one hand, and an independent contractor, on the
other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when
the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194 of the Civil Code can well apply.
In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract. Stated
differently, when an act which constitutes a breach of contract would have itself constituted the source of a
quasi-delictual liability had no contract existed between the parties, the contract can be said to have been
breached by tort, thereby allowing the rules on tort to apply.
FACTS:
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad,
then drunk, entered the EDSA LRT station after purchasing a token (representing payment of the
fare). While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the
security guard assigned to the area approached Navidad. A misunderstanding or an altercation
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to
indicate how the fight started or who, between the two, delivered the first blow or how Navidad later
fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner
Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed
instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with
her children, filed a complaint for damages against Junelito Escartin (security guard), Rodolfo
Roman (train operator), the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent
for the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-
claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had
exercised due diligence in the selection and supervision of its security guards.
ISSUE:
1. WON contract of carriage existed when the deceased entered the place where passengers supposed to wait after
paying the fare to board the train.
2. WON the LRTA be held solidarily liable with the security guard and/or the train operator?
RULING:
1. Yes.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety of
passengers. The Civil Code, governing the liability of a common carrier for death of or injury to its
[4]
passengers, provides:
Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.
Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence
or willful acts of the formers employees, although such employees may have acted beyond the scope of
their authority or in violation of the orders of the common carriers.
This liability of the common carriers DOES NOT CEASE upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful
acts or negligence of other passengers or of strangers, if the common carriers employees through the exercise
of the diligence of a good father of a family could have prevented or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. Such duty of a common carrier to provide
[5]
safety to its passengers so obligates it not only during the course of the trip but for so long as the
passengers are within its premises and where they ought to be in pursuance to the contract of
carriage. The statutory provisions render a common carrier liable for death of or injury to passengers
[6]
(a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence
of other passengers or of strangers if the common carriers employees through the exercise of due
diligence could have prevented or stopped the act or omission. In case of such death or injury, a carrier
is presumed to have been at fault or been negligent, and by simple proof of injury, the passenger is relieved
of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts
upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the
appellate court, have failed to show, the presumption would be that it has been at fault, an exception from
the general rule that negligence must be proved.
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim
arises from the breach of that contract by reason of its failure to exercise the high diligence required of the
common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may
choose to hire its own employees or avail itself of the services of an outsider or an independent firm
to undertake the task. In either case, the common carrier is not relieved of its responsibilities under
the contract of carriage.
2. Only LRTA is liable as there is nothing to link Prudent (guard) to the death of Navidad, for the reason that the
negligence of its employee, Escartin, has not been duly proven. Also there is no showing that petitioner Rodolfo
Roman (train operator) himself is guilty of any culpable act or omission, he must also be absolved from liability.
The employers liability is negligence or fault on the part of the employee. Once such fault is established, the
employer can then be made liable on the basis of the presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection and supervision of its employees. The liability is primary and can
only be negated by showing due diligence in the selection and supervision of the employee, a factual matter that has
not been shown. Absent such a showing, one might ask further, how then must the liability of the common carrier, on
the one hand, and an independent contractor, on the other hand, be described? It would be solidary. A contractual
obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa
contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may
arise even under a contract, where tort is that which breaches the contract. Stated differently, when an act which
constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract
existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort
to apply.
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is
concluded by the factual finding of the Court of Appeals that there is nothing to link (Prudent) to the death of Nicanor
(Navidad), for the reason that the negligence of its employee, Escartin, has not been duly proven x x x. This finding of
the appellate court is not without substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission,
he must also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a
juridical relation between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence.
WHEREFORE,Light Rail Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly and severally
to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;

c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees.[2]
7. Ramos v China Southern Airlines (DAN)

Petitioner purchased a roundtrip ticket from China Souther Airlines (CSA) from MNL-XIAMEN. Petitioners was able to successfully
boarded the plane on their way to China. However, on their way back, they were prevented from taking their designated flight
despite the fact that earlier that day an agent from Active Tours informed them that their bookings for China Southern Airlines
1920H flight are confirmed. The refusal came after petitioners already checked in all their baggages and were given the
corresponding claim stubs and after they had paid the terminal fees. According to the airlines' agent with whom they spoke at the
airport, petitioners were merely chance passengers but they may be allowed to join the flight if they are willing to pay an additional
500 Renminbi (RMB) per person in which petitioner refused. The defense of the airline is that petitioners were not confirmed
passengers of the airlines but were merely chance passengers. According to the airlines, it was specifically provided in the issued
tickets that petitioners are required to re-confirm all their bookings at least 72 hours before their scheduled time of departures but
they failed to do so which resulted in the automatic cancellation of their bookings. SC: breached of contract of carriage.
When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and
the passenger has every right to expect that he would fly on that flight and on that date. If that does not happen, then the carrier
opens itself to a suit for breach of contract of carriage. In an action based on a breach of contract of carriage, the aggrieved party
does not have to prove that the common carrier was at fault or was n egligent. All he has to prove is the existence of the contract
and the fact of its non-performance by the carrier, through the latter's failure to carry the passenger to its destination.
In Japan Airlines v. Simangan,29 the Court took the occasion to expound on the meaning of bad faith in a breach of contract of
carriage that merits the award of moral damages:
"Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on
breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case.
Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly
as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law
considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the
contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit."
FACTS:
On 7 August 2003, petitioners purchased five China Southern Airlines roundtrip plane tickets from Active Travel
Agency for $985.00.6 It is provided in their itineraries that petitioners will be leaving Manila on 8 August 2003 at
0900H and will be leaving Xiamen on 12 August 2003 at 1920H.7 Nothing eventful happened during petitioners' flight
going to Xiamen as they were able to successfully board the plane which carried them to Xiamen International
Airport. On their way back to the Manila, however, petitioners were prevented from taking their designated flight
despite the fact that earlier that day an agent from Active Tours informed them that their bookings for China
Southern Airlines 1920H flight are confirmed.The refusal came after petitioners already checked in all their baggages
and were given the corresponding claim stubs and after they had paid the terminal fees. According to the airlines'
agent with whom they spoke at the airport, petitioners were merely chance passengers but they may be allowed to
join the flight if they are willing to pay an additional 500 Renminbi (RMB) per person. When petitioners refused to
defray the additional cost, their baggages were offloaded from the plane and China Southern Airlines 1920H flight
then left Xiamen International Airport without them.9 Because they have business commitments waiting for them in
Manila, petitioners were constrained to rent a car that took them to Chuan Chio Station where they boarded the train
to Hongkong. Upon reaching Hong Kong, petitioners purchased new plane tickets from Philippine Airlines (PAL) that
flew them back to Manila.
Upon arrival in Manila, petitioners went to Active Travel to inform them of their unfortunate fate with China Southern
Airlines. In their effort to avoid lawsuit, Active Travel offered to refund the price of the plane tickets but petitioners
refused to accept the offer. Petitioners then went to China Southern Airlines to demand for the reimbursement of
their airfare and travel expenses in the amount of P87,375.00. When the airline refused to accede to their demand,
petitioners initiated an action for damages before the RTC of Manila against China Southern Airlines and Active Travel.
In their Answer, China Southern Airlines denied liability by alleging that petitioners were not confirmed passengers of
the airlines but were merely chance passengers. According to the airlines, it was specifically provided in the issued
tickets that petitioners are required to re-confirm all their bookings at least 72 hours before their scheduled time of
departures but they failed to do so which resulted in the automatic cancellation of their bookings.
ISSUE:
WON China Southern Airline breached the contract of carriage when it automatically cancelled the bookings of the
petitioners when the latter failed to re-confirm their bookings at least 72 hours before their scheduled time of
departures.
RULING:
Yes.
When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of
carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If that
does not happen, then the carrier opens itself to a suit for breach of contract of carriage. In an action based on a
breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or
was negligent. All he has to prove is the existence of the contract and the fact of its non-performance by the carrier,
through the latter's failure to carry the passenger to its destination.
It is beyond question in the case at bar that petitioners had an existing contract of air carriage with China Southern
Airlines as evidenced by the airline tickets issued by Active Travel. When they showed up at the airport and after they
went through the routine security check including the checking in of their luggage and the payment of the
corresponding terminal fees, petitioners were not allowed by China Southern Airlines to board on the plane. The
airlines' claim that petitioners do not have confirmed reservations cannot be given credence by the Court. The
petitioners were issued two-way tickets with itineraries indicating the date and time of their return flight to Manila.
These are binding contracts of carriage. China Southern Airlines allowed petitioners to check in their luggage and
issued the necessary claim stubs showing that they were part of the flight. It was only after petitioners went through
all the required check-in procedures that they were informed by the airlines that they were merely chance
passengers. Airlines companies do not, as a practice, accept pieces of luggage from passengers without confirmed
reservations. Quite tellingly, all the foregoing circumstances lead us to the inevitable conclusion that petitioners
indeed were bumped off from the flight. We cannot from the records of this case deduce the true reason why the
airlines refused to board petitioners back to Manila. What we can be sure of is the unacceptability of the proffered
reason that rightfully gives rise to the claim for damages.
The prologue shapes the body of the petitioners' rights, that is, that they are entitled to damages, actual, moral and
exemplary.
There is no doubt that petitioners are entitled to actual or compensatory damages.
With respect to moral damages, Bad faith does not simply connote bad judgment or negligence. It imports dishonest
purpose or some moral obliquity and conscious doing of a wrong. It means breach of a known duty through some
motive, interest or ill will that partakes the nature of fraud. Bad faith is in essence a question of intention.
In Japan Airlines v. Simangan,29 the Court took the occasion to expound on the meaning of bad faith in a breach of
contract of carriage that merits the award of moral damages:
"Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits
predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad
faith, as in this case. Inattention to and lack of care for the interests of its passengers who are entitled to its
utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger
to an award of moral damages. What the law considers as bad faith which may furnish the ground for an
award of moral damages would be bad faith in securing the contract and in the execution thereof, as well as
in the enforcement of its terms, or any other kind of deceit."
Applying the foregoing yardstick in the case at bar, We find that the airline company acted in bad faith in insolently
bumping petitioners off the flight after they have completed all the pre-departure routine. Bad faith is evident when
the ground personnel of the airline company unjustly and unreasonably refused to board petitioners to the plane
which compelled them to rent a car and take the train to the nearest airport where they bought new sets of plane
tickets from another airline that could fly them home. Petitioners have every reason to expect that they would be
transported to their intended destination after they had checked in their luggage and had gone through all the
security checks. Instead, China Southern Airlines offered to allow them to join the flight if they are willing to pay
additional cost; this amount is on top of the purchase price of the plane tickets. The requirement to pay an additional
fare was insult upon injury. It is an aggravation of the breach of contract. Undoubtedly, petitioners are entitled to the
award of moral damages. The purpose of awarding moral damages is to enable the injured party to obtain means,
diversion or amusement that will serve to alleviate the moral suffering [that] he has undergone by reason of
defendant['s] culpable action.
China Southern Airlines is also liable for exemplary damages as it acted in a wantonly oppressive manner as succinctly
discussed above against the petitioners. Exemplary damages which are awarded by way of example or correction for
the public good, may be recovered in contractual obligations, as in this case, if defendant acted in wanton, fraudulent,
reckless, oppressive or malevolent manner.
8. Sps. Fernando v Northwest Airlines (DAN)

“(i)n contracts of common carriage, in attention and lack of care on the part of the carrier resulting in the failure of
the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the
passengers to the award of moral damages in accordance with Article 2220 of the Civil Code.”
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral
obliquity and conscious doing of a wrong. It means breach of a known duty through some motive, interest or ill
will that partakes of the nature of fraud. A finding of bad faith entitles the offended party to moral damages.
Passengers do not contract merely for transportation. They have a right to be treated by the carrier’s employees
with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees. So it is, that any rule or
discourteous conduct on the part of employees towards a passenger gives the latter an action for damages
against the carrier.
In requiring compliance with the standard of extraordinary diligence, a Standard which is, in fact, that of the
highest possible degree of diligence, from common carriers and in creating a presumption of negligence against
them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them
to take adequate care of human beings and their property
FACTS:
Spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest Airlines, Inc.
and are holders of Elite Platinum World Perks Card, the highest category given to frequent flyers of the
carrier. They are known in the musical instruments and sports equipments industry in the Philippines
being the owners of JB Music and JB Sports with outlets all over the country. They likewise own the five
(5) star Hotel Elizabeth in Baguio City and Cebu City, and the chain of Fersal Hotels and Apartelles in
the country.
The Fernandos initiated the filing of the instant case which arose from two (2) separate incidents: first,
when Jesus Fernando arrived at Los Angeles (LA) Airport on December 20, 2001; second, when the
Fernandos were to depart from the LA Airport on January 29, 2002. The factual antecedents are as
follows:
Arrival at Los Angeles Airport on December 20, 2001

Jesus Fernando arrived at the LA Airport via Northwest Airlines Flight No. NW02 to join his family for
Christmas, however upon arrival at the airport it was found out that his documents reflect his return
ticket as August 2001. So he approached a Northwest personnel who was later identified as Linda
Puntawongdaycha, but the latter merely glanced at his ticket without checking its status with the
computer and peremptorily said that the ticket has been used and could not be considered as
valid. He then explained to the personnel that he was about to use the said ticket on August 20 or 21,
2001 on his way back to Manila from LA but he could not book any seat because of some ticket
restrictions so he, instead, purchased new business class ticket on the said date. Hence, the
ticket remains unused and perfectly valid.

The Immigration Officer brought Jesus Fernando to the interrogation room of the Immigration
and Naturalization Services (INS) where he was asked humiliating questions for more than two
(2) hours. When he was finally cleared by the Immigration Officer, he was granted only a twelve (12)-
day stay in the United States (US), instead of the usual six (6) months.

Departure from the LA Airport on January 29, 2002

When the Fernandos reached the gate area where boarding passes need to be presented, Northwest
supervisor Linda Tang stopped them and demanded for the presentation of their paper tickets
(coupon type). They failed to present the same since, according to them, Northwest issued electronic
tickets (attached to the boarding passes) which they showed to the supervisor. In the presence of the
other passengers, Linda Tang rudely pulled them out of the queue. Elizabeth Fernando explained
to Linda Tang that the matter could be sorted out by simply verifying their electronic tickets in her
computer and all she had to do was click and punch in their Elite Platinum World Perks Card
number. But Linda Tang arrogantly told them that if they wanted to board the plane, they should
produce their credit cards and pay for their new tickets, otherwise Northwest would order their
luggage off-loaded from the plane. Exasperated and pressed for time, the Fernandos rushed to the
Northwest Airline Ticket counter to clarify the matter. They were assisted by Northwest personnel
Jeanne Meyer who retrieved their control number from her computer and was able to ascertain that the
Fernandos’ electronic tickets were valid and they were confirmed passengers on both NW Flight No.
001 for Narita Japan and NW 029 for Manila on that day. To ensure that the Fernandos would no longer
encounter any problem with Linda Tang, Jeanne Meyer printed coupon tickets for them who were then
advised to rush back to the boarding gates since the plane was about to depart. But when the
Fernandos reached the boarding gate, the plane had already departed. They were able to depart,
instead, the day after, or on January 30, 2002, and arrived in the Philippines on January 31, 2002.

Northwest airlines employees on the other hand claim that they were “courteous” and “was very kind
enough” to assist them. Meyer verified their bookings and “printed paper tickets” for them.
Unfortunately, when they went back to the boarding gate, the plane had departed. Northwest
offered alternative arrangements for them to be transported to Manila on the same day on another
airline, either through Philippine Airlines or Cathay Pacific Airways, but they refused. Northwest also
offered them free hotel accommodations but they, again, rejected the offer, Northwest then made
arrangements for the transportation of the Fernandos from the airport to their house in LA, and booked
the Fernandos on a Northwest flight that would leave the next day, January 30, 2002. On January 30,
2002, the Fernandos flew to Manila on business class seats.

The Fernando’s filed a claim for damages. RTC ruled in favour of Plainitiffs which was affirmed by the
CA.
ISSUE:
(1) whether or not there was breach of contract of carriage and whether it was done In a wanton,
malevolent or reckless manner amounting to bad faith;
(2) whether or not Northwest is liable for the payment of moral damages and attorney’s fees and
whether it is liable to pay more than that awarded by the RTC;
(3) whether or not Northwest is liable for the payment of exemplary damages; and
RULING:
1. 1. Yes.
2. The Fernandos’ cause of action against Northwest stemmed from a breach of contract of
carriage. A contract is a meeting of minds between two persons whereby one agrees to give
something or render some service to another for a consideration. There is no contract unless
the following requisites concur: (1) consent of the contracting parties; (2) an object certain
which is the subject of the contract; and (3) the cause of the obligation which is established.
A contract of carriage is defined as one whereby a certain person or association of persons

obligate themselves to transport persons, things, or goods from one place to another for a fixed
price.

Under Article 1732 of the Civil Code, this “persons, corporations, firms, or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public” is called a common carrier. Undoubtedly,
a contract of carriage existed between Northwest and the Fernandos. They voluntarily and freely gave
their consent to an agreement whose object was the transportation of the Fernandos from LA to Manila,
and whose cause or consideration was the fare paid by the Fernandos to Northwest. 32
In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a ticket to a passenger confirmed
for a particular flight on a certain date, a contract of carriage arises. The passenger then has every right
to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a
suit for breach of contract of carriage.
When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the Fernandos
on their flight on 29 January 2002. We note that the witness of Northwest admitted on cross-
examination that based on the documents submitted by the Fernandos, they were confirmed
passengers on the January 29, 2002 flight.
In an action based on a breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All that he has to prove is the
existence of the contract and the fact of its non-performance by the carrier. As the aggrieved
party, the Fernandos only had to prove the existence of the contract and the fact of its non-performance
by Northwest, as carrier, in order to be awarded compensatory and actual damages.
Therefore, having proven the existence of a contract of carriage between Northwest and the Fernandos,
and the fact of non-performance by Northwest of its obligation as a common carrier, it is clear that
Northwest breached its contract of carriage with the Fernandos. Thus, Northwest opened itself to claims
for compensatory, actual, moral and exemplary damages, attorney’s fees and costs of suit. 39
Moreover, Article 1733 of the New Civil Code provides that common carriers, from the nature of
their business and for reasons of public policy, are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case. Also, Article 1755 of the same Code states that
a common carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances
2. 2. Yes.
3. Northwest is in bad faith. While We agree that the discrepancy between the date of actual travel
and the date appearing on the tickets of the Fernandos called for some verification, however, the
Northwest personnel failed to exercise the utmost diligence in assisting the Fernandos. The
actuations of Northwest personnel in both subject incidents are constitutive of bad faith.
On the first incident, Jesus Fernando even gave the Northwest personnel the number of his Elite
Platinum World Perks Card for the latter to access the ticket control record with the airline’s computer
for her to see that the ticket is still valid. But Linda Puntawongdaycha refused to check the validity of the
ticket in the computer. As a result, the Immigration Officer brought Jesus Fernando to the interrogation
room of the INS where he was interrogated for more than two (2) hours. When he was finally cleared by
the Immigration Officer, he was granted only a twelve (12)-day stay in the United States (US), instead of
the usual six (6) months.
In ignoring Jesus Fernando’s pleas to check the validity of the tickets in the computer, the Northwest
personnel exhibited an indifferent attitude without due regard for the inconvenience and anxiety Jesus
Fernando might have experienced.
Passengers do not contract merely for transportation. They have a right to be treated by the
carrier’s employees with kindness, respect, courtesy and due consideration. They are entitled to
be protected against personal misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against the carrier.
In requiring compliance with the standard of extraordinary diligence, a Standard which is, in
fact, that of the highest possible degree of diligence, from common carriers and in creating a
presumption of negligence against them, the law seeks to compel them to control their
employees, to tame their reckless instincts and to force them to take adequate care of human
beings and their property.
Notably, after the incident, the Fernandos proceeded to a Northwest Ticket counter to verify the status
of the ticket and they were assured that the ticked remained unused and perfectly valid. And, to avoid
any future problems that may be encountered on the validity of the ticket, a new ticket was issued to
Jesus Fernando. The failure to promptly verify the validity of the ticket connotes bad faith on the part of
Northwest.
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose
or some moral obliquity and conscious doing of a wrong. It means breach of a known duty
through some motive, interest or ill will that partakes of the nature of fraud. A finding of bad faith
entitles the offended party to moral damages.
As to the second incident, there was likewise fraud or bad faith on the part of Northwest when it did not
allow the Fernandos to board their flight for Manila on January 29, 2002, in spite of confirmed tickets.
We need to stress that they have confirmed bookings on Northwest Airlines NW Flight No. 001 for
Narita, Japan and NW 029 for Manila. They checked in with their luggage at LA Airport and were given
their respective boarding passes for business class seats and claim stubs for six (6) pieces of luggage.
With boarding passes and electronic tickets, apparently, they were allowed entry to the departure area;
and, they eventually joined the long queue of business class passengers along with their business
associates.
However, in the presence of the other passengers, Northwest personnel Linda Tang pulled the
Fernandos out of the queue and asked for paper tickets (coupon type). Elizabeth Fernando
explained to Linda Tang that the matter could be sorted out by simply verifying their electronic
tickets in her computer and all she had to do was click and punch in their Elite Platinum World
Perks Card number. Again, the Northwest personnel refused to do so; she, instead, told them to
pay for new tickets so they could board the plane. Hence, the Fernandos rushed to the Northwest
Airline Ticket counter to clarify the matter. They were assisted by Northwest personnel Jeanne Meyer
who retrieved their control number from her computer and was able to ascertain that the Fernandos’
electronic tickets were valid, and they were confirmed passengers on both NW Flight No. 001 for Narita
Japan and NW 029 for Manila on that day.
In Ortigas, Jr. v. Lufthansa German Airlines,45 this Court declared that “(i)n contracts of common
carriage, in attention and lack of care on the part of the carrier resulting in the failure of the
passenger to be accommodated in the class contracted for amounts to bad faith or fraud which
entitles the passengers to the award of moral damages in accordance with Article 2220 of the Civil
Code.”
In Pan American World Airways, Inc. v. Intermediate Appellate Court, where a would-be passenger had
the necessary ticket, baggage claim and clearance from immigration, all clearly and unmistakably
showing that she was, in fact, included in the passenger manifest of said flight, and yet was denied
accommodation in said flight, this Court did not hesitate to affirm the lower court’s finding awarding her
damages on the ground that the breach of contract of carriage amounted to bad faith. For the indignity
and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an
award of moral damages.
In this case, We need to stress that the personnel who assisted the Fernandos even printed coupon
tickets for them and advised them to rush back to the boarding gates since the plane was about to
depart. But when the Fernandos reached the boarding gate, the plane had already departed. They were
able to depart, instead, the day after, or on January 30, 2002.
In Japan Airlines v. Jesus Simangan,49 this Court held that the acts committed by Japan Airlines against
Jesus Simangan amounted to bad faith, thus:
x x x JAL did not allow respondent to fly. It informed respondent that there was a need to first check
the authenticity of his travel documents with the U.S. Embassy. As admitted by JAL, “the flight
could not wait for Mr. Simangan because it was ready to depart.”
Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice
but to be left behind. The latter was unceremoniously bumped off despite his protestations and valid
travel documents and notwithstanding his contract of carriage with JAL. Damage had already been
done when respondent was offered to fly the next day on July 30, 1992. Said offer did not cure
JAL’s default.
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals,51 where private respondent was not allowed to
board the plane because her seat had already been given to another passenger even before the
allowable period for passengers to check in had lapsed despite the fact that she had a confirmed
ticket and she had arrived on time, this Court held that petitioner airline acted in bad faith in violating
private respondent’s rights under their contract of carriage and is, therefore, liable for the injuries she
has sustained as a result.
Under Article 2220 of the Civil Code of the Philippines, an award of moral damages, in breaches
of contract, is in order upon a showing that the defendant acted fraudulently or in bad
faith. Clearly, in this case, the Femandos are entitled to an award of moral damages. The purpose of
awarding moral damages is to enable the injured party to obtain means, diversion or amusement that
will serve to alleviate the moral suffering he has undergone by reason of defendant’s culpable action.

They own hotels and a chain of apartelles in the country, and a parking garage building in Indiana, USA.
From this perspective, We adopt the said view. We, thus, increase the award of moral damages to the
Fernandos in the amount of P3,000,000.00.

As held in Kierulf v. Court of Appeals,57 the social and financial standing of a claimant may be
considered if he or she was subjected to contemptuous conduct despite the offender’s knowledge of his
or her social and financial standing.
In Trans World Airlines v. Court of Appeals,58 this Court considered the social standing of the
aggrieved passenger:
At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior
partner of a big law firm in Manila. He was a director of several companies and was active in
civic and social organizations in the Philippines. Considering the circumstances of this case and
the social standing of private respondent in the community, he is entitled to the award of moral
and exemplary damages. x x x This award should be reasonably sufficient to indemnify private
respondent for the humiliation and embarrassment that he suffered and to serve as an example
to discourage the repetition of similar oppressive and discriminatory acts.

3. 3. Yes.
4.
5. The Fernandos are entitled to exemplary damages, which are awarded by way of example or
correction for the public good, may be recovered in contractual obligations, if defendant acted in
wanton, fraudulent, reckless, oppressive, or malevolent manner. They are designed by our civil law to
permit the courts to reshape behavior that is socially deleterious in its consequence by creating
negative incentives or deterrents against such behavior. 61 Hence, given the facts and circumstances of
this case, We hold Northwest liable for the payment of exemplary damages in the amount of
P2,000,000.00.
In the case of Northwest Airlines, Inc. v. Chiong,Chiong was given the run-around at the Northwest
check-in counter, instructed to deal with a man in barong to obtain a boarding pass, and eventually
barred from boarding a Northwest flight to accommodate an American passenger whose name was
merely inserted in the Flight Manifest, and did not even personally check-in at the counter. Under the
foregoing circumstances, the award of moral and exemplary damages was given by this Court.
Time and again, We have declared that a contract of carriage, in this case, air transport, is primarily
intended to serve the traveling public and thus, imbued with public interest. The law governing common
carriers consequently imposes an exacting standard of conduct. A contract to transport passengers is
quite different in kind and degree from any other contractual relation because of the relation which an
air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to
avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the carrier’s employees, naturally, could
give ground for an action for damages.
As to the payment of attorney’s fees, We sustain the award thereof on the ground that the Fernandos
were ultimately compelled to litigate and incurred expenses to protect their rights and interests, and
because the Fernandos are entitled to an award for exemplary damages. Pursuant to Article 2208 of the
Civil Code, attorney’s fees may be awarded when exemplary damages are awarded, or a party is
compelled to litigate or incur expenses to protect his interest, or where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim.
Records show that the Fernandos demanded payment for damages from Northwest even before the
filing of this case in court. Clearly, the Fernandos were forced to obtain the services of counsel to
enforce a just claim, for which they should be awarded attorney’s fees. 65 We deem it just and equitable
to grant an award of attorney’s fees equivalent to 10% of the damages awarded.
B. Common Carriers
1. Concept
Definitions
Domestic Shipping (under RA 9295)
Public service (under CA 146)
2. Common Carirage
9. >De Guzman v CA
FACTS: Respondent Ernesto Cendana, a junk dealer, was engaged in buying used bottles and scrap metal in Pangasinan and then
delivering them to Manila for resale. He utilized 2 6-wheeler trucks which he owned for hauling the materials to Manila. On the
return trip to Pangasinan, he would load his vehicles with various items that merchants wanted delivered in Pangasinan. For that
service, respondent charged freight rates lower than the usual regular rates.
Sometime in November 1970, petitioner Pedro de Guzman, a merchant, contracted respondent for the hauling of 750 cartons of
milk from a warehouse in Makati, Rizal to petitioner’s establishment in Urdaneta on or before Dec. 4 1970. Accordingly, on Dec. 1,
respondent loaded the merchandise on to his trucks. 150 cartons were loaded on a truck he drove and the other 600 in another
truck driven by Manuel Estrada, respondent’s employee.
Only 150 boxes were delivered because apparently, the other 600 boxes were taken since the truck that carried these boxes was
hijacked somewhere along MacArthur Highway in Tarlac by armed men who took with them the cargo along with the men on the
truck.
On January 6 1971, petitioner commenced action against private respondent in the CFI of Pangasinan, demanding payment of
P22,150, the claimed value of the lost merchandise plus damages and attorney’s fees. Petitioner argued that private respondent,
being a common carrier, and having failed to exercise extraordinary diligence required of him by the law, should be held liable. In
his answer, respondent denied that he was a common carrier and argued that he could not be held responsible for the loss since
it was lost through force majeure.
On December 10 1975, the trial court rendered a decision finding the respondent to be a common carrier and holding him liable.
On appeal, the CA reversed the judgment of the trial court and held that respondent had been engaged in transporting return
loads of freight as a casual occupation, and not as a common carrier.
ISSUE: 1. WON private respondent is a common carrier
2. WON the hijacking of respondent’s truck was force majeure and WON the respondent was liable for the value of the cargolost
HELD: 1. Private respondent is a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation, offering their services to the public.
The article makes no distinction between principal business activity or ancillary activity, or “sideline”. The article also carefully
avoids making a distinction between people who regularly offer service with those who do it occasionally or from time to time.
Lastly, the article does not make any distinction between those who offer their services to the general public and those who offer
it only to a certain group of people. The Court also held that it does not matter that the respondent charged freight rates
significantly lower than the usual regular rates.
The CA also referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a
common carrier. This is a palpable error. According to the Court, a certificate of public convenience is not a requisite for incurring
liability under the CC provisions governing common carriers. That liability arises the moment a person or firm acts as a common
carrier. To exempt private respondent from the liabilities of a common carrier because he has no certificate of public convenience
would be offensive to sound public policy. (so bale the SC held nga they cannot be excused from their liability kay absurd
dawngawa pa ganisilanaka comply sa required certificate, e exempt pajudsila from liability)
2. The hijacking was force majeure, and the respondent is NOT liable for the value of the cargo lost.
Common carriers, by the nature of their business and for reasons of public policy, are held to a very high degree of care and
diligence (extraordinary diligence) in the carriage of goods as well as of passengers.
Article 1734 of the CC (refer langsacodals) establishes the general rule under which common carriers are responsible for the loss,
destruction, or deterioration of goods which they carry.
It is important to point out that Article 1734 is an exclusive list. Causes falling outside the list fall within the scope of Article 1735,
which states that in cases other than those listed in 1734, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence.
Applying 1734 and 1735, the hijacking does not fall within any of the circumstances under 1734. It would then follow, that under
1735, respondent is presumed to have acted negligently. Furthermore, petitioner insists that private respondent did not observe
extraordinary diligence, arguing that respondent should have hired a security guard to ride with the truck. This Court, however,
does not believe that the hiring of a security guard is necessary to comply with the requirement of extraordinary diligence.
However, under Article 1745 (6), a common carrier is held responsible even for acts of strangers like thieves or robbers, except
where such thieves or robbers in fact acted with grave or irresistible threat, violence, or force. In this case, armed men held up
the second truck owned by private respondent which carried the cargo. The record shows that indeed an information for robbery
in band was filed in the CFI of Tarlac. The accused in the case were charged with willfully and unlawfully taking and carrying away
the second truck loaded with 600 cartons of milk. The decision of the court shows that the accused acted with grave, if not
irresistible, threat, violence, or force.
It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of
goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have
complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value
of the undelivered merchandise which was lost because of an event entirely beyond private respondent's control.
10. Planters Products Inc v CA
FACTS: Planters Products Inc. (PPI), purchased from Mitsubishi 9,329.7069 metric tons of Urea 46% fertilizer which the latter
shipped in bulk on June 16 1974 aboard a cargo vessel “Sun Plum” owned by private respondentKyosei Kisen Kabushiki Kaisha as
evidenced by a Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure.
On May 17 1974, or prior to its voyage, a time charter-party on the vessel “Sun Plum” pursuant to the General Charter was
entered into between Mitsubishi as shipper/charterer and KKKK as shipwoner, in Tokyo, Japan. Before loading the fertilizer
aboard the vessel, 4 of her holds were all presumably inspected by the charterer’s representative and found fit to take a load of
urea in bulk pursuant to the charter-party.
After the urea fertilizer were loaded by stevedores under the employ of the charterer, the steel hatches were closed with iron
lids, and covered with 3 layers of tarpaulin, then tied with steel bonds. They remained tightly sealed throughout the entire
voyage.
Upon arrival, it took 11 days for PPI to unload the cargo.An inspection revealed a shortage in the cargo and that a portion of said
cargo was contaminated with dirt. Consequently, PPI sent a claim letter to Soriamont Steamship Agencies, the resident agent of
the carrier, for 245,969.32 representing the cost of the alleged shortage in the goods shipped and the contaminated portion. SSA
responded saying that they denied the “request” because “they had nothing to do with the discharge of the shipment”. Hence,
PPI filed an action for damages with the CFI of Manila. The CFI sustained the claim of plaintiff, but it was reversed upon appeal to
the CA. The CA held that the cargo vessel was a private carrier and not a common carrier by reason of the charter-party.
ISSUE: WON a common carrier becomes a private carrier by reason of a charter-party, and in the negative, WON the shipowner
was able to prove that he exercised the required degree of diligence
HELD:It depends, and yes, the shipowner was able to prove that he exercised the diligence required.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another
person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a
part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of
freight; Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased
by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of
which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control
over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a
single voyage. In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of time or for a
single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray
the expenses for the maintenance of the ship.
It is imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or
more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when
the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least
insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter
retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer.
Furthermore, in an action for recovery of damages against a common carrier on the goods shipped, the shipper should first prove
the fact of shipment and the loss or damage while the goods were in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to the carrier to prove that he has exercised extraordinary diligence or that it was due to
fortuitous event or some other circumstances inconsistent with its liability.
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima faciepresumption of
negligence.The master of the vessel, testified that before the fertilizers were loaded, the 4 hatches were cleaned, dried, and
fumigated, and that after the cargo was loaded, the hatches were sealed tightly and were impossible to open without the use of
the ship’s boom. It was also shown during trial that the hull of the vessel was in good condition, foreclosing the possibility of
spillage of the cargo inside the hull. Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome. On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the
exercise of due diligence in order to minimize the loss or damage to the goods it carried.
The Court alsonoted, in relation to the contaminated cargo, that it was in the month of July when the vessel arrived port and
unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply
officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed
enroute to the consignee's warehouse.
11. Bascos v CA
In this case, petitioner alleged that the hijacking constituted force majeure. However, under Article 1745, the acts committed by
thieves or robbers must be coupled with a grave or irresistible threat, violence, or force.
FACTS: Rodolfo Cipriano, representing Cipriano Trading Enterprise (CIPTRADE for short), entered into a hauling contract with
Jibfair Shipping Agency Corporation whereby the former bound itself to haul soya bean meal from Manila to the warehouse of
Purefoods In Laguna. To carry out its obligation, CIPTRADE subcontracted with EstrellitaBascos to transport and to deliver 400
sacks of soya bean meal from the Manila Port Area to Laguna. Petitioner failed to deliver the said cargo. As a consequence,
Cipriano paid Jibfair the amount of the lost goods in accordance with their contract.
Cipriano demanded reimbursement form petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a sum
of money and damages with a writ of preliminary attachment for breach of a contract of carriage. The trial court granted the writ.
In her answer, petitioner interposed that there was no contract of carriage since CIPTRADE leased her cargo truck to load cargo
from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner for loading the cargo; that the truck carrying the cargo
was hijacked in Manila; that the hijacking was immediately reported to CIPTRADE and that petitioner and police exerted all efforts
to locate the property; that an information for robbery and carnapping were filed against Jose Opriano, et al; and that hijacking,
being force majeure, exculpated petitioner from any liability.
The trial court rendered a decision in favor of CIPTRADE. Petitioner then appealed to the CA but CA affirmed the trial court’s
judgment. The CA held that petitioner was a common carrier.
ISSUE:1) was petitioner a common carrier? And 2) was the hijacking force majeure?
HELD: Petitioner was indeed a common carrier.
Under Article 1732 of the Civil Code, a common carrier is defined as a person, corporation, or firm, or association, engaged in the
business of carrying or transporting passengers, goods, or both, by land, water, or air, for compensation, offering their services to
the public. The test to determine a common carrier is whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted.
In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with
cargo to move. Judicial admissions are conclusive and need no further evidence to prove the same.
Petitioner argues that there was only a contract of lease because they offer their services only to a select group of people and
because the private respondents, plaintiffs in the lower court, did not object to the presentation of affidavits by petitioner where
the transaction was referred to as a lease contract.
Regarding the first contention, the Court cites the case of De Guzman v. CA. It was held therein that Article 1732 of the CC makes
no distinction between one whose principal business activity is the carrying of persons or goods and one who does such only as an
ancillary activity. Regarding the affidavits, both the trial and appellate courts have dismissed them as self-serving and petitioner
contests the conclusion. This Court is bound by the factual conclusions of the lower court. Yet, granting that the evidence were
not self-serving, it is not sufficient to prove a contract of lease. It must be understood that a contract is what the law defines it to
be and not what it is called by the contracting parties.
The hijacking was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the vigilance over goods transported by them. Accordingly,
they are presumed to have been negligent if the goods are lost, destroyed, or deteriorated. There are very few instances when
the presumption does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence to overcome the presumption.
In this case, petitioner alleged that the hijacking constituted force majeure. However, under Article 1745, the acts committed by
thieves or robbers must be coupled with a grave or irresistible threat, violence, or force.
Both the trial court and the CA have concluded that accusatory affidavits presented by the petitioner are not enough to overcome
the presumption. The affidavits were not based on a first-hand account; rather it was based on what had been told to her by her
driver.
The presumption of negligence was raised against petitioner. It was petitioner’s burden to overcome it. Thus, contrary to her
assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient
proof of extraordinary diligence made the presumption conclusive against her.
12. >Fabre Jr v CA
FACTS: Petitioner Engracio Fabre, Jr. and his wife were owners of a 1982 Mazda minibus. They used the bus principally in
connection with a bus service for school children which they operated in Manila. The couple had a driver, PofirioCabil, whom they
hired in 1981, after trying him out for 2 weeks. His job was to take school children to and from a St. Scholastica’s College in
Malate, Manila.
On November 2, 1984, private respondent Word for the World Christian Fellowship arranged with petitioners for the
transportation of 33 members of its ministry from Manila to La Union and back. The group was scheduled to leave at 5 in the
afternoon. However, as several members were late, the bus did not leave until 8 in the evening. Petitioner Cabil drove the
minibus.
The usual route to La union was through Pangasinan, but a bridge there was under repair, which led Cabil, who was unfamiliar
with the area, to take a detour through another town. At 11:30 that night, petitioner Cabil came upon a sharp curve. The road was
slippery due to rain, causing the bus to skid. Several passengers were injured. The driver claimed he did not see the curve until it
was too late. He said he was not familiar with the area and he could not see the curve since it was too dark and there were no
signs on the road.
Amyline Antonio, who was seriously injured, brought this case to the RTC of Metro Manila. As a result of the accident, she is now
paralyzed from the waist down. The trial court ruled in favor of Antonio, and held that since only WWCF and Antonio adduced
evidence, the court is not in a position to award the other plaintiffs. CA affirmed the decision with respect to Antonio, but
dismissed it with respect to the other plaintiffs. CA sustained the trial court’s finding that Cabil failed to exercise due care and
precaution in the operation of his vehicle.
ISSUE:WON petitioners were negligent
WON petitioners were liable for the injuries suffered by private respondent
WON damages can be awarded and in the positive, up to what extent
HELD:With the exception of the award of damages, the petition is devoid of merit.
It is unnecessary to determine whether to decide this case on the theory that petitioners are liable for breach of contract of
carriage or culpa contractual or culpa aquiliana, as both the RTC and CA held that the relation of passenger and carrier is
contractual both in origin and in nature. In either case, the question is whether Cabil was negligent.
The finding that Cabil was negligent and that Fabres, who owned the bus, failed to exercise the diligence of a good father of a
family in the selection and supervision of their employee is fully supported by the evidence on record. The factual findings of the
two courts are final and conclusive. Cabil was driving at 50kph, during a rainy evening, in a road where the normal speed is 20kph.
Pursuant to Article 2176 and 2180 of the CC, his negligence gave rise to the presumption that his employers, the Fabres, were
themselves negligent in the selection and supervisions of their employee.
Petitioners argue that an earlier departure could have avoided the mishap and that the WWCF was directly responsible for the
conduct of the trip. Neither of these arguments holds water. The hour of the departure had not been fixed, and even if it had
been, the delay did not bear directly on the incident. With respect to the second contention, it was held in an earlier case that a
person who hires an automobile and gives the drivers directions, but exercises no other control over the driver, is not responsible
for negligent acts of the driver.
Furthermore, in the case at bar, Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that
Cabil had been driving for school children only, from their homes to the school in Metro Manila. They had hired him only after a
two-week apprenticeship. They had tested him for certain matters, such as WON he could remember the children’s names, which
is irrelevant to his qualification to drive a long distance travel. The existence of hiring procedures and supervisory policies cannot
be casually invoked to overturn the presumption of negligence on the part of an employer.
The award of damages are sustained, however the Court thinks that the CA erred in increasing the amount of compensatory
damages because private respondents did not question this amount as inadequate. The award of exemplary damages and
attorney’s fees were also properly made, but for the same reason, it was error to increase the award of moral damage and reduce
the award of attorney’s fees, inasmuch as private respondents, in whose favor the awards were made, have not appealed.
13. >>First Phil. Industrial Corp v CA

FACTS: Petitioner is a grantee of a pipeline concession under RA 387, as amended, to contract, install and operate oil pipelines.
Petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could
be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993
pursuant to the LGC. In order not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for
the first quarter of 1993.
On June 15, 1994, petitioner filed with the RTC of Batangas City a complaintfor tax refund against respondents City of Batangas
and Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: x x x (2) the authority
of cities to impose and collect a tax on the gross receipts of "contractors and independent contractors" under Sec. 141 (e) and 151
does not include the authority to collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors; x x x ...
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under Section 133 (j) of the LGC as
said exemption applies only to "transportation contractors and persons engaged in the transportation by hire and common
carriers by air, land and water." Respondents assert that pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term "common carrier"
under the said code pertains to the mode or manner by which a product is delivered to its destination.
RTC dismissed. CA affirmed. SC affirmed but MR was allowed.
ISSUE: Whether pipe line operators are considered as common carriers and thus exempted from the taxing authority of the LGUs.
RULING: YES, pipe line operators are considered common carriers.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in the business of
transporting persons or property from place to place, for compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the
public." The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as
ready to engage in the transportation of goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established roads; and
4. The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is engaged in the
business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all
persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier.
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government Code refers only
to common carriers transporting goods and passengers through moving vehicles or vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction as to the means
of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should
be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers.
It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax
against common carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under the National Internal
Revenue Code.To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of
the Local Government Code.
14. Loadstar Shipping Co v CA

FACTS: On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the following goods for
shipment: a) 705 bales of lawanit hardwood; b) 27 boxes and crates of tilewood assemblies and the others ;and c) 49 bundles of
mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks including "TOTAL LOSS BY
TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for
P4 million. On its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa
Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the same.
As the insurer, MIC paid P6,075,000 to the insured in full settlement of its claim, and the latter executed a subrogation receipt
therefor.
MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault and negligence of
LOADSTAR and its employees.
In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel was due
to force majeure. LOADSTAR submits that the vessel was a private carrier because it was not issued certificate of public
convenience, it did not have a regular trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a
special cargo."
Lower court decided against Loadstar. CA affirmed.
ISSUES: Whether the M/V "Cherokee" a private or a common carrier and whether LOADSTAR observe due and/or ordinary
diligence in these premises.
RULING: Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued
a certificate of public convenience, and this public character is not altered by the fact that the carriage of the goods in question
was periodic, occasional, episodic or unscheduled.
The cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that the factual settings are different.
The records do not disclose that the M/V "Cherokee," on the date in question, undertook to carry a special cargo or was chartered
to a special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general
provision to the effect that the M/V"Cherokee" was a "general cargo carrier."Further, the bare fact that the vessel was carrying a
particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from
a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under Article 1732 of
the Civil Code.
Moving on to the second assigned error, we find that the M/V "Cherokee" was not seaworthy when it embarked on its voyage on
19 November 1984. The vessel was not even sufficiently manned at the time. "For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to
maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Article 1755
of the Civil Code."
Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied in this case. The doctrine of
limited liability does not apply where there was negligence on the part of the vessel owner or agent.LOADSTAR was at fault or
negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching
typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition
in the performance of its duties, LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the loss
of the vessel and its cargo.
15. Calvo v UCPB Gen Insurance Terminal Services Inc

FACTS: Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship
customs broker. At the time material to this case, petitioner entered into a contract with San Miguel Corporation (SMC) for the
transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's
warehouse at the Tabacalera Compound. The cargo was insured by respondent UCPB General Insurance Co., Inc.
The shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were
unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc. Petitioner, pursuant to her contract
with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse. The goods were inspected by
Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft
liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, respondent,
as subrogee of SMC, brought suit against petitioner in the RTC which rendered judgment finding petitioner liable to respondent for
the damage to the shipment. CA affirmed.
Petitioner contends that contrary to the findings of the trial court and the CA, she is not a common carrier but a private carrier
because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to the public but only offers
the same to select parties with whom she may contract in the conduct of her business.
ISSUE: Whether petitioner is a common carrier.
RULING: COMMON CARRIER
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her
business. To uphold petitioner's contention would be to deprive those with whom she contracts the protection which the law
affords them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of
petitioner's business.
In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the "spoilage or wettage" took place
while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru," which transported the cargo to Manila,
or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in open air for nine days.
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that when the shipper
transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange Report (EIR) and,
when petitioner's employees withdrew the cargo from the arrastre operator, they did so without exception or protest either with
regard to the condition of container vans or their contents.
Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she immediately delivered the
containers to SMC's compound, suffice it to say that to prove the exercise of extraordinary diligence, petitioner must do more than
merely show the possibility that some other party could be responsible for the damage. It must prove that it used "all reasonable
means to ascertain the nature and characteristic of goods tendered for transport and that it exercised due care in the handling
thereof." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides – Common carriers are responsible for the
loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:
(4) The character of the goods or defects in the packing or in the containers.
For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the
carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or
exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom. In this case, petitioner
accepted the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner
to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735 holds.
16. >Asia Lighterage and Shipping Inc.

FACTS: On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192 was shipped by
Marubeni American Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM for delivery to the consignee,
General Milling Corporation in Manila, evidenced by Bill of Lading. The shipment was insured by the private respondent Prudential
Guarantee and Assurance, Inc. against loss or damage for P14,621,771.
The carrying vessel arrived in Manila and the cargo was transferred to the custody of the petitioner Asia Lighterage and Shipping,
Inc. The petitioner was contracted by the consignee as carrier to deliver the cargo to consignee's warehouse at Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming typhoon. On
August 22, 1990, the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the approaching
typhoon. PSTSI III was tied down to other barges which arrived ahead of it while weathering out the storm that night. A few days
after, the barge developed a list because of a hole it sustained after hitting an unseen protuberance underneath the water. The
petitioner filed a Marine Protest. It likewise secured the services of Gaspar Salvaging Corporation which refloated the barge. The
hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf. Upon reaching the Sta. Mesa
spillways, the barge again ran aground due to strong current. To avoid the complete sinking of the barge, a portion of the goods
was transferred to three other barges.
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining
cargo. A second Marine Protest was filed.
The private respondent indemnified the consignee in the amount of P4,104,654.22. Thereafter, as subrogee, it sought recovery of
said amount from the petitioner, but to no avail.
ISSUES: Whether the petitioner is a common carrier and if so, whether it exercised extraordinary diligence in its care and custody
of the consignee's cargo.
RULING: On the first issue, we rule that petitioner is a common carrier.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route,
maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not
bound to carry goods unless it consents. In short, it does not hold out its services to the general public. We disagree.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage and it offers its barges to the public for
carrying or transporting goods by water for compensation. Petitioner is clearly a common carrier.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled
manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have
to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals. The test to determine a
common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or extent of the business transacted." In the case at bar, the petitioner
admitted that it is engaged in the business of shipping and lighterage, offering its barges to the public, despite its limited clientele
for carrying or transporting goods by water for compensation.
On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise extraordinary diligence in its care
and custody of the consignee's goods.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner claims
that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove
that the typhoon is the proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during
and after the occurrence of the typhoon to prevent or minimize the loss. Thus, when petitioner persisted to proceed with the
voyage, it recklessly exposed the cargo to further damage.
17. AF Sanchez Brokerage v CA

FACTS: Wyeth-Pharma GMBH shipped on board an aircraft at Dusseldorf, Germany oral contraceptives for delivery to Manila in
favor of the consignee, Wyeth-Suaco Laboratories, Inc. Wyeth-Suaco insured the shipment against all risks with FGU Insurance.
Upon arrival of the shipment, it was discharged "without exception" and delivered to the warehouse of the Philippine Skylanders,
Inc. (PSI) for safekeeping.
In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco engaged the services of
Sanchez Brokerage. As its customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for
the cargo and thereafter delivers it to Wyeth-Suaco.
Later, 2 representatives of Sanchez Brokerage paid PSI storage fee. On the receipt, another representative of Sanchez Brokerage,
M. Sison, acknowledged that he received the cargoes consisting of three pieces in good condition.
The cargoes were thereupon stripped from the aluminum containers and loaded inside two transport vehicles hired by Sanchez
Brokerage. Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. for quality control check.
Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the cargoes. Upon inspection however, he
discovered that 44 cartons containing Femenal and Nordiol tablets were in bad order. The tablets were "wetted".
Wyeth-Suaco later demanded from Sanchez Brokerage the payment of P191K representing the value of its loss arising from the
damaged tablets. As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU
Insurance which paid Wyeth-Suaco the amount of P181K in settlement of its claim. Wyeth-Suaco thus issued Subrogation Receipt
in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181K it paid Wyeth-Suaco, Sanchez Brokerage, disclaimed liability
for the damaged goods, positing that the damage was due to improper and insufficient export packaging, among others. Hence,
the filing by FGU Insurance of a complaint for damages.
The RTC dismissed the case but was reversed by the CA it holding that the Sanchez Brokerage engaged not only in the business of
customs brokerage but also in the transportation and delivery of the cargo of its clients, hence, a common carrier under Article
1732 of the Civil Code.
ISSUE: WON petitioner is a common carrier.

RULING: YES. Petitioner is a common carrier. The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who
does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a
customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as
required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article 1733, extraordinary diligence in the vigilance
over the goods it transports according to all the circumstances of each case. In the event that the goods are lost, destroyed or
deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary
diligence.
The concept of "extra-ordinary diligence" as explained: It requires common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their nature requires.
In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order and
condition; and that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad order.
To free itself from liability, petitioner posits that they were damaged due to the fault or negligence of the shipper for failing to
properly pack them and to the inherent characteristics of the goods
While paragraph No. 4 of Article 1734 exempts a common carrier from liability if the loss or damage is due to the character of the
goods or defects in the packing or in the containers, the rule is that if the improper packing is known to the carrier or his
employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the resulting damage.
If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it should naturally
have received the cargo under protest or with reservations.
Since petitioner received all the cargoes in good order and condition at the time they were turned over by the PSI warehouseman,
and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent on petitioner
to prove that it exercised extraordinary diligence in the carriage of the goods. It did not, however. Hence, its presumed
negligence.
18. ?Schmitz Transport and Brokerage Corp v Transport Venture

FACTS:
ISSUE:
RULING:
19. Phil Charter v MV National Honor

FACTS: J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and accessories on board the vessel
M/V "National Honor," represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The
shipment was for delivery to Manila. The freight forwarder issued a bill of lading in the name of the shipper consigned to the
order of Blue Mono International Company, Incorporated (BMICI).
The shipment was contained in two wooden crates. The shipment had a total invoice value of US$90k. It was insured for ₱2.5M
with the Philippine Charter Insurance Corporation (PCIC).
The M/V "National Honor" arrived at the Manila International Container Terminal. The following day, the vessel started
discharging its cargoes using its winch crane. Dauz, Jr., the checker-inspector of the NSCP along with others conducted an
inspection of the cargo. They inspected the hatches, checked the cargo and found it in apparent good condition.
The stevedore 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.
BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such damaged condition. The Mariners’ Adjustment
Corporation hired by PCIC conducted a survey and declared that the packing of the shipment was considered insufficient.
BMICI subsequently filed separate claims against the NSCP and its insurer, the PCIC. When NSCP denied liability, PCIC paid the
claim and was issued a Subrogation Receipt.
Later, PCIC, as subrogee, filed a complaint for damages against "Unknown owner of the vessel M/V National Honor," and NSCP as
defendants. PCIC alleged that the loss was due to the fault and negligence of the defendants. The RTC and CA ruled in favor of the
defendants hence the case at bar.
ISSUE: WON the defendants are liable for damages
RULING: NO. They are free from liability.
The common carrier’s duty to observe the requisite extraordinary 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 NCC, 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.
The enumeration in Article 1734 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
The case at bar falls under one of the exceptions mentioned in Article 1734 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 defendants, 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.
20. Lea Mer Industries Inc. v Malayan Insurance Co. Inc.

FACTS: Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900 metric tons of
silica sand valued at P565K. Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from
Palawan to Manila. During the voyage, the vessel sank, resulting in the loss of the cargo
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. To recover the amount paid and in the
exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer, which refused to comply. Consequently,
Malayan instituted a Complaint
The RTC dismissed the case upon finding that the cause of the loss was a fortuitous event. This was, however, reversed
by the CA hence the case at bar.
ISSUE: WON petitioner is liable for the loss of the cargo
RULING: YES. The biatch is liable because it was not able to rebut the presumption of negligence. Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or both -- by land,
water, or air -- when this service is offered to the public for compensation. Petitioner is clearly a common carrier, because it offers
to the public its business of transporting goods through its vessels.
Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers
they transport, as required by the nature of their business and for reasons of public policy. Extraordinary diligence requires
rendering service with the greatest skill and foresight to avoid damage and destruction to the goods entrusted for carriage and
delivery.
Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have
transported. This presumption can be rebutted only by proof that they observed extraordinary diligence, or that the loss or
damage was occasioned by any of the following causes: (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.
AS TO THE CONTENTION OF FORTUITOUS EVENT: To excuse the common carrier fully of any liability, the fortuitous event must
have been the proximate and only cause of the loss. Moreover, it should have exercised due diligence to prevent or minimize the
loss before, during and after the occurrence of the fortuitous event.
In the case at bar, It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the loss of the
cargo was due to the bad weather condition brought about by a Typhoon. Evidence was presented to show that petitioner had
not been informed of the incoming typhoon, and that the Philippine Coast Guard had given it clearance to begin the voyage.
The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient. As required by the
pertinent law, it was not enough for the common carrier to show that there was an unforeseen or unexpected occurrence. It had
to show that it was free from any fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during or after the alleged
fortuitous event. Its witness testified that he could no longer remember whether anything had been done to minimize loss when
water started entering the barge.
Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a preponderance of evidence
that the barge was not seaworthy when it sailed for Manila. Respondent was able to prove that, in the hull of the barge, there
were holes that might have caused or aggravated the sinking. Petitioner offered no evidence to rebut the existence of the holes.
Its witness testified that the barge was in tip-top or excellent condition, but that he had not personally inspected it when it left
Palawan.
21. Loadstar Shipping v Pioneer Asia

FACTS: Petitioner Loadstar Shipping Co., Inc. is the registered owner and operator of the vessel M/V Weasel.
Loadstar entered into a voyage-charter with Northern Mindanao Transport Company, Inc. for the carriage of 65,000 bags of
cement from Iligan City to Manila. The shipper was Iligan Cement Corporation, while the consignee was Market Developers, Inc.
Prior to the voyage, the consignee insured the shipment of cement with respondent Pioneer Asia Insurance Corporation
for P1.4M
In the afternoon of June 24, M/V Weasel left Iligan City for Manila in good weather. However, at 4 in the morning the following
day, Captain Montera ordered the vessel to be forced aground. Consequently, the entire shipment of cement was good as gone
due to exposure to sea water. Petitioner thus failed to deliver the goods to the consignee in Manila.
The consignee demanded from petitioner full reimbursement of the cost of the lost shipment. Petitioner, however, refused to
reimburse. Nevertheless, respondent insurance company paid the consignee. In return, the consignee executed Subrogation
Receipt in favor of respondent concerning the latters subrogation rights against petitioner.
A case was filed. The RTC ruled in favor of respondent which was affirmed by the CA.
PETITIONER’S CONTENTION: petitioner contends that at the time of the voyage the carriers voyage-charter with the shipper
converted it into a private carrier. Thus, the presumption of negligence against common carriers could not apply. Petitioner
further avers that the stipulation in the voyage-charter holding it free from liability is valid and binds the respondent. Lastly,
petitioner insists that it had exercised extraordinary diligence and that the proximate cause of the loss of the cargo was a
fortuitous event.
ISSUE: 1. WON petitioner is a common carrier; 2. WON petitioner exercised extraordinary diligence
RULING: 1. YES. Petitioner is a corporation engaged in the business of transporting cargo by water and for compensation, offering
its services indiscriminately to the public. Thus, without doubt, it is a common carrier.
The voyage-charter agreement between petitioner and Northern Mindanao Transport Company, Inc. did not in any way convert
the common carrier into a private carrier.
As decided by a case: it is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-
charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned.
Conformably, petitioner remains a common carrier notwithstanding the existence of the charter agreement with the Northern
Mindanao Transport Company, Inc. since the said charter is limited to the ship only and does not involve both the vessel and its
crew.
2. No. Petitioner did not exercise extraordinary diligence. As a common carrier, petitioner is required to observe extraordinary
diligence in the vigilance over the goods it transports. When the goods placed in its care are lost, petitioner is presumed to have
been at fault or to have acted negligently. Petitioner therefore has the burden of proving that it observed extraordinary diligence
in order to avoid responsibility for the lost cargo.
Article 1734 enumerates the instances when a carrier might be exempt from liability for the loss of the goods. These are:
(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; and
(5) Order or act of competent public authority
Records show that in the evening of June 24, 1984, the sea and weather conditions in the vicinity of Negros Occidental were calm.
The records reveal that petitioner took a shortcut route, instead of the usual route, which exposed the voyage to unexpected
hazard. Petitioner has only itself to blame for its misjudgment.
22. Cebu Salvage Corp v Phil Home Assurance Corp

FACTS: May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?
Cebu Salvage Corporation (CARRIER AND PETITIONER) and Maria Cristina Chemicals Industries Inc. (MCCII, CHARTERER) entered
into a “voyage charter” to load 1100 metric tons of silica quartz from Negros Occidental to Misamis Oriental via M/T Espiritu
Santo. However, the ship never reached the destination since it sank, resulting to the total loss of the cargo.
MCCII filed a claim for loss with the INSURER (Philippine Home Assurance Corporation). Insurer gave P211, 500 and was
subrogated to the rights of MCCII. Thereafter it filed a case for reimbursement against the CARRIER in RTC. RTC judged in favour
of insurer. CA affirmed the decision, hence this petition.
CARRIER and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the ship was leased for a
single voyage for the conveyance of goods, in consideration of the payment of freight. 14 Under a voyage charter, the shipowner
retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the
vessel in return for his payment of freight. 15 An owner who retains possession of the ship remains liable as carrier and must
answer for loss or non-delivery of the goods received for transportation.
CARRIER arguesthat CA erred in finding that the “voyage charter” was a contract of carriage, and that such was merely a contract
of hire where MCCII merely hired the vessel from the real owner, ALS Timber Enterprises. Hence, not being the owner of M/T
Espiritu Santo, petitioner did not have control and supervision over the vessel, master and crew and therefore should not be
liable.
ISSUE: WON CARRIER is liable for the loss of cargo even if it did not own the vessel it used to consummate the contract?
Incidentally, is this a contract of carriage?
RULING: Carrier is liable, and such was a contract of carriage due to the following reasons by the Supreme Court:
There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it was engaged in the business of
carrying and transporting goods by water, for compensation, and offered its services to the public. From the nature of their
business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they
transport according to the circumstances of each case.
In the event of loss of the goods, common carriers are responsible, unless they can prove that this was brought about by the
causes specified in Article 1734 of the Civil Code. 23 In all other cases, common carriers are presumed to be at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence.
The fact that a carrier does not own the vessel it uses to consummate the contract of carriage does not negate its character and
duties as common carrier. It had control over what vessel it would use. The MCCII (respondent's subrogor) could not be
reasonably expected to inquire about the ownership of the vessels which petitioner carrier offered to utilize. As a practical
matter, it is very difficult and often impossible for the general public to enforce its rights of action under a contract of carriage if it
should be required to know who the actual owner of the vessel is.
To permit a common carrier to escape its responsibility for the goods it agreed to transport ( by the expedient alleging non-
ownership of the vessel it employed) would radically derogate from the carrier’s duty of extraordinary negligence. This idea is
both preposterous and dangerous. It would open the door to collusion between carrier and the real owner and to the possible
shifting of liability from carrier to one w/o financial capability to answer for the damages. Hence, the carrier should be held liable.
Petitioner next contends that if there was a contract of carriage, then it was between MCCII and ALS as evidenced by the bill of
lading ALS issued. Again, we disagree.
While the bill of lading may serve as the contract of carriage between the parties, it cannot prevail over the express provision of
the voyage charter that the carrier and the charterer executed. It was not signed by MCCII, as in fact it was simply signed by the
supercargo of ALS. The bill of lading was merely a receiptissued by ALS to evidence the fact that the goods had been received for
transportation. The Bill of Lading becomes, therefore, only a receipt and not the contract of carriage in a charter of the entire
vessel, for the contract is the Charter Party, and is the law between the parties who are bound by its terms and condition
provided that these are not contrary to law, morals, good customs, public order and public policy.
OTHER TOPICS: INSURANCE (in case lang i-ask)
The fact that the parties stipulated that the cargo insurance was for the charterer’s account does not exculpate the carrier from
liability for the breach of contract of carriage – it simply meant that the charterer would take care of having the goods insured.
23. Sps. Cruz v Sun Holidays

FACTS: Spouses Cruz lodged a complaint for damages against Sun Holidays for the death of their son, Ruelito (a 28-year old
engineer working Saudi Arabia), and his wife who both perished on board M/V Coco Beach III which capsized. The stay of the
newly wed was by virtue of a tour-package-contract at the Coco Beach Resort which included transportation to and from the
resort and Batangas.
Matute, a scuba diver and one of the survivors, narrated the events that happened. At first, they were advised to stay for one
more night due to the strong winds and heavy rains. However, the next day, they sailed and shortly thereafter, it started to rain
again and the winds got stronger causing the boat to tilt side to side. Later, two large waves hit the boat and caused it to capsize.
The passengers who had put their lifejackets on struggled to get out. Help then came only after 45 minutes.
Petitioners sent a letter for indemnification worth P4million but such was denied by the respondent, saying they would only give
P10,000. Hence, the petitioners filed a claim for damages in RTC due to negligence of respondent for sailing despite
PAGASA’sstorm warning bulletins. Respondent claims that they are not common carriers since the boats they have are not for the
general public, but merely for guests and crew members. And assuming they were, such happening was under the concept of
fortuitous event and that they satisfied the four conditions required to sail: PAGASA’s clearance, the captain’s clearance, the
resort’s Assistant manager’s clearance and the calmness of the sea.
The RTC and CA sided with the respondent.
ISSUE: WON respondent is a common carrier? And WON such happening was a fortuitous event?
RULING: Respondent is a common carrier and such happening is not a fortuitous event for the following reasons:
Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also
carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population.
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly considered
ancillary thereto. The constancy of respondent's ferry services in its resort operations is underscored by its having its own Coco
Beach boats. And the tour packages it offers, which include the ferry services, may be availed of by anyone who can afford to pay.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. The Court is aware of the practice of
beach resort operators offering tour packages to factor the transportation fee in arriving at the tour package price. That guests
who opt not to avail of respondent's ferry services pay the same amount is likewise inconsequential. These guests may only be
deemed to have overpaid.
Under the Civil Code, carriers are required to observe extraordinary diligence. They are bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common carrier is at fault
or negligent and such may be overcome only by evidence that the carrier exercised extraordinary diligence.
As to the concept of fortuitous event, the Court is convinced that it does not fall under such idea. The elements of a "fortuitous
event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that constituted the casofortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible
for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in
the aggravation of the resulting injury to the creditor. 24
To fully free a common carrier from any liability, the fortuitous event must have been the proximate and ONLY cause of the loss.
Evidence shows that M/B Coco Beach III suffered engine trouble before it capsized and sank. The incident was, therefore, not
completely free from human intervention. Hence, respondent should be liable.
BONUS TOPICS # 1 – DAMAGES AND NET EARNINGS CAPACITY COMPUTATION
Article 1764 27 vis-à-vis Article 2206 28 of the Civil Code holds the common carrier in breach of its contract of carriage that results
in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity and (3)
moral damages.
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity=life expectancy x (gross annual income - reasonable and necessary living expenses). The first factor, i.e.,
life expectancy, is computed by applying the formula (2/3 x [80 — age at death]) adopted in the American Expectancy Table of
Mortality. The second factor is computed by multiplying the life expectancy by the total earnings less expenses necessary in the
creation of such earnings or income and less living and other incidental expenses. 32 The loss is equal such portion of earnings as
he would have used to support his dependents or heirs. The petitioners are also entitled to exemplary damages, and
consequently to attorney’s fees due to the presence of exemplary damages.
The petitioner is also entitled to interest since according to Eastern Shipping Lines, Inc. v. Court of Appeals, when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable
for payment of interest in the concept of actual and compensatory damages
BONUS TOPIC # 2 – PUBLIC SERVICE ACT PARTIALLY SUPPLEMENTS LAW ON COMMON CARRIERS
The concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the
Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers
set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship
line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply
and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and
other similar public services . . . 18 (emphasis and underscoring supplied.)
24. Unsworth Transport International (Phis) Inc v CA

FACTS:
Shipper Sylvex Purchasing Corporation delivered to Unsworth Transport International (UTI) a shipment of 27 drums of raw
materials for pharmaceutical manufacturing (extracts, flavouring liquid and flammable liquid) for delivery to consignee
UniLab(United Laboratories Inc.). The materials were insured by Pioneer Insurance and Surety Corporation also in favour of
Unilab. After a bill of lading was issued by UTI, the shipment was boarded on the ships of American President Lines (APL) namely
M/V Pres. Jackson and M/V Pres. Taft.
The shipment arrived the port of Manila and the goods were placed in the warehouse of UTI. Surveyors from Oceanica Cargo
Marine Surveyors Corporation inspected the condition of the goods in the warehouse and reported that most goods in the drums
were in good condition, except for a spillage on the drum of a vitamin extract.
After a few days, the arrastreJardine Davies Transport Services issued a “gate pass” stating that there were 22(out of 27) drums of
raw materials and that such were in good condition. These materials were then loaded on truck for delivery to Unilab. On the
same day, Unilab received the materials and was surveyed by another set of independent surveyors J.G. Bernas Adjusters and
Surveyors. These surveyors reported thatthere were spillages, punctures and shortships(Wikipedia: meaning there were goods
not included in the shipment) on the drums. Hence, the Unilab’s representative excluded one paper bag and one drum for being
unfit.
Unilab filed a formal claim against Pioneer Insurance and UTI. Though UTI admitted that it was a freight forwarder, it however
denied liability on the basis of the “gate pass” issued by Jardine that the goods were in complete and good condition (bisangudug
22 out of 27 raangnabutan); while Pioneer Insurance paid the claimed amount on March 23, 1993. By virtue of the Loss and
Subrogation Receipt issued by Unilab in favor of Pioneer Insurance, the latter filed a complaint for Damages against APL, UTI and
petitioner. RTC and CA rendered decision in favour of Pioneer Insurance.
ISSUE:
WON petitioner UTI is a common carrier? WON petitioner exercised due diligence?
RULING:
UTI is a common carrier and failed to factually prove due diligence required. Admittedly, petitioner 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 forwarder's liability is limited to damages arising from its own negligence, including negligence in choosing the carrier;
HOWEVER, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their
transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the
responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise itself.
Consequently, common carriers are presumed to have been at fault or negligent if the goods they transported deteriorated or
got lost or destroyed.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.
Petitioner failed to rebut the prima facie presumption of negligence in the carriage of the subject shipment:
First, as stated in the bill of lading, the subject shipment was received by UTI in apparent good order and condition in New York,
United States of America. Second, the OCMSC Survey Report stated that one steel drum was discovered to be with a cut/hole on
the side, with approximate spilling of 1%. Third, though the “gate pass” noted that the subject shipment was in good order and
condition, it was specifically stated that there were 22 (should be 27 drums per Bill of Lading) drums of raw materials for
pharmaceutical manufacturing. Last, J.G. Bernas' Survey Report stated that "1-s/drum was punctured and retaped on the bottom
side and the content was lacking, and there was a short delivery of 5-drums."
All these conclusively prove the fact of shipment in good order and condition, and the consequent damage to one steel drum
vitamin extract while in the possession of petitioner which failed to explain the reason for the damage.
HOWEVER, it is to be noted that the Civil Code does not limit the liability of the common carrier to a fixed amount per package.
In all matters not regulated by the Civil Code, the rights and obligations of common carriers are governed by the Code of
Commerce and special laws. Thus, the Carriage of Goods by Sea Act(COGSA) supplements the Civil Code by establishing a
provision limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the bill of lading. 30 Section 4
(5) of the COGSA provides:
“(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not
shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of
such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in
the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.”
The value of the goods was not declared in the bill of lading, hence, in light of the foregoing, petitioner's 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 with interest and attorney’s fees. The mere insertion by the shipper of an invoice number did not operate to
show that petitioner had knowledge of the actual value of the cargo.
Hence Supreme Court AFFIRMED the CA with MODIFICATION by reducing the principal amount due private respondent Pioneer
Insurance and Surety Corporation from P76,231.27 to $500, with interest of 6% per annum from date of demand, and 25% of the
amount due as attorney's fees.
BONUS TOPIC – REMEDIAL LAW

Factual questions may not be raised in a petition for review on certiorari. “Though it is not our function to evaluate anew the
evidence presented, we still refer to the records of the case to show that, as correctly found by the RTC and the CA, petitioner
failed to rebut the prima facie presumption of negligence in the carriage of the subject shipment.”
25. >Sps. Pereña v Sps Zarate

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary diligence in the
conduct of his business. He is presumed to be negligent when death occurs to a passenger. His liability may include indemnity for loss
of earning capacity even if the deceased passenger may only be an unemployed high school student at the time of the accident.
FACTS:
SpsPerenas (Petitioner) were engaged in the business of transporting students from their residences in Paranaque to Don
Bosco Makati City. They used a KIA Ceres Van. Clemente Alfaro was employed as the driver. Sps Zarate’s son (Aaron),
(Respondent) was one of the students. On Aug. 22, 1996, since they were running late, Alfaro took an alternate route by
traversing the narrow path underneath the Magallanes Interchange as a shortcut to Makati, instead of passing on the South
Superhighway. In the narrow path was a railroad without warning signs or watchmen. At that same time, PNR Commuter 302
(train) operated by JhonnyAlano, was traversing the railroad. Alfaro was unaware of the upcoming train coz his view was blocked
coz he overtook the bus also in the area. The bus was able to cross but the van driven by Alfaro was hit at the rear, throwing the
students out, and Aaron landed at the train’s path which resulted to his head being severed. Sps Zarate commenced an action for
damages against Alfaro, SpsPerenas, PNR and Alano. The claim against SpsPerenas was based upon the breach of the contract of
carriage. The claim against PNR was based upon quasi-delict under 2176 CC. As a defense, Sps. Perenas claimed that hey exercised
the diligence of a good father of a family in the selection and supervision of Alfaro ( that he had a license, not involved in a prior
vehicular accident, Aaron rides the van daily, and Teodoro sometimes accompany him). PNR defends by claiming that the
proximate cause of the collision was the reckless crossing of the van. RTC decided in favor of Zarates and held defendants jointly
and severally liable. On appeal, CA modified the ruling and reduced the moral damages. It upheld the award for the loss of
Aaron’s earning capacity using the American Expectancy Table of Mortality, applying the Cariaga v Laguna Tayabas Bus Company
wherein the heirs of Cariaga was awarded the deceased’s earning capacity despite being a medical student. Aaron’s life
expectancy was to be 39.3 upon reckoning his life expectancy from age of 21 (when he should graduate college and work) instead
of 15 (age when he died). Reconsideration was denied, hence the petition.
ISSUE:
WON Sps Zarate and PNR were jointly and severally liable?
WON the award for loss of earning capacity is speculative despite Aaron being a minor?
3rd issue – amount of damages not excessive (mental anguish, etc.)
RULING: PETITION HAS NO MERIT

1) SPS PERENAS OPERATED AS A COMMON CARRIER, SO THEIR STANDARD OF CARE WAS EXTRAORDINARY DILIGENCE,
NOT THE ORDINARY DILIGENCE OF A GOOD FATHER OF A FAMILY – IN EFFECT THEIR DEFENSES WERE INAPPROPRIATE IN AN
ACTION FOR BREACH OF CONTRACT OF CARRIAGE
>What is a CARRIER? It is a person or corporation who undertakes to transport or convey goods or persons from one
place to another, gratuitously or for hire.
PRIVATE/SPECIAL CARRIER – one who, without making the activity a vocation, or without holding himself or itself out to
the public as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular instance only,
to transport goods or persons from one place to another either gratuitously or for hire. The provisions on ordinary contracts of
the Civil Code govern the contract of private carriage. The diligence required of a private carrier is only ordinary, that is, the
DILIGENCE OF A GOOD FATHER OF A FAMILY
COMMON/PUBLIC CARRIER - a person, corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering such services to the public. Contracts
of common carriage are governed by the provisions on common carriers of the Civil Code, the Public Service Act and other special
laws relating to transportation. A common carrier is required to observe EXTRAORDINARY DILIGENCE (this is because of the
nature of the business and for reasons of public policy – Art. 1755 CC), and is PRESUMED to be at fault or to have acted
negligently in case of the loss of the effects of passengers, or the death or injuries to passengers.
> PUBLIC USE VIS-À-VIS COMMON CARRIERS
Public use is the same as “use by the public”. Its essential feature is not confined to privileged individuals, but is open to
the indefinite public. The test to use with respect to a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part of the
activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the undertaking is a
SINGLE TRANSACTION NOT A PART OF THE GENERAL BUSINESS OR OCCUPATION, then only a PRIVATE carrier.
> IN THIS CASE, SpsPerenas operated as a COMMON CARRIER, coz despite catering to a limited clientele, they held
themselves out as a ready transportation indiscriminately to the students of a particular school living within or near where they
operated the service and for a fee. Being a common carrier, it was incumbent upon them to rebut the PRESUMPTION OF FAULT
AND NEGLIGENCE, which they failed. Pursuant to 1759 CC, their observance of the diligence of a good father of a family did not
extinguish their liability as a common carrier. Likewise, their driver was guilty of NEGLIGENCE (the omission to do something
which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the
doing of something which a prudent and reasonable man would not do). TEST OF THE EXISTENCE OF NEGLIGENCE (Did the
defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have
used in the same situation? If not, then he is guilty of negligence.)
> PNR is also guilty of negligence for it did not ensure the safety of the pedestrians and motorists for lack of crossbars,
signal lights, warning signs, and other permanent safety barriers in the railway.
2. AWARD FOR LOSS OF EARNING CAPACITY IS NOT SPECULATIVE
>The computation was based on the minimum wage. (gi argue mngudsa petitioner, applying a case, nga speculative daw
kay di daw sure if ma professional basi Aaron)
>Sps Zarate were deprived of his presence and services as well. DENIED.
26. Westwind Shipping Corporation v UCPB General Insurance Co

Which between a common carrier and an arrastre operator should be responsible for damage or loss incurred by the shipment during
its unloading? COMMON CARRIER
FACTS:
On Aug. 1993, Kinsho Mataichi Corp shipped from the port of Kobe, Japan, metal containers for delivery to San Miguel
Corp. It was loaded on a vessel owned by Westwind. It was then unloaded upon arrival in Manila, but 6 containers sustained
dents and punctures from the forklift used. On Sept. 1993, Orient Freight, customs broker of SMC, withdrew the containers
including the damaged ones and delivered to SMC warehouse. Upon delivery, it was found out that additional 9 containers were
also damaged, for a total of 15 containers in bad order. A year after, SMC filed a claim against UCPB, Westwind, Orient, Asian
Terminals (arrastre operator) for the damaged containers amounting to P292k. UCPB paid then SMC signed the subrogation
receipt. Now, UCPB seeks damages against Westwind, Asian Terminals and Orient. RTC dismissed UCPB’s complaint saying that its
claim against Asian for damaged goods prescribed (it should be filed within 15 days from consignee’s knowledge); Westwind and
Orient did not operate the forklift during the stevedoring. On appeal, CA sustained the prescription against Asian but reversed
against Westwind (owner of vessel), Orient (delivered to warehouse of SMC), saying that the common carrier, not the arrastre
operator, is responsible during the unloading of the cargoes from the vessel and that it is not relieved from liability and is still
bound to exercise extraordinary diligence at the time in order to see to it that the cargoes under its possession remain in good
order and condition. Hence the petition.
ISSUE:
WON Westwind and Orient are liable.
RULING: PETITIONS LACK MERIT – BOTH LIABLE
 COMMON CARRIERS
The nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods transported by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common
carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a
right to receive them.
o MARINE VESSELS
Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo from the time it is turned
over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the shore or on the
discharging wharf at the port of unloading, unless agreed otherwise.
o COGSA SEC 2
Under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage,
custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the
rights and immunities set forth in the Act. Section 3 (2) thereof then states that among the carriers’ responsibilities
are to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
 ARRASTRE OPERATOR
Main function is to handle the cargo deposited on the wharf or between the establishment of the consignee or shipper and
the ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the
goods and to turn them over to the party entitled to their possession.
o IN ESSENCE, both the ARRASTRE and the CARRIER are charged with and obligated to deliver the goods in good
condition to the consignee, since both have similar relationship with respect to the consignee. Nevertheless, it is
not always that both arrastre and carrier solidarily liable.
 QUESTION NOW IS: WHICH HAD CUSTODY OF THE SHIPMENT DURING ITS UNLOADING FROM THE VESSEL? – COMMON
CARRIER (WESTWIND and ORIENT)
As mentioned above, Sec. 3(2) of COGSA, one of the carrier’s responsibilities are to properly and carefully load, care for and
discharge the goods carried. Also, like the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is
accordingly responsible for the acts of the master, the crew, the stevedore, and his other agent. It is settled in maritime law
jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier.
o What Westwind failed to realize is that the extraordinary responsibility of the common carrier lasts until the
time the goods are actually or constructively delivered by the carrier to the consignee or to the person who has
a right to receive them. There is actual delivery in contracts for the transport of goods when possession has
been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to remove
the goods. In this case, since the discharging of the containers/skids, which were covered by only one bill of
lading, had not yet been completed at the time the damage occurred, there is no reason to imply that there was
already delivery, actual or constructive, of the cargoes to ATI.
o The contention of Orient is likewise untenable. A customs broker has been regarded as a common carrier
because transportation of goods is an integral part of its business. Article 1732 does not distinguish between
one whose principal business activity is the carrying of goods and one who does such carrying only as an
ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs declaration and proper shipping documents as
required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary
consideration. DENIED.
27. Federal Phoenix Assurance Co. Ltd v Fortune Sea Carrier Inc
The vessel was converted into a private carrier notwithstanding the existence of the Time Charter Party agreement with Northern
Transport since the said agreement was not limited to the ship only but extends even to the control of its crew.
FACTS:
Fortune leased its vessel to Northern Mindanao Transport Co. The Time Charter Party agreement stipulated that the
vessel be leased for 90 days (later extended for another 90 days) to carry bags of cement to different destinations. Later,
Northern ordered 2069 bales of abaca fibers to be shipped on said leased vessel from supplier Hemp Trading to consignee
Newtech Pulp. Shipment was insured by Federal Phoenix. Upon arrival at Iligan City, stevedores while discharging, noticed smoke
coming out of the cargo haul. 60 bales were then damaged by the fire. So, Newtech went after Federal to which the latter paid
P162k. After subrogation, Federal then went after Fortune by filing a complaint for sum of money after unheeded demands. As
defense, Fortune said that the vessel was under the complete control of Northern, hence it was a private carrier. RTC decided in
Fortune’s favor. On appeal, CA reversed saying that although the agreement was denominated as Time Charter Party, it found
compelling reasons to hold that the contract was one of bareboat or demise. Hence, the petition.
ISSUE:
WON CA erred in declaring that Fortune Sea was converted into a private carrier by virtue of the charter party
agreement it entered into with Northern Transport
RULING: PETITION HAS NO MERIT

> Fortune Sea is a corporation engaged in the business of transporting cargo by water and for compensation, offering its
services to the public. As such, it is without a doubt, a common carrier.
> The Time Charter Party agreement executed by Fortune Sea and Northern Transport clearly shows that the charter
includes both the vessel and its crew thereby making Northern Transport the owner pro hac vice of M/V Ricky Rey during
the whole period of the voyage.
o The vessel was converted into a private carrier notwithstanding the existence of the Time Charter Party
agreement with Northern Transport since the said agreement was not limited to the ship only but extends even
to the control of its crew.
o Testimony of Captain of ship shows that when the whole vessel was leased to Northern Transport, the
entire command and control over its navigation was likewise transferred to it. DENIED
28. Torres-Madrid Brokerage Inc v FEB Mitsui Marine Insurance Co.

Facts:Various electronic goods coming from Malaysia and Thailand arrived to manila for Sony Philippines. Sony then contracted
the services of petitioner to facilitate, process, withdraw, and deliver the shipment from the port to its warehouse in Biñan,
Laguna. Petitioner in turn, who did not own any delivery trucks subcontracted respondent BMT to transport the goods from
Manila to Lagunawhich Sony acceded.
4 trucks were then supposedly used to transport the goods. On the day of the delivery however, there were only 3 trucks that
arrived. It was found out subsequently that one track driven by rudolfolapesura was abandoned with its him nowhere to be
found. Petitioner then subsequently demanded from respondent BMT payment for the lost shipment in which respondent
refused to pay alleging that the goods were hijacked. In the meantime, Sony filed an insurance claim with the Mitsui, the insurer
of the goods. After evaluating the merits of the claim, Mitsui paid Sony PHP7,293,386.23 corresponding to the value of the lost
goods which caused Sony’s right to be subrogated in favor of respondent Mitsui. Respondent Mitsui then in return, demanded
against petitioner who then impleaded BMT as a third party defendant praying among others that in case petitioner is held liable,
BMT will be liable for reimbursement. Both petitioner and respondent BMT was then held liable.
Petitioner denied that it was a common carrier required to exercise extraordinary diligence. It maintains that it exercised the
diligence of a good father of a family and should be absolved of liability because the truck was "hijacked" and this was a
fortuitous event. Petitioner denies being a common carrier because it does not own a single truck to transport its shipment and
it does not offer transport services to the public for compensation. It emphasizes that Sony knew TMBI did not have its own
vehicles and would subcontract the delivery to a third-party. Further, petitioner now insists that the service it offered was
limited to the processing of paperwork attendant to the entry of Sony's goods. It denies that delivery of the shipment was a
part of its obligation.
Petitioner solely blames BMT as it had full control and custody of the cargo when it was lost. BMT, as a common carrier, is
presumed negligent and should be responsible for the loss.
BMT claimed that it had exercised extraordinary diligence over the lost shipment, and argued as well that the loss resulted from
a fortuitous event.
Issue:WON petitioner can be considered a common carrier?
Ruling:Yes. Petitioner, albeit being a brokerage, is still considered as a common carrier.
Common carriers are persons, corporations, firms or associations engaged in the business of transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public. By the nature of their business and for reasons
of public policy, they are bound to observe extraordinary diligence in the vigilance over the goods and in the safety of their
passengers
In A.F. Sanchez Brokerage, Inc. v. Court of Appeals, we held that a customs broker — whose principal business is the preparation
of the correct customs declaration and the proper shipping documents — is still considered a common carrier if it also undertakes
to deliver the goods for its customers. The law does not distinguish between one whose principal business activity is the carrying
of goods and one who undertakes this task only as an ancillary activity. During trial, petitioner’s General Manager admitted that
Petitioner’s contracts include transportation and deliver of the goods to sony’s warehouse.
Petitioner’s non-ownership of trucks is immaterial. As long as an entity holds itself to the public for the transport of goods as a
business, it is considered a common carrier regardless of whether it owns the vehicle used or has to actually hire one. Petitioner’s
responsibility was maintained even if it hired another common carrier (BMT) until the goods were delivered actually or
constructively.
Instead of showing that it had acted with extraordinary diligence, Petitioner simply argued that it was not a common carrier
bound to observe extraordinary diligence. Its failure to successfully establish this premise carries with it the presumption of fault
or negligence, thus rendering it liable to Sony/Mitsui for breach of contract.
3. Private Carriage
29. Home Insturance Co v American Steamship Agencies
(Charter Party- Contract between the charterer and shipowner)
Facts:21,740 jute bags of Peruvian fish meal were shipped from Peru on January 17, 1963 through SS Crowborough which was
owned and operated by respondent American Steamship Agencies. The cargo was consigned to San Miguel Brewery and was
insured by the petitioner. Upon arrival, the same was discharged by respondent stevedoring corporation. When the cargo was
delivered to San Miguel, it was found out that there was shortage. Sam Miguel was able to claim only from the petitioner by
reason of denial of liability of respondents. This prompted petitioner to file a case against respondents for reimbursement.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and quality
that it had received the same from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366 of the Code of
Commerce stating that the claim must be made within 24 hours from receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the provisions of the Charter party referred to in the bills of
lading, the charterer, not the shipowner, was responsible for any loss or damage of the cargo. Furthermore, it claimed to have
exercised due diligence in stowing the goods and that as a mere forwarding agent, it was not responsible for losses or damages to
the cargo.
In the Charter party, there was a stipulation that exempts the owner of the vessel from any loss or damage or delay arising from
any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board,
for whose acts the owner would ordinarily be liable except for said paragraph
Issue:WON the stipulation in the charter party absolving the owner from liability is valid?
Ruling: Respondent is not liable. The stipulation of non-liability is valid.
Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce
making the ship agent civilly liable for indemnities suffered by third persons arising from acts or omissions of the captain in the
care of the goods and Article 1744 of the Civil Code under which a stipulation between the common carrier and the shipper or
owner limiting the liability of the former for loss or destruction of the goods to a degree less than extraordinary diligence is valid
provided it be reasonable, just and not contrary to public policy. The release from liability in this case was held unreasonable and
contrary to the public policy on common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a
common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private
carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed
valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not
acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the
negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force
where the public at large is not involved, as in the case of a ship totally chartered for the use of a single party.
30. National Steel Corp v CA

Facts: Petitioner National Steel Corp (NSC for brevity) entered into a special contract of charter party with Vlasons Shipping Inc
(VSI for brevity). VSI owned MV Vlasons I, a vessel which renders tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter
party with its owner. On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV 'VLASONS I'
loaded at plaintiffs pier at Iligan City, the NSC's shipment of 1,677 skids oftinplates and 92 packages of hot rolled sheets or a
total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila from the port of Iligan city. Upon
arriving at Manila, the vessel’s hatches were opened. when the vessel's three (3) hatches containing the shipment were opened
by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. By reason of
heavy rain, the cargo was only unloaded and discharged after 11 days. After investigation, it was concluded that the packing
materials of the cargo were wet and was caused by contact with sea water due to heavy weather.
This prompted the NSC to file against VSI for damages alleging among others that VSI is guilty of negligence in making the ship
seaworthy and all its other parts fit and safe for the carriage of the cargos which is a violation of VSI’s obligation under the
Contract of Charter Voyage. VSI denied the allegations and contended that it was able to exercise due diligence in making sure
that the vessel was sea worthy and that it was not a common carrier. Further, it contended that under the contract of charter
voyage hire, it was not liable for damages until it can be proven that it was guilty of willful negligence and that the vessel was
free of risk and expense in connection with the loading and discharging of the cargo; that the damage, if any, was due to the
inherent defect, quality or vice of the cargo or to the insufficient packing thereof or to latent defect of the cargo not discoverable
by due diligence or to any other cause arising without the actual fault or privity of defendant and without the fault of the agents
or servants of defendant.
Issue:WON VSI is not a common carrier and WON it is liable for damages?
Ruling:VSI is not a common carrier. Article 1732 of the Civil Code defines a common carrier as "persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public." It has been held that the true test of a common carrier is the
carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a
fee.A carrier which does not qualify under the above test is deemed a private carrier. "Generally, private carriage is undertaken
by special agreement and the carrier does not hold himself out to carry goods for the general public. The most typical, although
not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the
shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages."
In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the Regional Trial Court,
it carried passengers or goods only for those it chose under a "special contract of charter party."As correctly concluded by
the Court of Appeals, the MV Vlasons I "was not a common but a private carrier." Consequently, the rights and
obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations
in their contract of private carriage or charter part
It is clear from the parties' Contract of Voyage Charter Hire, dated July 17, 1974, that VSI "shall not be responsible for losses
except on proven willful negligence of the officers of the vessel." The NANYOZAI Charter Party, which was incorporated in the
parties' contract of transportation further provided that the shipowner shall not be liable for loss of or damage to the cargo
arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy
or to ensure that the same was "properly manned, equipped and supplied," and to "make the holds and all other parts of the
vessel in which cargo [was] carried, fit and safe for its reception, carriage and preservation."The NANYOZAI Charter Party also
provided that "[o]wners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or
default of the master or crew."|||
Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the foregoing provisions of the
Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a
common carrier.|||
However, NSC was not able to discharge its burden to prove VSI’s negligence. Records show that VSI’s official and crew were able
to secure the cargo despite the heavy weather that it experienced while it was on voyage. Further, it was proven that it was the
stevedores employed by NSC that was in fault for using poor material to cover the materials when strong rains disrupted the
unloading of the cargo. The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable
weather will not make VSI liable for any damage caused thereby. It was the stevedore company who had the duty to unload the
cargo in a prudent manner and is liable for the loss or damage of cargo.
31. Valenzuela Hardwood and Industrial Supply v CA

Facts: Petitioner is an entity who is in the business of logging while respondent is a shipping company.
Petitioner contracted respondent for the cargo delivery of its round logs from Isabela to Manila. Petitioner then insured the
cargoes to an insurance company which was perfected through a valid payment of an insurance premium.
During its voyage, the ship sank and the logs were lost. Petitioner filed a claim against the insurance company but it was denied. It
then filed a claim against respondent.
Petitioner invokes Art. 1745 of the civil code while Respondent defended itself arguing that there was a stipulation in the charter
party that the ship owner will not be liable in case of loss and this argument was sustained by the CA.
Issue: WON respondent is liable for the loss of the logs.
Held: No, respondent is not liable for the loss of the logs because their agreement was in the nature of a private carriage which
means that the provisions on Art. 1745 on common carriers cannot apply and they are instead governed by their charter
agreement.
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary
prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) That the common carriers liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of the Code of
Commerce[14] and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil Code,
[15]
petitioner further contends that said stipulation gives no duty or obligation to the private respondent to observe the diligence
of a good father of a family in the custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a private carrier in
transporting petitionerslauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by
petitioner may not be applied unless expressly stipulated by the parties in their charter party.[16]
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship
captain. Pursuant to Article 1306 [17] of the Civil Code, such stipulation is valid because it is freely entered into by the parties and
the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is
not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and
obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not
involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy
embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.
SC said that the issue has already been resolved in Home Insurance Co. vs American Steamship Agencies, The provisions of our
Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a
stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid .
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not
acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the
negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force
where the public at large is not involved, as in this case of a ship totally chartered for the use of a single party. [19] (Underscoring
supplied.)
32. FGU Insurance Corp v GP Sarmiento Trucking Corp

Facts: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white
refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along
South Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing
the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck,
causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered
cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests of Concepcion Industries, Inc.,
sought reimbursement of the amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim, FGU
filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional Trial
Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion
Industries, Inc., since 1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the
cause of damage was purely accidental.
The issues having thus been joined, FGU presented its evidence, establishing the extent of damage to the cargoes and the
amount it had paid to the assured. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the
complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier.
Issue: WON respondent GPS is a common carrier and WON the doctrine of res ipsa loquiturcan apply.
Held: No, respondent is not a common carrier and res ipsa loquitur cannot apply.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply justified. GPS,
being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual
or entity, cannot be considered a common carrier. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering
their services to the public,[8] whether to the public in general or to a limited clientele in particular, but never on an exclusive
basis.[9] The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee.[10] Given accepted standards, GPS scarcely falls within the term common carrier.
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere
proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. [11] The
law, recognizing the obligatory force of contracts, [12] will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof.The effect of every infraction is to create a
new duty, that is, to make recompense to the one who has been injured by the failure of another to observe his contractual
obligation[16] unless he can show extenuating circumstances, like proof of his exercise of due diligence (normally that of the
diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that of
extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioners assured, and
admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on,
or failure of compliance with, the obligation in this case, the delivery of the goods in its custody to the place of destination - gives
rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to
establish otherwise. GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay
petitioner. The driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be held
liable under the agreement. A contract can only bind the parties who have entered into it or their successors who have assumed
their personality or their juridical position
Petitioners civil action against the driver can only be based on culpa aquiliana, which, unlike culpa contractual, would
require the claimant for damages to prove negligence or fault on the part of the defendant. [18]
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where the thing which
caused the injury complained of is shown to be under the latters management and the accident is such that, in the ordinary
course of things, cannot be expected to happen if those who have its management or control use proper care. It affords
reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of care. [19] It is not a rule
of substantive law and, as such, it does not create an independent ground of liability. Instead, it is regarded as a mode of proof, or
a mere procedural convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific
proof of negligence. The maxim simply places on the defendant the burden of going forward with the proof. [20] Resort to the
doctrine, however, may be allowed only when (a) the event is of a kind which does not ordinarily occur in the absence of
negligence; (b) other responsible causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated by the
evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the plaintiff. [21] Thus, it is not applicable
when an unexplained accident may be attributable to one of several causes, for some of which the defendant could not be
responsible.[22]
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the
defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of
the relation of the parties.[23] Nevertheless, the requirement that responsible causes other than those due to defendants conduct
must first be eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure (non-contractual)
tort since obviously the presumption of negligence in culpa contractual, as previously so pointed out, immediately attaches by a
failure of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is predicated on culpa acquiliana,
while he admittedly can be said to have been in control and management of the vehicle which figured in the accident, it is not
equally shown, however, that the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have
waived the right to present evidence.[24] Thus, respondent corporation may no longer offer proof to establish that it has exercised
due care in transporting the cargoes of the assured so as to still warrant a remand of the case to the trial court.
4. Services
33. Crisostomo v CA
Facts: Petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc. to
arrange and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of Europe. The package tour included
the countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which included airfare, and the booking fee was also waived
because petitioners niece, MeriamMenor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to deliver petitioners travel
documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the package tour. Menor then told her to be at
the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the flight for the first
leg of her journey from Manila to Hongkong. To petitioners dismay, she discovered that the flight she was supposed to take had
already departed the previous day. She learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called
up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant which included England, Scotland
and Wales in its itinerary. For this tour package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as partial payment and commenced the trip in July
1991.
Upon petitioners return from Europe, she demanded from respondent the reimbursement of P61,421.70, representing the
difference between the sum she paid for Jewels of Europe and the amount she owed respondent for the British Pageant tour.
Despite several demands, respondent company refused to reimburse the amount, contending that the same was non-refundable.
[1]
Petitioner was thus constrained to file a complaint against respondent for breach of contract of carriage and damages
Petitioner contends that respondent did not observe the standard of care required of a common carrier when it informed
her wrongly of the flight schedule. She could not be deemed more negligent than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its obligation. If she were negligent at all, the same is merely contributory and
not the proximate cause of the damage she suffered. Her loss could only be attributed to respondent as it was the direct
consequence of its employees gross negligence.
Issue: WON respondent is a common carrier and with that, WON or respondent is liable for the claims of petitioner.
Held: No, respondent is not a common carrier and respondent is not liable.
By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place to another for a fixed price. [9] Such person or association of
persons are regarded as carriers and are classified as private or special carriers and common or public carriers. [10] A common
carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the business of transporting either
passengers or goods and is therefore, neither a private nor a common carrier. Respondent did not undertake to transport
petitioner from one place to another since its covenant with its customers is simply to make travel arrangements in their
behalf. Respondents services as a travel agency include procuring tickets and facilitating travel permits or visas as well as
booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent company, this does not mean that
the latter ipso facto is a common carrier. At most, respondent acted merely as an agent of the airline, with whom petitioner
ultimately contracted for her carriage to Europe. Respondents obligation to petitioner in this regard was simply to see to it that
petitioner was properly booked with the airline for the appointed date and time. Her transport to the place of destination,
meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service of arranging and facilitating petitioners
booking, ticketing and accommodation in the package tour. In contrast, the object of a contract of carriage is
the transportation of passengers or goods. It is in this sense that the contract between the parties in this case was an ordinary
one for services and not one of carriage. Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is determinative of the degree of care required
in the performance of the latters obligation under the contract. For reasons of public policy, a common carrier in a contract of
carriage is bound by law to carry passengers as far as human care and foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the circumstances.[11] As earlier stated, however, respondent is not a common
carrier but a travel agency. It is thus not bound under the law to observe extraordinary diligence in the performance of its
obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is that
of a good father of a family under Article 1173 of the Civil Code.[12] This connotes reasonable care consistent with that which an
ordinarily prudent person would have observed when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in doing the alleged negligent act use that reasonable
care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.
We do not agree with the finding of the lower court that Menors negligence concurred with the negligence of petitioner and
resultantly caused damage to the latter. Menors negligence was not sufficiently proved, considering that the only evidence
presented on this score was petitioners uncorroborated narration of the events. It is well-settled that the party alleging a fact has
the burden of proving it and a mere allegation cannot take the place of evidence. [17] If the plaintiff, upon whom rests the burden
of proving his cause of action, fails to show in a satisfactory manner facts upon which he bases his claim, the defendant is under
no obligation to prove his exception or defense.
Contrary to petitioners claim, the evidence on record shows that respondent exercised due diligence in performing its
obligations under the contract and followed standard procedure in rendering its services to petitioner. As correctly observed by
the lower court, the plane ticket [19] issued to petitioner clearly reflected the departure date and time, contrary to petitioners
contention. The travel documents, consisting of the tour itinerary, vouchers and instructions, were likewise delivered to petitioner
two days prior to the trip. Respondent also properly booked petitioner for the tour, prepared the necessary documents and
procured the plane tickets. It arranged petitioners hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.
Hence, petitioner cannot recover and must bear her own damage.
5. Distinction from towage, arrastre and stevedoring

34. Marina Port Services Inc v American Home Assurance Corp
Facts:
On September 21, 1989, Countercorp Trading PTE., Ltd. shipped from Singapore to the Philippines 10 container vans of soft wheat
flour with seals intact on board the vessel M/V Uni Fortune. The shipment was insured against all risks by AHAC and consigned to
MSC Distributor (MSC).
Upon arrival at the Manila South Harbor on September 25, 1989, the shipment was discharged in good and complete order
condition and with safety seals in place to the custody of the arrastre operator, MPSI. After unloading and prior to hauling, the
Bureau of Customs broke the seals and opened the vans for tax evaluation. After which they were locked again with safety wire
seals.
On October 10, 1989, MSC's representative, AD's Customs Services (ACS), took out five container vans for delivery to MSC. At the
compound's exit, MPSI issued to ACS the corresponding gate passes for the vans indicating its turn¬over of the subject shipment
to MSC. However, upon receipt of the container vans at its warehouse, MSC discovered substantial shortages in the number of
bags of flour delivered. Hence, it filed a formal claim for loss with MPSI. From October 12 to 14, 1989 and pursuant to the gate
passes issued by MPSI, ACS took out the remaining five container vans from the container yard and delivered them to MSC. Upon
receipt, MSC once more discovered substantial shortages. Thus, MSC filed another claim with MPSI. Per MSC, the total number of
the missing bags of flour was 1,650 with a value of £257,083.00.
MPSI denied both claims thus MSC claimed for insurance from AHAC. MSC then issued a subrogation in favour of AHAC. AHAC
filed a case in the RTC for damages.
RTC rendered a decision dismissing the complaint on the grounds that AHAC’s evidence failed to clearly shows that the loss
happened while the subject shipment was still under MPSI's responsibility. They subsequently appealed to the CA which reversed
the RTC decision stating that since the burden of proof to show due compliance with the obligation to deliver the goods to the
appropriate party devolves upon the arrastre operator. In consonance with this, a presumption of fault or negligence for the loss
of the goods arises against the arrastre operator pursuant to Articles 1265 and 1981 of the Civil Code. CA concluded that MPSI
was negligent as manifested by the fact that [MPSI] never took any action to address such complaint even after it received the
formal claim of loss in the first five (5) vans. As a consequence, more bags of flour were eventually lost or pilfered in the
remaining container vans that were still in [MPSI's] custody at that time.
Issue: WON MPSI is liable for damages for the goods lost
Held:
Petition granted. CA decision reversed, RTC decision reinstated.
(naay discussion about the SC di mu try basta question of fact but covered ni siya sa exception kay naay misapprehension of facts
and ang findings are contrary sa trial court)
The relationship between an arrastre operator and a consignee is similar to that between a warehouseman and a depositor, or to
that between a common carrier and the consignee and/or the owner of the shipped goods. As custodian of the shipment
discharged from the vessel, the arrastre operator must take good care of the same and turn it over to the party entitled to its
possession. In case of claim for loss filed by a consignee or the insurer as subrogee, it is the arrastre operator that carries the
burden of proving compliance with the obligation to deliver the goods to the appropriate party. Otherwise, it shall be presumed
that the loss was due to its fault.
It is significant to note that MPSI, in order to prove that it properly delivered the subject shipment consigned to MSC, presented
10 gate passes marked as Exhibits 4 to 13. It serves as acknowledgements that Issuance of the Gate Pass constitutes delivery to
and receipt by consignee of the goods as described above in good order and condition, unless an accompanying B.O. certificate
duly issued and noted on the face of the Gate Pass appears. As held in International Container Terminal Services, Inc. v. Prudential
Guarantee & Assurance Co., Inc., the signature of the consignee's representative on the gate pass is evidence of receipt of the
shipment in good order and condition.
Also, that MPSI delivered the subject shipment to MSC's representative in good and complete condition and with lock and seals
intact is established by the testimonies of MPSFs employees who were directly involved in the processing of the subject shipment.
AHAC justifies the failure of ACS to immediately protest the alleged loss or pilferage upon initial pick-up of the first batch of
container vans. According to it, ACS could not have discovered the loss at that moment since the stripping of container vans in the
pier area is not allowed. The Court cannot, however, accept such excuse. For one, AHAC's claim that stripping of the container
vans is not allowed in the pier area is a mere allegation without proof. It is settled that "[m]ere allegations do not suffice; they
must be substantiated by clear and convincing proof."For another, even assuming that stripping of the container vans is indeed
not allowed at the pier area, it is hard to believe that MSC or its representative ACS has no precautionary measures to protect
itself from any eventuality of loss or pilferage
There being no exception as to bad order, the subject shipment, therefore, appears to have been accepted by MSC, through ACS,
in good order."It logically follows [then] that the case at bar presents no occasion for the necessity of discussing the diligence
required of an [arrastre operator] or of the theory of [its] prima facie liability x x x, for from all indications, the shipment did not
suffer loss or damage while it was under the care x x x of the arrastre operator x x x."
35. Asian Terminals Inc v Allied Guarantee Insurance Co

Facts:
Marina Port Services, Inc. (Marina), the predecessor of herein petitioner Asian Terminals, Inc. (petitioner ATP), is an arrastre
operator based in the South Harbor, Port Area, Manila. On February 5, 1989, a shipment was made of 72,322 lbs. of kraft linear
board (a type of paperboard) loaded and received from the ports of Lake Charles, LA, and Mobile, AL, U.S.A., for transport and
delivery to San Miguel Corporation (San Miguel) in Manila, Philippines. The vessel used was the M/V Nicole, operated by
Transocean Marine, Inc. (Transocean), a foreign corporation, whose Philippine representative is Philippine Transmarine Carrier,
Inc. (Philippine Transmarine).
The M/V Nicole arrived in Manila on April 8, 1989 and, shortly thereafter, the subject shipment was offloaded from the vessel to
the arrastre Marina until April 13, 1989. Thereafter, it was assessed that a total of 158 rolls of the goods were "damaged" during
shipping. Further, upon the goods' withdrawal from the arrastre and their delivery, first, to San Miguel's customs broker, Dynamic
Brokerage Co. Inc. (Dynamic), and, eventually, to the consignee San Miguel, another 54 rolls were found to have been damaged,
for a total of 212 rolls of damaged shipment worth P755,666.84. Herein respondent Allied Guarantee Insurance, Co., Inc.,
(respondent Allied), was the insurer of the shipment. Thus, it paid San Miguel P755,666.84 and was subrogated in the latter's
rights. Allied then filed a complaint in the RTC for damages against Transocean, Philippine Transmarine, Dynamic and Marina
seeking to be indemnified.
The suit alleged that the shipment was loaded from the ports of origin "in good and complete order condition," and all losses
were due to the fault of the named defendants. In its Amended Answer with Compulsory Counterclaim and Crossclaim, Marina
denied the complaint's allegations and maintained that 158 rolls in the shipment were already in "bad order condition" when it
turned over the same to the consignee's representative/broker. The other co-defendants Transocean and Philippine Transmarine
also denied most of the complaint's allegations and counter-alleged that a large portion of "the shipment was already in
torn/scuffed condition prior to loading" in their vessel. In addition, they attributed the damage to the nature, vice or defect of the
goods, the perils and accidents of the sea, to pre-shipment loss and insufficiency of packing.
RTC found the defendant shipping company Transocean liable for the 158 rolls of damaged goods due to the latter's failure to
observe the necessary precautions and extraordinary diligence as common carrier to prevent such damage. Then, the additional
54 rolls of the goods that were lost were found to have been damaged while in the possession of Marina, the arrastre operator
and Dynamic, the broker.
This was affirmed by CA.
Issue:
WON ATI is liable for the 54 damaged rolls
Held: Liable. Decision is Affirmed.
(naa pd discussion about dili trier of facts ang SC. Unlike sa previous case, wala ni siya ni fall sa exception. Wa nalang nako gi apil
kay di mani remedial nga sub)
Petitioner ATI argues that the appellate court erroneously failed to note the so-called Turn Over Survey of Bad Order Cargoes and
the Requests for Bad Order Survey which supposedly could absolve it from liability for the damaged shipment. However, the court
denies the petition with respect to the additional 54 rolls of damaged goods, as petitioner's liability thereon was duly proven and
well established during trial. The rulings of both the trial and appellate courts in this respect are upheld.
It is noteworthy to mention that "in general, the nature of the work of an arrastre operator covers the handling of cargoes at piers
and wharves," which was what exactly defendant Marina's function entails in this case. To carry out its duties, the arrastre is
required to provide cargo handling equipment which includes, among others, trailer, chassis for containers." On the other hand,
defendant Dynamic (which) in its capacity as broker, withdrew the 357 rolls of kraft linear board from the custody of defendant
Marina and delivered the same to the consignee, San Miguel Corporation's warehouse in Tabacalera at United Nations, Manila, is
considered a common carrier. Hence, the "legal relationship betw.een the consignee and the arrastre operator is akin to that of a
depositor and the warehouseman. The relationship between the consignee and the common carrier is similar to that of the
consignee and the arrastre operator. . Both the arrastre and the carrier are, therefore, charged with and obligated to deliver the
goods in good condition to the consignee.
The trial court correctly held that the broker, Dynamic, cannot alone be held liable for the additional 54 rolls of damaged goods
since such damage occurred during the following instances: (1) while the goods were in the custody of the arrastre ATI; (2) when
they were in transition from ATI's custody to that of Dynamic (i.e., during loading to Dynamic's trucks); and (3) during Dynamic's
custody. While the trial court could not determine with pinpoint accuracy who among the two caused which particular damage
and in what proportion or quantity, it was clear that both ATI and Dynamic failed to discharge the burden of proving that damage
on the 54 rolls did not occur during their custody. As for petitioner ATI, in particular, what worked against it was the testimony,
as cited above, that its employees' use of the wrong lifting equipment while loading the goods onto Dynamic's trucks had a role
in causing the damage. Such is a finding of fact made by the trial court which this Court, without a justifiable ground, will not
disturb. Further, to prove the exercise of diligence in handling the subject cargoes, petitioner must do more than merely show the
possibility that some other party could be responsible for the loss or the damage. It must prove that it exercised due care in the
handling thereof.
Certainly, ATI's reliance on the Turn Over Survey of Bad Order Cargoes as well as the Requests for Bad Order Survey is misplaced.
An examination of the documents would even reveal that the first set of documents, the Turn Over Survey of Bad Order Cargoes,
pertain to the 158 rolls of damaged goods which occurred during shipment and prior to ATI's custody.[49] But responsibility for
the 158 rolls was already established to be that of the common carrier and is no longer disputed by the parties. Thus, this fact has
little or no more relevance to the issue of liability over the additional 54 rolls of damaged goods. Anent the second set of
documents, the Requests for Bad Order Survey, which mention only 158 rolls of damaged goods and do not mention any
additional damage, the same do not result in an automatic exculpation of ATI from liability. Further, it is unclear whether these
Requests for Bad Order Survey were executed prior to or after loading was done onto Dynamic's trucks. As earlier indicated, there
is testimony that it was during the loading to the trucks that some or all of the damage was incurred.
Marina, the arrastre operator, from the above evidence, was not able to overcome the presumption of negligence. The Bad Order
Cargo Receipts, the Turn Over Survey of Bad Order Cargoes as well as the Request for Bad Order Survey did not establish that the
additional 54 rolls were in good condition while in the custody of the arrastre. Said documents proved only that indeed the 158
rolls were already damaged when they were discharged to the arrastre operator and when it was subsequently withdrawn from
the arrastre operator by [the] customs broker. Failing to present the necessary evidence, ATI was unable to overcome the
presumption of its own negligence while in the custody of the goods.
As it is now established that there was negligence in both petitioner ATI's and Dynamic's performance of their duties in the
handling, storage and delivery of the subject shipment to San Miguel, resulting in the loss of 54 rolls of kraft linear board, both
shall be solidarily liable for such loss
6. Governing Laws
7. Registered Rule and Kabit System
36. Lim v CA
Facts:
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu passenger jeepney from Gomercino Vallarta,holder of
a certificate of public convenience for the operation of public utility vehicles plying the Monumento-Bulacan route. Gonzales
continuously used the vehicle while Vallarta remained on record as its registered owner and operator (mao ni bale ang “kabit”
system mga pre)
On 22 July 1990, while the jeepney was running northbound along the North Diversion Road somewhere in Meycauayan, Bulacan,
it collided with a ten-wheeler-truck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito Gunnaban.
Gunnaban owned responsibility and averred that he lost his brakes.
Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of the deceased passenger, and
had the Ferroza restored to good condition. He also negotiated to repair the jeepney but was not accepted by respondent. He
offered 20K, later increased to 40K but still was not accepted by respondent because he was asking for 236K or a bnew jeepney.
Negotiations failed thus a case was filed.
In the RTC, lim denield liability and averred he exercised due diligence in the selection and supervision of his employees. He
further averred that Villarta was the proper party in interest because it was his name that was registered. Gunnaban claimed that
it was a fortuitous event.
RTC decided in favor of respondent. In support of its decision, the trial court ratiocinated that as vendee and current owner of the
passenger jeepney private respondent stood for all intents and purposes as the real party in interest. Even Vallarta himself
supported private respondent's assertion of interest over the jeepney for, when he was called to testify, he dispossessed himself
of any claim or pretension on the property. Lim was also found of negligence because Gunanban was his driver and his mechanic
albeit having no training for such position. This was affirmed by CA.
Issue: WON Gonzales is the real party in interest or should it be Vallarta the name on the record?
Held:
The kabit system is an arrangement whereby a person who has been granted a certificate of public convenience allows other
persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings. Although
the parties to such an agreement are not outrightly penalized by law, the kabit system is invariably recognized as being contrary
to public policy and therefore void and inexistent under Art. 1409 of the Civil Code.
The Court explained that one of the primary factors considered in the granting of a certificate of public convenience for the
business of public transportation is the financial capacity of the holder of the license, so that liabilities arising from accidents may
be duly compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by the grantee to escape
civil liability caused by a negligent use of a vehicle owned by another and operated under his license and vice versa. It would seem
then that the thrust of the law in enjoining the kabit system is not so much as to penalize the parties but to identify the person
upon whom responsibility may be fixed in case of an accident with the end view of protecting the riding public.
In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit system does not exist. First,
neither of the parties to the pernicious kabit system is being held liable for damages. Second, the case arose from the negligence
of another vehicle in using the public road to whom no representation, or misrepresentation, as regards the ownership and
operation of the passenger jeepney was made and to whom no such representation, or misrepresentation, was necessary. Thus it
cannot be said that private respondent Gonzales and the registered owner of the jeepney were in estoppel for leading the public
to believe that the jeepney belonged to the registered owner. Third, the riding public was not bothered nor inconvenienced at the
very least by the illegal arrangement. On the contrary, it was private respondent himself who had been wronged and was seeking
compensation for the damage done to him. Certainly, it would be the height of inequity to deny him his right.
In light of the foregoing, it is evident that private respondent has the right to proceed against petitioners for the damage caused
on his passenger jeepney as well as on his business. The court pud granted ang 236K kay even tho 30K ra ang palit sa respondent
sa jeep, which gi contest kaayo sa petitioners kay unjust enrichment daw, ni ana ang court nga valid ra kay dili ra ang actual
damage sa jeep but ang 236k includes the could have been profits as well as interests.
37. FEB Leasing and Finance Corp (Now BPI Leasing Corp) v Baylon
Facts: An Isuzu oil tanker hit the daughter of respondent spouses and died after a few days. At the time of the accident, the
vehicle was registered in FEB's name but was leased to BG Hauler Inc. and was being driven by BG's driver.
Petitioner contends that the lease contract between BG Hauler and FEB specifically provides that BG Hauler shall be liable for any
loss, damage, or injury the leased oil tanker may cause even if petitioner is the registered owner of the said oil tanker.
Spouses Baylon counter that the lease contract between petitioner and BG Hauler cannot bind third parties like them.
Issue: W/N the registered owner of a financially leased vehicle remains liable for loss, damage, or injury caused by the vehicle
notwithstanding an exemption provision in the financial lease contract.
Held: PCI Leasing vs UCPB (2008), SC held liable PCI Leasing, the registered owner of an 18-wheeler Fuso Tanker Truck leased to
SUGECO and being driven by the latter's driver, for damages arising from a collision. This despite an express provision in the lease
contract to the effect that the lessee, SUGECO, shall indemnify and hold the registered owner free from any liabilities, damages,
suits, claims, or judgments arising from SUGECOs use of the leased motor vehicle.
With respect to the public and third persons, the registered owner of a motor vehicle is directly and primarily responsible for the
consequences of its operation regardless of who the actual vehicle owner might be. Well-settled is the rule that the registered
owner of the vehicle is liable for quasi-delicts resulting from its use. Thus, even if the vehicle has already been sold, leased, or
transferred to another person at the time the vehicle figured in an accident, the registered vehicle owner would still be liable for
damages caused by the accident. The sale, transfer or lease of the vehicle, which is not registered with the Land Transportation
Office, will not bind third persons aggrieved in an accident involving the vehicle.
The policy behind the rule is to enable the victim to find redress by the expedient recourse of identifying the registered vehicle
owner in the records of the Land Transportation Office. The registered owner can be reimbursed by the actual owner, lessee or
transferee who is known to him. Unlike the registered owner, the innocent victim is not privy to the lease, sale, transfer or
encumbrance of the vehicle. Hence, the victim should not be prejudiced by the failure to register such transaction or
encumbrance.
In this case, petitioner admits that it is the registered owner of the oil tanker that figured in an accident causing the death of
Loretta. As the registered owner, it cannot escape liability for the loss arising out of negligence in the operation of the oil tanker.
Its liability remains even if at the time of the accident, the oil tanker was leased to BG Hauler and was being driven by the latters
driver, and despite a provision in the lease contract exonerating the registered owner from liability.
38. Filcar Transport Services v Espinas

Facts: When the signal light turned green, Espinas proceeded to cross the intersection. He was already in the middle of the
intersection when another car (Filcar's) suddenly hit and bumped his car. As a result of the impact, Espinas' car turned clockwise.
Filcar argued that while it is the registered owner of the car, it was assigned to its Corporate Secretary. Filcar further stated that
when the incident happened, the car was being driven by their Corporate Secretary's personal driver.
Issue: W/N Filcar, as registered owner of the motor vehicle which figured in an accident, may be held liable for the damages
caused to Espinas.
Held: Under Article 2176, in relation with Article 2180, of the Civil Code, an action predicated on an employee's act or omission
may be instituted against the employer who is held liable for the negligent act or omission committed by his employee.
Although the employer is not the actual tortfeasor, the law makes him vicariously liable on the basis of the civil law principle of
pater familias for failure to exercise due care and vigilance over the acts of one's subordinates to prevent damage to another.
Citing Equitable Leasing Corporation v. Suyom: In so far as third persons are concerned, the registered owner of the motor vehicle
is the employer of the negligent driver, and the actual employer is considered merely as an agent of such owner.
Regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as the public and third persons
are concerned; consequently, it is directly and primarily responsible for the consequences of its operation. In contemplation of
law, the owner/operator of record is the employer of the driver, the actual operator and employer being considered as merely its
agent.
Rationale for holding the registered owner vicariously liable: The main aim of motor vehicle registration is to identify the owner so
that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor
can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways
caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very
scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuries
caused on public highways.
Thus, whether there is an employer-employee relationship between the registered owner and the driver is irrelevant in
determining the liability of the registered owner who the law holds primarily and directly responsible for any accident, injury or
death caused by the operation of the vehicle in the streets and highways.
39. Metro Manila Transit Corp v Cuevas

Facts: MMTC and Mina's Transit entered into an agreement to sell whereby the latter bought several bus units from the former
and they agreed that MMTC would retain the ownership of the buses until certain conditions were met, but in the meantime
Mina's Transit could operate the buses within Metro Manila.
One of the buses hit and damaged a Honda motorcycle owned by Reynaldo and driven by Junnel, so they sued MMTC and Mina's
Transit (registered joint owners of the bus) for damages.
MMTC argues that there is a provision in the agreement to sell mandating Mina's Transport to hold MMTC free from liability
arising from the use and operation of the bus units.
Mina's Transit contended that it was not liable because: (a) it exercised due diligence in the selection and supervision of its
employees; (b) its bus driver exercised due diligence; and (c) Junnel's negligence was the cause of the accident.
Issue: W/N it was liable for the injuries sustained by the respondents despite the provision in the agreement to sell that shielded
it from liability.
Held: In view of MMTC's admission in its pleadings that it had remained the registered owner of the bus at the time of the
incident, it could not escape liability for the personal injuries and property damage suffered by the Cuevases. This is because of
the registered-owner rule, whereby the registered owner of the motor vehicle involved in a vehicular accident could be held liable
for the consequences.
Citing Filcar v Espinas: It is well settled that in case of motor vehicle mishaps, the registered owner of the motor vehicle is
considered as the employer of the tortfeasor-driver, and is made primarily liable for the tort committed by the latter under Article
2176, in relation with Article 2180, of the Civil Code.
For the purpose of holding the registered owner of the motor vehicle primarily and directly liable for damages under Article 2176,
in relation with Article 2180, of the Civil Code, the existence of an employer-employee relationship is not required.
Indeed, MMTC could not evade liability by passing the buck to Mina's Transit. The stipulation in the agreement to sell did not bind
third parties like the Cuevases, who were expected to simply rely on the data contained in the registration certificate of the erring
bus.
C. Obligations of the parties and Defenses

1. Obligations of Common Carrier
Basic Obligations
40. Compania Maritima v Insurance Co of North America
Facts:
Issue:
Held:
41. Servando v Phil Steam Navigation Co

Facts:
Issue:
Held:
42. Maerskline v CA
Facts:
Issue:
Held:
43. Macam v CA
Facts:
Issue:
Held:
44. Delsan Transport Lines Inc v American Home Assurance Corp

Facts:
Issue:
Held:
45. Westwind Shipping Corporation v UCPB General Insurance Co.

Facts:
Issue:
Held:
46. Nedlloyd Lijnen BV Rotterdam v Glow Laks Enterprises Ltd

Facts:
Issue:
Held:
Duty to Execise Extraordinary Diligence

47. Kapalaran Bus Lines v Coronado
Facts:
Issue:
Held:
48. Juntilla v Fontanar

Facts:
Issue:
Held:
49. Eastern Shipping Lines v IAC

Facts:
Issue:
Held:
50. Republic of the Phil v Lorenzo Shipping Corp

Facts:
Issue:
Held:
51. Victory Liner v Race (December 8, 2008)

Facts:
Issue:
Held:
52. Victory Liner v Race (December 8, 2008)

Facts:
Issue:
Held:
53. PAL v CA
Facts:
Issue:
Held:
54. Cangco v Manila Railroad Co

Facts:
Issue:
Held:
55. Solidbank Corp v Sps Tan

Facts:
Issue:
Held:
In carriage by sea
56. Caltex Phil v Sulpicio Lines
Facts:
Issue:
Held:
57. Delsan Transport v CA

Facts:
Issue:
Held:
58. National Steel Corp v CA

Facts:
Issue:
Held:
59. Loadstar Shipping v CA

Facts:
Issue:
Held:
60. Coastwise Lighterage v CA

Facts:
Issue:
Held:
61. Manila Steamship v Abdulhaman

Facts:
Issue:
Held:
62. Negros Navigation v CA

Facts:
Issue:
Held:
63. Phil Home Assurance Corp v CA

Facts:
Issue:
Held:
64. Phil American Gen Insurance v CA

Facts:
Issue:
Held:
65. Belgian Overseas v Phil First Insurance

Facts:
Issue:
Held:
66. Valenzuela Hardwood and Industrial Supply v CA

Facts:
Issue:
Held:
In carriage by land
67. Nocum v Laguna Tayabas Bus Company
In a jeepney, Angela, a passenger, was injured because of the flammable material brought by Antonette, another
passenger. Antonette denied her baggage to be inspected invoking her right to privacy. Should the jeepney operator be
held liable for damages?
No. The operator is not liable for damages. In overland transportation, the common carrier is not bound nor
empowered to make an examination on the contents of packages or bags, particularly those handcarried by passengers.
(Nocum v. Laguna Tayabas Bus Company, G.R. No. L-23733, Oct. 31, 1969)
Facts:
Nocum, who was a passenger in appellant's Bus No. 120 then making a trip within the barrio of Dita, Municipality of Bay, Laguna,
was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in said bus and declared to its conductor
as containing clothes and miscellaneous items by a co-passenger.
Nocum sued Laguna Tayabas for breach of contract of carriage.
Trial Court: Laguna Tayabas liable since it did not observe the extraordinary or utmost diligence of a very cautious person required
by the Civil Code, and defense of fortuitous event is unavailing.
TC decision based on:
- According to Severino Andaya, a witness for the plaintiff, a man with a box went up the baggage compartment of the bus
where he already was and said box was placed under the seat. They left Azcarraga at about 11:30 in the morning and when
the explosion occurred, he was thrown out. PC investigation report states that thirty seven (37) passengers were injured.
- The bus conductor, Sancho Mendoza, testified that the box belonged to a passenger whose name he does not know and
who told him that it contained miscellaneous items and clothes. He helped the owner in loading the baggage which weighed
about twelve (12) kilos and because of company regulation, he charged him for it twenty-five centavos (P0.25). From its
appearance there was no indication at all that the contents were explosives or firecrackers. Neither did he open the box
because he just relied on the word of the owner.
- Dispatcher Nicolas Cornista of defendant company corroborrated the testimony of Mendoza and he said, among other
things, that he was present when the box was loaded in the truck and the owner agreed to pay its fare. He added that they
were not authorized to open the baggages of passengers because instruction from the management was to call the police if
there were packages containing articles which were against regulations.
Issue:
Whether Laguna Tayabas is liable?
Held:
No. The operator is not liable for damages. In overland transportation, the common carrier is not bound nor
empowered to make an examination on the contents of packages or bags, particularly those handcarried by
passengers. In approving the draft of the Civil Code as prepared by the Code Commission, Congress must have
concurred with the Commission that by requiring the highest degree of diligence from common carriers in the safe
transport of their passengers and by creating a presumption of negligence against them. Article 1733 of the Civil Code
reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers
transported by them to be "according to all the circumstances of each case." In fact, Article 1755 repeats this same
qualification.
Fairness demands that in measuring a common carrier's duty towards its passengers, allowance must be given to the
reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety.
It is to be presumed that a passenger will not take with him anything dangerous to the lives and limbs of his co-
passengers, not to speak of his own.
Not to be lightly considered must be the right to privacy to which each passenger is entitled, he cannot be subjected
to any unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the
contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger's baggage
when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being
transgressed. Calling a policeman to his aid, as suggested by the service manual invoked by the trial judge, in
compelling the passenger to submit to more rigid inspection, after the passenger had already declared that the box
contained mere clothes and other miscellaneous, could not have justified invasion of a constitutionally protected
domain.
There is need, as We hold here, for evidence of circumstances indicating cause or causes for apprehension that the
passenger's baggage is dangerous and that it is failure of the common carrier's employee to act in the face of such
evidence that constitutes the cornerstone of the common carrier's liability.
68. Baritua v Nimfa Divina Mercander

Facts:
Issue:
Held:
69. Sanico v Colpano

Facts:
Issue:
Held:
70. Mariano Jr v Callejas

Facts:
Issue:
Held:
In carriage by sea
71. Tabacalera Insurance Co v North Front Shipping Services
Facts:
Issue:
Held:
72. Sulpicio Lines Inc v First Lepanto-Taisho Insurance Corp

Facts:
Issue:
Held:
73. Vector Shipping Corp v Macasa

Facts:
Issue:
Held:
74. Aboitiz Shipping Corp v Insurance Co of North America

Facts:
Issue:
Held:
75. Nedloyd Lijnen BV Rotterdam v Glow Laks Enterprises Ltd (same case as no 46)
Facts:
Issue:
Held:
In carriage by air
76. Saludo v CA
Facts:
Issue:
Held:
77. Yrasuegui v PAL

Facts:
Issue:
Held:
8. Obligations of Shipper and Passenger

78. Manay Jr v Cebu Air
9. Defenses of Common Carrier

Fire as cause
79. DSR-Senator Lines and CF Sharp and Co v Federal Phoenix Assurance Co
Shore pass requirement

80. Japan Airlines v Asuncion
Exercise of Extraordinary Diligence, Inherent Character of Goods and Inadequacy of Packaging

81. Planters Products Inc v CA
Exercise of Extraordinary Diligence and Doctrine of Last Clear Chance

82. William Tiu v Pedro Arrisgado
83. Regional Container Lines (RCL) v Netherlands Insurance Co. – see #93
Fortuitous Event
84. Central Shipping Co v Insurance Co of North America
85. FGU Insurance v CA
86. Lea Mer Industries Inc v Malayan Insurance Co Inc
87. Loadstar Shipping Co Inc v Pioneer Asia Insurance Corp
88. Bernales v Northwest Airlines
89. >>>Torres- Madrid Brokerage v FEB mitsui Marine Insurance Co
Storm or Peril of the Sea

90. >>Transimex Co v Mafre Asian Insurance Corp
Notice of Claim
91. Phil. Charter Insurance Corp v Chemoil Lighterage Corp
Presumption of Negligence
92. Diaz v CA
Burden on Common Carrier

93. Regional Container Lines (RCL) v Netherlands Insurance Co.
Effect of Affidavit of Desistance and Release of Claim

94. Sanico v Colipano
D. BILL OF LADING
1. Concept; Character
95. Eastern Shipping Lines Inc v BPI/MS Insurance Corp
Common carriers, from the nature of their business and on public policy considerations, are
bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject
to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively, by
the carrier to the consignee, or to the person who has a right to receive them.
In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt
and symbol of the goods covered by it. If it has no notation of any defect or damage in the goods, it is
considered as a "clean bill of lading." A CLEAN BILL OF LADING constitutes prima
facie evidence of the receipt by the carrier of the goods as therein described.
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. From the foregoing, the fault is attributable to
ESLI (common carrier). While no longer an issue, it may be nonetheless state that ATI(arrastre
operator) was correctly absolved of liability for the damage.
The BILLS OF LADING REPRESENT the formal expression of the parties' rights, duties
and obligations. It is the best evidence of the intention of the parties which is to be deciphered from
the language used in the contract, not from the unilateral post facto assertions of one of the parties,
or of third parties who are strangers to the contract. Thus, when the terms of an agreement have
been reduced to writing, it is deemed to contain all the terms agreed upon and there can be, between
the parties and their successors in interest, no evidence of such terms other than the contents of the
written agreement.
SEE #106 for more discussion on the case
Facts:
Issue:
Held:
10. Kinds; Clean Bill of Lading

96. Iron Bulk Shipping Phils Co Ltd v Rammington Industrial Sales Corp
Anent the first assigned error: That the Court of Appeals erred in relying on the pro forma Bills
of Lading to establish the condition of the cargo upon landing.
There is no merit to petitioner's contention that the Bill of Lading covering the subject cargo
cannot be relied upon to indicate the condition of the cargo upon loading. It is settled that a BILL OF
LADING HAS A TWO-FOLD CHARACTER. In Phoenix Assurance Co., Ltd. vs. United States Lines,
we held that:
[A] bill of lading 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. AS A
RECEIPT, it recites the date and place of shipment, describes the goods as to quantity,
weight, dimensions, identification marks and condition, quality and value. AS A CONTRACT,
it names the contracting parties, which include the consignee, fixes the route, destination, and
freight rate or charges, and stipulates the rights and obligations assumed by the parties. 8

We find no error in the findings of the appellate court that the questioned bill of lading is a clean
bill of lading, i.e., it does not indicate any defect in the goods covered by it, as shown by the
notation, "CLEAN ON BOARD" 9 and "Shipped at the Port of Loading in apparent good condition
on board the vessel for carriage to Port of Discharge".
Petitioner presented evidence to prove that, contrary to the recitals contained in the subject bill
of lading, the cargo therein described as clean on board is actually wet and covered with rust.
Indeed, having the nature of a receipt, or an acknowledgement of the quantity and condition of
the goods delivered, the bill of lading, like any other receipts, may be explained, varied or
even contradicted. However, we agree with the Court of Appeals that far from contradicting the
recitals contained in the said bill, petitioner's own evidence shows that the cargo covered by the
subject bill of lading, although it was partially wet and covered with rust was, nevertheless, found to
be in a "fair, usually accepted condition" when it was accepted for shipment. 12
THE FACT THAT THE ISSUED BILL OF LADING IS PRO FORMA IS OF NO MOMENT. If
the bill of lading is not truly reflective of the true condition of the cargo at the time of loading to the
effect that the said cargo was indeed in a damaged state, the carrier could have refused to accept it,
or at the least, made a marginal note in the bill of lading indicating the true condition of the
merchandise. But it did not. On the contrary, it accepted the subject cargo and even agreed to the
issuance of a clean bill of lading without taking any exceptions with respect to the recitals contained
therein. Since the carrier failed to annotate in the bill of lading the alleged damaged condition of the
cargo when it was loaded, said carrier and the petitioner, as its representative, are bound by the
description appearing therein and they are now estopped from denying the contents of the said bill.
Facts:
Issue:
Held:
97. Lorenzo Shipping v Chubb and Sons

Not important. Same same with previous case discussion
The steel pipes, subject of this case, were in good condition when they were loaded at the port of
origin (Manila) on board petitioner Lorenzo Shipping's M/V Lorcon IV en route to Davao City. Petitioner
Lorenzo Shipping issued clean bills of lading covering the subject shipment. A bill of lading, aside from being
a contract 38 and a receipt, 39 is also a symbol 40 of the goods covered by it. A bill of lading which has no
notation of any defect or damage in the goods is called a "clean bill of lading." 41 A clean bill of lading
constitutes prima facie evidence of the receipt by the carrier of the goods as therein described. 42
The case law teaches us that mere proof of delivery of goods in good order to a carrier and the
subsequent arrival in damaged condition at the place of destination raises a prima faciecase against the
carrier. 43 In the case at bar, M/V Lorcon IV of petitioner Lorenzo Shipping received the steel pipes in good
order and condition, evidenced by the clean bills of lading it issued. When the cargo was unloaded from
petitioner Lorenzo Shipping's vessel at the Sasa Wharf in Davao City, the steel pipes were rusted all over.
M/V San Mateo Victory of respondent Gearbulk, Ltd, which received the cargo, issued Bills of Lading Nos.
DAV/OAK 1 to 7 and Nos. DAV/SEA 1 to 6 covering the entire shipment, all of which were marked "ALL
UNITS HEAVILY RUSTED." R.J. Del Pan Surveyors found that the cargo hold of the M/V Lorcon IV was
flooded with seawater, and the tank top was rusty, thinning and perforated, thereby exposing the cargo to
sea water. There can be no other conclusion than that the cargo was damaged while on board the vessel of
petitioner Lorenzo Shipping, and that the damage was due to the latter's negligence. In the case at bar, not
only did the legal presumption of negligence attach to petitioner Lorenzo Shipping upon the occurrence of
damage to the cargo. 44 More so, the negligence of petitioner was sufficiently established. Petitioner Lorenzo
Shipping failed to keep its vessel in seaworthy condition. R.J. Del Pan Surveyors found the tank top of M/V
Lorcon IV to be "rusty, thinning, and with several holes at different places." Witness Captain Pablo Fernan,
Operations Manager of respondent Transmarine Carriers, likewise observed the presence of holes at the
deck of M/V Lorcon IV. 45 The unpatched holes allowed seawater, reaching up to three (3) inches deep, to
enter the flooring of the hatch of the vessel where the steel pipes were stowed, submerging the latter in sea
water. 46 The contact with sea water caused the steel pipes to rust. The silver nitrate test, which Toplis and
Harding employed, further verified this conclusion. 47Significantly, petitioner Lorenzo Shipping did not even
attempt to present any contrary evidence. Neither did it offer any proof to establish any of the causes that
would exempt it from liability for such damage. 48 It merely alleged that the: (1) packaging of the goods was
defective; and (2) claim for damages has prescribed.
To be sure, there is evidence that the goods were packed in a superior condition. John M. Graff,
marine surveyor of Toplis and Harding, examined the condition of the cargo on board the vessel San Mateo
Victory. He testified that the shipment had superior packing "because the ends were covered with plastic,
woven plastic. Whereas typically they would not go to that bother . . . Typically, they come in with no plastic
on the ends. They might just be banded, no plastic on the ends . . ."
||| (Lorenzo Shipping Corp. v. Chubb and Sons, Inc., G.R. No. 147724, [June 8, 2004])

See no. 95
11. Kinds; On Board Bill v Received for Shipment Bill

99. >>>>Magellan Mfg. Marketing Corp v CA
READ ISSUE NO 3 – main point in this case
Q: WON the certification issued certifying that the cargo was on board had the effect of converting the original "received for
shipment only" bill of lading into an "on board" bill of lading as required by the buyer
A: The court did not rule upon the matter. Such ruling does not matter in the case as even assuming it in effect
converted the bill of lading, it still fails to comply with the requirements in the Letter of Credit as the certification was
made when the date of compliance is overdue.
ATTY: Supposing if such certificate was issued before the due date, there will be substantial
compliance of the LC in so far as on board bill requirement is concerned. BUT there will be a
problem as to the presentation of the substantial complaince as PAROL EVIDENCE RULE

applies.
It cannot plausibly be said that the aforestated certification of F.E. Zuellig, Inc. can qualify the bill of lading, as
originally issued, into an on board bill of lading as required by the terms of the letter of credit issued in favor of
petitioner. For one, the certification was issued only on July 19, 1980, way beyond the expiry date of June 30,
1980 specified in the letter of credit for the presentation of an on board bill of lading. Thus, even assuming that
by a liberal treatment of the certification it could have the effect of converting the received for shipment bill of
lading into an on board of bill of lading, as petitioner would have us believe, such an effect may be achieved
only as of the date of its issuance, that is, on July 19, 1980 and onwards.
The fact remains, though, that on the crucial date of June 30, 1980 no on board bill of lading was presented by
petitioner in compliance with the terms of the letter of credit and this default consequently negates its
entitlement to the proceeds thereof. Said certification, if allowed to operate retroactively, would render illusory
the guaranty afforded by an on board bill of lading, that is, reasonable certainty of shipping the loaded cargo
aboard the vessel specified, not to mention that it would indubitably be stretching the concept of substantial
compliance too far.
1. COMMERCIAL LAW; MARITIME LAW; TRANSHIPMENT IS NOT DEPENDENT UPON THE

OWNERSHIP OF THE TRANSPORTING SHIPS OR CONVEYANCES OR IN THE CHANGE OF
CARRIER. — TRANSHIPMENT, in maritime law, is defined as "the act of taking cargo out of one
ship and loading it in another," or "the transfer of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination named in the contract has been
reached," or "the transfer for further transportation from one ship or conveyance to another." Clearly,
either in its ordinary or its strictly legal acceptation, there is transhipment whether or not the same
person, firm or entity owns the vessels. In other words, the fact of transhipment is not dependent
upon the ownership of the transporting ships or conveyances or in the change of carriers, as the
petitioner seems to suggest, but rather on the fact of actual physical transfer of cargo from one vessel
to another.
2. ID.; ID.; BILL OF LADING; OPERATES BOTH AS A RECEIPT AND AS A CONTRACT. — It
is a long standing jurisprudential rule that a bill of lading 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. As a contract, it names the parties, which includes the consignee, fixes the route,
destination, and freight rates or charges, and stipulates the rights and obligations assumed by the
parties. Being a contract, it is the law between the parties who are bound by its terms and conditions
provided that these are not contrary to law, morals, good customs, public order and public policy. A
bill of lading usually becomes effective upon its delivery to and acceptance by the shipper. It is
presumed that the stipulations of the bill were in the absence of fraud, concealment or improper
conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the bill
or not. However, the aforequoted ruling applies only if such contracts will not create an absurd
situation as in the case at bar (Maersk v CA). The questioned provision in the subject bill of lading
has the effect of practically leaving the date of arrival of the subject shipment on the sole
determination and will of the carrier. (as mentioned in the case of Maersk #104)
3. ID.; ID.; ID.; A SHIPPER WHO RECEIVES A BILL OF LADING WITHOUT OBJECTION IS
PRESUMED TO HAVE ASSENTED TO ALL ITS TERMS. — The holding in most jurisdictions has
been that a shipper who receives a bill of lading without objection after an opportunity to inspect it,
and permits the carrier to act on it by proceeding with the shipment is presumed to have accepted it
as correctly stating the contract and to have assented it its terms. In other words, the acceptance of
the bill without dissent raises the presumption that all the terms therein were brought to the
knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake, he is
estopped from thereafter denying that he assented to such terms. This rule applies with particular
force where a shipper accepts a bill of lading with full knowledge of its contents and acceptance
under such circumstances makes it a binding contract.
4. ID.; ID.; TRANSHIPMENT WITHOUT LEGAL EXCUSE IS A VIOLATION OF CONTRACT.
— Moreover, it is a well-known commercial usage that transhipment of freight without legal
excuse, however, competent and safe the vessel into which the transfer is made, is a violation
of the contract and an infringement of the right of the shipper, and subjects the carrier to
liability if the freight is lost even by a cause otherwise excepted. It is highly improbable to
suppose that private respondents, having been engaged in the shipping business for so long, would
be unaware of such a custom of the trade as to have undertaken such transhipment without
petitioner's consent and unnecessarily expose themselves to a possible liability. Verily, they could
only have undertaken transhipment with the shipper's permission, as evidenced by the signature of
James Cu.
>>>>>>>>>5. ID.; ID.; ON BOARD OF LADING AND RECEIVED FOR SHIPMENT BILL OF
LADING, DISTINGUISHED. — An ON BOARD BILL OF LADING is one in which it is stated that the
goods have been received on board the vessel which is to carry the goods, whereas a RECEIVED
FOR SHIPMENT BILL OF LADING is one in which it is stated that the goods have been received for
shipment with or without specifying the vessel by which the goods are to be shipped. Received for
shipment bills of lading are issued whenever conditions are not normal and there is insufficiency of
shipping space. An on board bill of lading is issued when the goods have been actually placed aboard
the ship with every reasonable expectation that the shipment is as good as on its way. It is, therefore,
understandable that a party to a maritime contract would require an on board bill of lading because of
its apparent guaranty of certainty of shipping as well as the seaworthiness of the vessel which is to
carry the goods.
6. ID.; ID.; DEMURRAGE IS A CLAIM FOR DAMAGES FOR FAILURE TO ACCEPT
DELIVERY AND EXISTS ONLY WHEN EXPRESSLY STIPULATED. — Demurrage, in its strict
sense, 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. In a broad sense, every improper detention of a vessel may be
considered a demurrage. Liability for demurrage, using the word in its strictly technical sense, exists
only when expressly stipulated in the contract. Using the term in its broader sense, damages in the
nature of demurrage are recoverable for a breach of the implied obligation to load or unload the cargo
with reasonable dispatch, but only by the party to whom the duty is owed and only against one who is
a party to the shipping contract. Notice of arrival of vessels or conveyances, or of their placement for
purposes of unloading is often a condition precedent to the right to collect demurrage charges.
7. ID.; ID.; BILL OF LADING; CONTENTS THEREOF EVIDENCING INTENTION PREVAILS
OVER SHIPPER'S THESIS. — As between such stilted thesis of petitioner and the contents of the bill
of lading evidencing the intention of the parties, it is irremissible that the latter must prevail. Petitioner
conveniently overlooks the first paragraph of the very article that he cites which provides that "(i)f the
terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of the stipulations shall control." In addition, Article 1371 of the same Code provides
that "(i)n order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered."
8. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE RULE; MUST BE RAISED INCEPTIVELY
IN THE COMPLAINT. — Under the parol evidence rule, the terms of a contract are rendered
conclusive upon the parties, and evidence aliunde is not admissible to vary or contradict a complete
and enforceable agreement embodied in a document, subject to well defined exceptions which do not
obtain in this case. The parol evidence rule is based on the consideration that when the parties have
reduced their agreement on a particular matter into writing, all their previous and contemporaneous
agreements on the matter are merged therein. Accordingly, evidence of a prior or contemporaneous
verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid
instrument. The mistake contemplated as an exception to the parol evidence rule is one which is a
mistake of fact mutual to the parties. Furthermore, the rules on evidence, as amended, require that in
order that parol evidence may be admitted, said mistake must be put in issue by the pleadings, such
that if not raised inceptively in the complaint or in the answer, as the case may be, a party can not
later on be permitted to introduce parol evidence thereon.
9. CIVIL LAW; CONTRACTS; MUTUALITY OF CONTRACT IS VIOLATED IF PARTY IS
ALLOWED TO BACK OUT OF THE OFFER. — There is no dispute that private respondents
expressly and on their own volition granted petitioner an option with respect to the satisfaction of
freightage and demurrage charges. Having given such option, especially since it was accepted by
petitioner, private respondents are estopped from reneging thereon. Petitioner, on its part, was well
within its right to exercise said option. Private respondents, in giving the option, and petitioner, in
exercising that option, are concluded by their respective actions. To allow either of them to unilaterally
back out on the offer and on the exercise of the option would be to countenance abuse of rights as an
order of the day, doing violence to the long entrenched principle of mutuality of contracts.
Facts:
"On May 20, 1980, plaintiff-appellant Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with
Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in consideration of $23,220.00. As payment
thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its president, James Cu, MMMC then
contracted F.E. Zuellig, a shipping agent, through its solicitor, one Mr. King, to ship the anahaw fans through the
other appellee, Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading
and that transshipment is not allowed under the letter of credit (Exh. B-1). On June 30, 1980, appellant MMMC paid
F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied Bank. The bank
then credited the amount of US$23 ,220.00 covered by the letter of credit to appellant's account. However, when
appellant's president James Cu, went back to the bank later, he was informed that the payment was refused by the
buyer allegedly because there was no on-board bill of lading, and there was a transshipment of goods. As a result of
the refusal of the buyer to accept, upon appellant's request, the anahaw fans were shipped back to Manila by
appellees, for which the latter demanded from appellant payment of P246,043.43. Appellant abandoned the whole
cargo and asked appellees for damages. llcd
"In their Partial Stipulation of Facts, the parties admitted that a shipment of 1,047 cartons of 136,000 pieces of
Anahaw Fans contained in 1 x 40 and 1 x 20 containers was loaded at Manila on board the MV `Pacific Despatcher'
freight prepaid, and duly covered by Bill of Lading No. MNYK 201T dated June 27, 1980 issued by OOCL; that the
shipment was delivered at the port of discharge on July 19, 1980, but was subsequently returned to Manila after the
consignee refused to accept/pay the same."
"When petitioner informed private respondents about what happened, the latter issued a certificate
|||
stating that its bill of lading it issued is an on board bill of lading and that there was no actual
transshipment of the fans. According to private respondents when the goods are transferred from one
vessel to another which both belong to the same owner which was what happened to the Anahaw fans,
then there is (no) transshipment. Petitioner sent this certification to Choju Co., Ltd., but the said company
still refused to accept the goods which arrived in Japan on July 19, 1980. |||
Issue:
1. WON there was transshipment
2. WON parol evidence rule can be set aside as there was a “mistake” in the bill of lading militates against the conclusiveness of
the bill of lading
3. WON the certification issued certifying that the cargo was on board had the effect of converting the original "received for
shipment only" bill of lading into an "on board" bill of lading as required by the buyer
Held:
1. Yes
On the matter of transshipment, petitioner maintains that ". . . while the goods were transferred in Hongkong
from MV Pacific Despatcher, the feeder vessel, to MV Oriental Researcher, a mother vessel, the same
cannot be considered transshipment because both vessels belong to the same shipping company, the
private respondent Orient Overseas Container Lines, Inc."
Transshipment, in maritime law, is defined as "the act of taking cargo out of one ship and loading it in
another," 9 or "the transfer of goods from the vessel stipulated in the contract of affreightment to another
vessel before the place of destination named in the contract has been reached," 10 or "the transfer for further
transportation from one ship or conveyance to another." 11 Clearly, either in its ordinary or its strictly legal
acceptation, there is transshipment whether or not the same person, firm or entity owns the vessels. In other
words, the fact of transhipment is not dependent upon the ownership of the transporting ships or
conveyances or in the change of camera, as the petitioner seems to suggest, but rather on the fact of actual
physical transfer of cargo from one vessel to another.
That there was transhipment within this contemplation is the inescapable conclusion, as there unmistakably
appears on the face of the bill of lading the entry "Hong Kong" in the blank space labeled "Transshipment,"
which can only mean that transshipment actually took place. 12 This fact is further bolstered by the
certification 13 issued by private respondent F.E. Zuellig, Inc. dated July 19, 1980, although it carefully used
the term "transfer" instead of transshipment. Nonetheless, no amount of semantic juggling can mask the fact
that transshipment in truth occurred in this case.
2. No.
Petitioner, in effect, is saying that since there was a mistake in documentation on the part of private
respondents, such a mistake militates against the conclusiveness of the bill of lading insofar as it reflects the
terms of the contract between the parties, as an exception to the parol evidence rule, and would therefore
permit it to explain or present evidence to vary or contradict the terms of the written agreement, that is, the
bill of lading involved herein.
LexLib
It is a long standing jurisprudential rule that a bill of lading 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. As a
contract, it names the parties, which includes the consignee, fixes the route, destination, and freight rates or
charges, and stipulates the rights and obligations assumed by the parties. 15 Being a contract, it is the law
between the parties who are bound by its terms and conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. 16 A bill of lading usually becomes effective upon its
delivery to and acceptance by the shipper. It is presumed that the stipulations of the bill were, in the absence
of fraud, concealment or improper conduct, known to the shipper, and he is generally bound by his
acceptance whether he reads the bill or not. 17
The holding in most jurisdictions has been that a shipper who receives a bill of lading without objection after
an opportunity to inspect it, and permits the carrier to act on it by proceeding with the shipment is presumed
to have accepted it as correctly stating the contract and to have assented to its terms. In other words, the
acceptance of the bill without dissent raises the presumption that all the terms therein were brought to the
knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake, he is estopped from
thereafter denying that he assented to such terms. This rule applies with particular force where a shipper
accepts a bill of lading with full knowledge of its contents and acceptance under such circumstances makes
it a binding contract.
Under the parol evidence rule, 21 the terms of a contract are rendered conclusive upon the parties, and
evidence aliunde is not admissible to vary or contradict a complete and enforceable agreement embodied in
a document, subject to well defined exceptions which do not obtain in this case. The parol evidence rule is
based on the consideration that when the parties have reduced their agreement on a particular matter into
writing, all their previous and contemporaneous agreements on the matter are merged therein. Accordingly,
evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or
defeat the operation of a valid instrument. 22 the mistake contemplated as an exception to the parol
evidence rule is one which is a mistake of fact MUTUAL to the parties. 23 Furthermore, the rules on
evidence, as amended, require that in order that parol evidence may be admitted, said mistake must be put
in issue by the pleadings, such that if not raised inceptively in the complaint or in the answer, as the case
may be, a party can not later on be permitted to introduce parol evidence thereon. 24
Needless to say, the mistake adverted to by herein petitioner, and by its own admission, was supposedly
committed by private respondents only and was raised by the former rather belatedly only in this instant
petition. Clearly then, and for failure to comply even only with the procedural requirements thereon, we
cannot admit evidence to prove or explain the alleged mistake in documentation imputed to private
respondents by petitioner.
3. The court did not rule upon the matter. Such ruling does not matter in the case as even assuming it in effect
converted the bill of lading, it still fails to comply with the requirements in the Letter of Credit as the certification was
made when the date of compliance is overdue.
An on board bill of lading is one in which it is stated that the goods have been received on board the vessel
which is to carry the goods, whereas a received for shipment bill of lading is one in which it is stated that the
goods have been received for shipment with or without specifying the vessel by which the goods are to be
shipped. Received for shipment bills of lading are issued whenever conditions are not normal and there is
insufficiency of shipping space. 29 An on board bill of lading is issued when the goods have been actually
placed aboard the ship with every reasonable expectation that the shipment is as good as on its way. 30 It is,
therefore, understandable that a party to a maritime contract would require an on board bill of lading
because of its apparent guaranty of certainty of shipping as well as the seaworthiness of the vessel which is
to carry the goods. LibLex
It cannot plausibly be said that the aforestated certification of F.E. Zuellig, Inc. can qualify the bill of lading,
as originally issued, into an on board bill of lading as required by the terms of the letter of credit issued in
favor of petitioner. For one, the certification was issued only on July 19, 1980, way beyond the expiry date of
June 30, 1980 specified in the letter of credit for the presentation of an on board bill of lading. Thus, even
assuming that by a liberal treatment of the certification it could have the effect of converting the received for
shipment bill of lading into an on board of bill of lading, as petitioner would have us believe, such an effect
may be achieved only as of the date of its issuance, that is, on July 19, 1980 and onwards.
The fact remains, though, that on the crucial date of June 30, 1980 no on board bill of lading was presented
by petitioner in compliance with the terms of the letter of credit and this default consequently negates its
entitlement to the proceeds thereof. Said certification, if allowed to operate retroactively, would render
illusory the guaranty afforded by an on board bill of lading, that is, reasonable certainty of shipping the
loaded cargo aboard the vessel specified, not to mention that it would indubitably be stretching the concept
of substantial compliance too far.
Neither can petitioner escape liability by adverting to the bill of lading as a contract of adhesion, thus
warranting a more liberal consideration in its favor to the extent of interpreting ambiguities against private
respondents as allegedly being the parties who gave rise thereto. The bill of lading is clear on its face. There
is no occasion to speak of ambiguities or obscurities whatsoever. All of its terms and conditions are plainly
worded and commonly understood by those in the business.
(Magellan Manufacturing Marketing Corp. v. Court of Appeals, G.R. No. 95529, [August 22, 1991], 278
|||
PHIL 118-141)
12. Parol evidence rule

100. Saludo v CA
7. ID.; ID.; ID.; BETWEEN THE SHIPPER AND THE CARRIER; WHEN NO GOODS HAVE BEEN
DELIVERED FOR SHIPMENT; NO RECITAL IN THE BILL CAN ESTOP THE CARRIER FROM SHOWING
THE TRUE FACTS. — While we agree with petitioners' statement that "an airway hill estops the carrier from
denying receipt of goods of the quantity and quality described in the bill," a further reading and a more faithful
quotation of the authority cited would reveal that "(a) bill of lading may contain constituent elements of estoppel
and thus become something more than a contract between the shipper and the carrier. . . . (However), as
between the shipper and the carrier, WHEN NO GOODS HAVE BEEN DELIVERED FOR SHIPMENT no
recitals in the bill can estop the carrier from showing the true facts . . .. Between the consignor of goods
and a receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption
that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must
outweigh the recital."
For this reason, we must perforce allow explanation by private respondents why, despite the issuance of the
airway bill and the date thereof, they deny having received the remains of Crispina Saludo on October 26,
1976 as alleged by petitioners.
8. ID.; ID.; ID.; ACCEPTANCE THEREOF WITHOUT DISSENT; PRESUMPTION. — There is a holding in
most jurisdictions that the acceptance of a bill of lading without dissent raises a presumption that all terms
therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or
mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with
particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance,
under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation
in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this
exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed
on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if
printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt
which states that its conditions are to be found on the back, such receipt comes within the general rule, and the
shipper is held to have accepted and to be bound by the conditions there to be found.
Facts:
Issue:
Held:
13. Validity of Stipulations

101. Ysmael v Barreto
1. WHAT A COMMON CARRIER CANNOT DO. — A common carrier cannot lawfully stipulate for
exemption from liability (different from limiting the diligence to be exercised), unless such exemption is just
and reasonable and the contract is freely and fairly made.
2. WHEN CANNOT LIMIT ITS LIABILITY. — By the weight of modern authority, the carrier cannot
limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own
negligence.
3. REASON FOR RULE. — The rule rests on consideration of public policy, as the contract of the
carrier is to carry and deliver the goods, and a contract that undertakes to relieve the carrier from any
liability for loss or damage accruing or arising from its own negligence would in legal effect nullify the
contract.
Stipulation limiting amount - invalid too low even if shipper has option to pay additional to increase the value as there is monopoly in the industry.
"It is expressly understood that carrier shall not be liable for loss or damage from any cause or for any reason to an amount exceeding
three hundred pesos (P300) Philippine currency for any single package of silk or other valuable cargo, nor for an amount exceeding
one hundred pesos (P100) Philippine currency for any single package of other cargo, unless the value and contents of such packages
are correctly declared in this bill of lading at the time of shipment and freight paid in accord with the actual measurement or weight of
the cargo shipped."
OWN NOTE: if there is option, it complies Art. 1749 but the value may be quetioned under Art. 1750.
IOW, WON stipulation valid is different from the validity of the amount
Note: if the shipper declares higher value than the market price, it is valid as long as he pays and
Facts:
paragraph 7 of the bill of lading, which is as follows:

"All claims for shortage or damage must be made at the time of delivery to consignee or his
agent, if the packages or containers show exterior signs of damage; otherwise to be made in writing to
the carrier within twenty-four hours from the time of delivery. Claims for nondelivery or shipment must be
presented in writing to the carrier within thirty days from the date of accrual. Suits based upon claims arising
from shortage, damage, or nondelivery of shipment shall be instituted within sixty days from date of
accrual of the right of action. Failure to make claims or to institute judicial proceedings as herein provided
shall constitute a waiver of the claim or right of action."
Clause 12 of the bill of lading, which is as follows:

"It is expressly understood that carrier shall not be liable for loss or damage from any cause or for any
reason to an amount exceeding three hundred pesos (P300) Philippine currency for any single package of silk or
other valuable cargo, nor for an amount exceeding one hundred pesos (P100) Philippine currency for any
single package of other cargo, unless the value and contents of such packages are correctly declared in
this bill of lading at the time of shipment and freight paid in accord with the actual measurement or weight of
the cargo shipped."
|||
Issue:
WON such LIMITATION AS TO TIME prescribe to bring action is valid.
WON such LIMITATION AS TO AMOUNT of liability is valid
Held:
1. Limitation as to time prescribe to bring action is valid only if the time is reasonable.
In this case, the limitation is invalid as it is unreasonable. And it also said:

"Granting, without deciding, that said conditions appearing on the back of the originals might
have legal effect, the court is of the opinion that in view of the fact that said conditions are not printed
on the triplicate copies which were delivered to the plaintiff, such conditions are not binding upon the
plaintiff."
It appears that the plaintiff made its claim of loss within seven days after receipt of information
that 160 cases only were delivered. Its second claim was made on December 29,1922, in which it said
that, if the claim was not paid before January 3, 1923, it would be placed in the hands of attorneys for
collection. On January 3, 1923, Gabino Barretto & Company advised the plaintiff that it would not pay the
claim, and on April seventeenth plaintiff filed its complaint.
In the case of Aguinaldo vs. Daza (G. R. No. 25961), 1 in which the printed conditions on the bill
of lading were identical with those in the instant case, the action was not commenced for more than a
year after the delivery of the goods by the plaintiff and the receipt of the bill of lading, and it was there
held that:
"We are of the opinion that, having regard to the situation involved in this shipment, and the
slowness of communication between Manila and Catbalogan, the contractual limitation stated in this
bill of lading with respect to the time for presentation of the written claim was insufficient. The same
considerations are necessarily decisive with respect to the time required for the institution of judicial
action. It results that the stipulations relied upon by the defendant-appellee constitute no obstacle to
the maintenance of the present action."
All things considered, we are clearly of the opinion that the action was brought within a
"reasonable time" as those words are specified and defined in the authorities cited. It is true that both the
plaintiff and the defendants are residents of the City of Manila, but it is also true that Surigao where the
goods in question were to be delivered is one of the most distant places from Manila in the Philippine
Islands. In the very nature of things, plaintiff would not want to commence its action until such time as it
had made a full and careful investigation of all of the material facts and even the law of the case, so as to
determine whether or not the defendants were liable for its loss.
2. No. It is against public policy. The limit of defendants' liability for each case of silk "for loss or
damage from any cause or for any reason" would put it in the power of the defendants to have
taken the whole cargo of 164 cases of silk at a valuation of P300 for each case, or less than one-
eighth of its actual value. If that rule of law should be sustained, no silk would ever be shipped from one
island to another in the Philippines. Such a limitation of value is unconscionable and void as against public
policy.
That condition is printed on the back of the bill of lading. In disposing of that question, the lower
court points out that the conditions in question "are not printed on the triplicate copies which were
delivered to the plaintiff," and that by reason thereof they "are not binding upon the plaintiff." The clause
in question provides that the carrier shall not be liable for loss or damage from any cause or for any
reason to an amount in excess of P300 "for any single package of silk or other valuable cargo."
The ship in question was a common carrier and, as such, must have been operated as a public
utility. It is a matter of common knowledge that large quantities of silk are imported in the Philippine
Islands, and that after being imported, they are sold by the merchants in Manila and other large seaports,
and then shipped to different points and places in the Islands. Hence, there is nothing unusual about the
shipment of silk. In truth and in fact, it is a matter of usual and ordinary business. There was no fraud or
concealment in the shipment in question. Clause 12 above quoted places a limit of P300 "for any single
package of silk." The evidence shows that 164 "cases" were shipped, and that the value of each case
was very near P2,500. In this situation, the limit of defendants' liability for each case of silk "for loss
or damage from any cause or for any reason" would put it in the power of the defendants to have
taken the whole cargo of 164 cases of silk at a valuation of P300 for each case, or less than one-
eighth of its actual value. If that rule of law should be sustained, no silk would ever be shipped from
one island to another in the Philippines. Such a limitation of value is unconscionable and void as against
public policy.
(Juan Ysmael & Co., Inc. v. Limgengco, G.R. No. 28028, [November 25, 1927], 51 PHIL
|||
90-99)
||| (Juan Ysmael & Co., Inc. v. Limgengco, G.R. No. 28028, [November 25, 1927], 51 PHIL 90-99)
102. Sweet Lines Inc v Teves

Stipulation to fix venue is Invalid in this case. No opportunity to examine and consider the
same; no other option to reach their destination as there was virtually a monopoly in the
shipping industry; the limitation is against public policy as it defeats the purpose of the
convenience of the plaintiffs as well as his witnesses and to promote the ends of justice
2. CIVIL ACTIONS; VENUE; SUBJECT TO PARTIES' AGREEMENT. — A written agreement of the parties as
to venue, as authorized by Section 3, Rule 4, is not only binding between the parties but also enforceable by
the courts. After an action has been filed, change or transfer of venue by agreement of the parties is
controllable in the discretion of the court.
3. ID.; ID.; ID.; WHEN CONTRARY TO PUBLIC POLICY. — The Court may declare the agreement as to
venue to be in effect contrary to public policy, — despite that in general, changes and transfers of venue
by written agreement of the parties are allowable — whenever it is shown that a stipulation as to venue
works injustice by practically denying to the party concerned designated by the rules.
Facts:
Two passengers of an inter-island vessel sued petitioner company in the Court o First Instance of Misamis
Oriental for breach of contract of carriage. Petitioner moved to dismiss the complaint on the ground of
improper venue. The motion was premised on the condition printed att he back of the tickets that actions
arising from " It is hereby agreed and understood that any and all actions arising out of the conditions and
provisions of this ticket, irrespective of where it is issued, shall be filed in the competent courts in the City of
Cebu.”
The trial court denied the motion to dismiss as well as the motion for reconsideration. The Supreme Court
sustained the trial court and declared the condition void and unenforceable as contrary to public policy which
is to make the courts accessible to all who may have need of their services.
Detailed facts:
Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by professions, bought tickets
Nos. 0011736 and 011737 for Voyage 90 on December 31, 1971 at the branch office of petitioner, a
shipping company transporting inter-island passengers and cargoes, at Cagayan de Oro City. Respondents
were to board petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu. Upon
learning that the vessel was not proceeding to Bohol, since many passengers were bound for Surigao,
private respondents per advice, went to the branch office for proper relocation to M/S "Sweet Town".
Because the said vessel was already filed to capacity, they were forced to agree "to hide at the cargo
section to avoid inspection of the officers of the Philippine Coastguard." Private respondents alleged that
they were, during the trip," "exposed to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not honored
and they were constrained to pay for other tickets.
Issue:
WON the stipulation of venue is valid and enforceable in this case
Held:
Invalid in this case. No opportunity to examin and consider the same; no other option to
reach their destination as there was virtually a monopoly in the shipping industry; the
limitation is against public policy as it defeats the purpose of the convenience of the
plaintiffs as well as his witnesses and to promote the ends of justice
Neither did the latter have the opportunity to take the same into account prior to the purchase of their tickets.
For, unlike the small print provisions of insurance contracts — the common example of contracts of
adherence — which are entered into by the insured in full awareness of said conditions, since the insured is
afforded the opportunity to examine and consider the same, passengers of inter-island vessels do not have
the same chance, since their alleged adhesion is presumed only from the fact that they purchased the
passage tickets.
shipping companies, like petitioner, engaged in inter-island shipping, have a virtual monopoly of the business
of transporting passengers and may thus dictate their terms of passage, leaving passengers with no choice
but to buy their tickets and avail of their vessels and facilities
Considering the expense and trouble a passenger residing outside of Cebu City would incur to prosecute a
claim in the City of Cebu, he would most probably decide not to file the action at all. The condition will thus
defeat, instead of enhance, the ends of justice.
It should be borne in mind, however, that with respect to the fourteen (14) conditions — one of which is
"Condition No. 14" which is in issue in this case — printed at the back of the passage tickets, these are
commonly known as "contracts of adhesion," the validly and/or enforceability of which will have to be
determined by the peculiar circumstances obtaining in each case and the nature of the conditions or terms
sought to be enforced. For, "(W)hile generally, stipulations in a contract come about after deliberate drafting
by the parties thereto, . . . there are certain contracts almost all the provisions of which have been drafted
only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only
participation of the party is the signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of
lading, contracts of sale of lots on the installment plan fall into this category." 16

By the peculiar circumstances under which contracts of adhesion are entered into — namely, that it is
drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by the other
party, in this instance the passengers, private respondents, who cannot change the same and who are thus
made to adhere thereto on the "take it or leave it" basis - certain guidelines in the determination of their
validity and/or enforceability have been formulated in order to insure that justice and fair play characterize
the relationship of the contracting parties. Thus, this Court speaking through Justice J.B.L. Reyes in Qua
Chee Gan v. Law Union and Rock Insurance Co., 17 and later through Justice Fernando in Fieldman
Insurance v. Vargas, 18held —
"The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital, endowed
with overwhelming economic power, manage to impose upon parties dealing with them cunningly
prepared 'agreements that the weaker party may not change one whit, his participation in the
'agreement' being reduced to the alternative 'to take it or leave it,' labelled since Raymond Saleilles
'contracts by adherence' (contracts d' adhesion) in contrast to those entered into by parties
bargaining on an equal footing. Such contracts (of which policies of insurance and international bill of
lading are prime examples) obviously call for greater strictness and vigilance on the part of the courts
of justice with a view to protecting the weaker party from abuses and imposition, and prevent their
becoming traps for the unwary."
To the same effect and import, and, in recognition of the peculiar character of contracts of this kind, the
protection of the disadvantaged is expressly enjoined by the New Civil Code —
"In all contractual, property or other relations, when one of the parties is at a disadvantage on
account of his moral dependence, is ignorance, indigence, mental weakness, tender age and other
handicap, the courts must be vigilant for his protection." 19
Considered in the light of the foregoing norms and in the context of circumstances prevailing in the inter-
island shipping industry in the country today, We find and hold that Condition No. 14 printed at the back of
the passage tickets should be held as void and unenforceable for the following reasons — first, under
circumstances obtaining in the inter-island shipping industry, it is not just and fair to bind passengers to the
terms of the conditions printed at the back of the passage tickets, on which Condition No. 14 is printed in fine
letters, and second, Condition No. 14 subverts the public policy on transfer of venue of proceedings of this
nature, since the same will prejudice rights and interests of innumerable passengers in different parts of the
country who, under Condition No. 14, will have to file suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of and acute
shortage in inter-island vessels plying between the country's several islands, and the facilities they offer
leave much to be desired. Thus, even under ordinary circumstances, the piers are congested with
passengers and their cargo waiting to be transported, The conditions are even worse at peak and/or the
rainy seasons, when passengers literally scramble to secure whatever accommodations may be availed of,
even through circuitous routes, and/or at the risk of their safety — their immediate concern, for the moment,
being to be able to board vessels with the hope of reaching their destinations. The schedules are — as often
as not if not more so — delayed or altered. This was precisely the experience of private respondents when
they were relocated to M/S "Sweet Town" from M/S "Sweet Hope" and then allegedly "exposed to the
scorching heat of the sun and the dust coming from the ship's cargo of corn grits," because even the latter
vessel was filled to capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to examine their tickets
received from crowded/congested counters, more often than not during rush hours, for conditions that may
be printed thereon, much less charge them with having consented to the conditioner so printed, especially if
there are a number of such conditions in fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the instance of the petitioner;
respondents had no say in its preparation. Neither did the latter have the opportunity to take the same into
account prior to the purchase of their tickets. For, unlike the small print provisions of insurance contracts —
the common example of contracts of adherence — which are entered into by the insured in full awareness of
said conditions, since the insured is afforded the opportunity to examine and consider the same, passengers
of inter-island vessels do not have the same chance, since their alleged adhesion is presumed only from the
fact that they purchased the passage tickets.
It should also be stressed that shipping companies are franchise holders of certificates of public convenience
and, therefore, possess a virtual monopoly over the business of transporting passengers between the ports
covered by their franchise. This being so, shipping companies, like petitioner, engaged in inter-island
shipping, have a virtual monopoly of the business of transporting passengers and may thus dictate their
terms of passage, leaving passengers with no choice but to buy their tickets and avail of their vessels and
facilities. Finally, judicial notice may be taken of the fact that the bulk of those who board these inter-island
vessels come from the low-income groups and are less literate, and who have little or no choice but to avail
of petitioner's vessels. cdphil
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although
venue may be changed or transferred from one province to another by agreement of the parties in writing
pursuant to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it
practically negates the action of the claimants, such as the private respondents herein. The philosophy
underlying the provisions on transfer of venue of actions is the convenience of the plaintiffs as well as his
witnesses and to promote the ends of justice.21 Considering the expense and trouble a passenger residing
outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would most probably decide not
to file the action at all. The condition will thus defeat, instead of enhance, the ends of justice. Upon the other
hand, petitioner has branches or offices in the respective ports of call of its vessels and can afford to litigate
in any of these places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the instant
case, will not cause inconvience to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that which
has a tendency to be injurious to the public or against the public good . . .". 22Under this principle ". . .
freedom of contract or private dealing is restricted by law for the good of the public." 23 Clearly, Condition No.
14, if enforced, will be subversive of the public good or interest, since it will frustrate in meritorious cases,
actions of passenger claimants outside of Cebu City, thus placing petitioner company at a decided
advantage over said persons, who may have perfectly legitimate claims against it. The said condition should,
therefore, be declared void and unenforceable, as contrary to public policy — to make the courts accessible
to all who may have need of their services.
103. Servando v Phil. Steam Navigation

Other issues re stipulation
Change of stopping time

Facts:
Appellees Clara Uy Bico and Amparo Servando loaded their respective cargoes on board
appellant's vessel for carriage from Manila to Negros Occidental. Upon arrival of the vessel
at the place of destination, the cargoes were discharged, complete and in good order, into
the warehouse of the Bureau of Customs. After appellee Uy Bico had taken delivery of
aportion of her cargoes, the warehouse was rated by fire of unknown origin, destroying the
rest of the two appellees' cargoes. Appellees filed their claims from appellant for the
recovery of the value of the goods destroyed by fire. Appellant rejected the claims but the
trial court ruled in favor of appellees and ordered payment of their claims, stating that since
the burning of the warehouse occurred before actual or constructive delivery of the goods to
the appellees, the loss is chargeable against the appellant.
On review, the Supreme Court held that appellant, as obligor, is exempt from liability for
non-performance because the burning of the warehouse containing appellees' goods, which
is the immediate and proximate cause of the loss, is a fortuitous event or force majeure
which could not have been forseen by appellant.
Judgment appealed from, set aside.
Issue:
WON A stipulation by the parties in the bills of lading issued for the cargoes in question,
limiting the responsibility of the carrier for the lost or damage that may be caused to the
shipment is valid where there is nothing therein that is contrary to law, moral or public
policy, and is binding upon the parties even if written on the back of the bill of lading and not
signed by the parties. |||
Held:
YES. Besides, the agreement contained in the above quoted Clause 14 is a mere iteration
of the basic principle of law written in Article 1174 of the Civil Code:
"Article 1174. Except in cases expressly specified by the law, or when it is otherwise

declared by stipulation, or when the nature of the obligation requires the assumption
of risk, no person shall be responsible for those events which should not be
foreseen, or which, though foreseen, were inevitable."
(Servando v. Philippine Steam Navigation Co., G.R. Nos. L-36481-2, [October 23, 1982],
|||
203 PHIL 184-192)
104. Maersk Line v CA

3. ID.; CONTRACTS; CONTRACT OF ADHESION; AS A GENERAL RULE, CONSIDERED VOID;
EXCEPTION; APPLICABLE TO BILL OF LADING. — Generally, contracts of adhesion are considered void
since almost all the provisions of these types of contracts are prepared and drafted only by one party, usually
the carrier (Sweet Lines v. Teves, 83 SCRA 361 [1978]). The only participation left of the other party in such a
contract is the affixing of his signature thereto, hence the term "adhesion" (BPI Credit Corporation v. Court of
Appeals, 204 SCRA 601 [1991]; Angeles v. Calasanz, 135 SCRA 323 [1985]). Nonetheless, settled is the rule
that bills of lading are contracts not entirely prohibited (Ong Yiu v. Court of Appeals, et al., 91 SCRA 223
[1979]; Servando, et al. v. Philippine Steam Navigation Co., 117 SCRA 832 [1982]). One who adheres to the
contract is in reality free to reject it in its entirety; if he adheres, he gives his consent (Magellan Manufacturing
Marketing Corporation v. Court of Appeals, et al., 201 SCRA 102 [1991]). In Magellan, (supra), we ruled: "It is
a long standing jurisprudential rule that a bill of lading 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. As a
contract, it names the parties, which includes the consignee, fixes the route, destination, and freight rates or
charges, and stipulates the rights and obligations assumed by the parties. Being a contract, it is the law
between the parties who are bound by its terms and conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. A bill of lading usually becomes effective upon its
delivery to and acceptance by the shipper. It is presumed that the stipulations of the bill were, in the absence
of fraud, concealment or improper conduct, known to the shipper, and he is generally bound by his acceptance
whether he reads the bill or not." HOWEVER, THE AFOREQUOTED RULING APPLIES ONLY IF SUCH
CONTRACTS WILL NOT CREATE AN ABSURD SITUATION AS IN THE CASE AT BAR. THE
QUESTIONED PROVISION IN THE SUBJECT BILL OF LADING HAS THE EFFECT OF PRACTICALLY
LEAVING THE DATE OF ARRIVAL OF THE SUBJECT SHIPMENT ON THE SOLE DETERMINATION AND
WILL OF THE CARRIER. |||
4. ID.; SPECIAL CONTRACTS; COMMON CARRIER; GENERALLY, NOT OBLIGATED BY LAW TO CARRY
AND TO DELIVER MERCHANDISE PROMPTLY; EXCEPTION. — While it is true that 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 to deliver at a given date or time
(Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or cargo should at least be
made within a reasonable time. In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held: "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 is to be determined from the circumstances surrounding the case and by application of the ordinary
rules for the interpretation of contracts."
|||
5. ID.; ID.; ID.; ID.; DELAY FOR A PERIOD OF MORE THAN TWO (2) MONTHS IN BEYOND THE REALM
OF REASONABLENESS. — An examination of the subject bill of lading shows that the subject shipment was
estimated to arrive in Manila on April 3, 1977. While there was no special contract entered into by the parties
indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the
specific date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard, there
arises no need to execute another contract for the purpose as it would be a mere superfluity. In the case
before us, we find that a delay in the delivery of the goods spanning a period of two (2) months and seven (7)
days falls way beyond the realm of reasonableness. Described as gelatin capsules for use in pharmaceutical
products, subject shipment was delivered to, and left in, the possession and custody of petitioner-carrier for
transport to Manila via Oakland, California. But through petitioner's negligence was mishipped to Richmond,
Virginia. Petitioner's insistence that it cannot be held liable for the delay finds no merit.
|||
Facts:
Issue:
Held:
105. >>Provident Insurance Corp v CA

NOTICE OF CLAIM STIPULATION
Provisions limiting the time to notify the shipper for any damage in the shipment for the right of action to recover damages against the
carrier prosper is generally VALID.
Carriers and depositaries sometimes require presentation of claims within a short time after delivery as a condition
precedent to their liability for losses. Such requirement is not an empty formalism. It has a definite purpose, i.e., to afford
the carrier or depositary a reasonable opportunity and facilities to check the validity of the claims while the facts are still
fresh in the minds of the persons who took part in the transaction and the document are still available.
It is very clear that the Bill of Lading provides for the time or period within which a claim should be made or suit
filed in Court. Plaintiff or Atlas Fertilizer Corporation failed on this score. Moreover, ATLAS FERTILIZER
CORPORATION COULD NOT CLAIM IGNORANCE OF THE CONTENTS OF THE BILL OF LADING just
because the printed letters are so small that they are hard to read or that the shipper did not sign it FOR
ATLAS FERTILIZER CORPORATION BEING A REGULAR SHIPPER AND A BIG CORPORATION. Plaintiff
is presumed to know the contents thereof for the reason that this is the very document
Note: in the law, notice of claim need not be in writing. Stipulation requiring such to be in writing is valid.
Facts:
Stipulation No. 7 of the bill of lading, the full text of which reads —
7. All claims for damages to the goods must be made to the carrier at the time of delivery to
the consignee or his agent if the package or containers show exterior sign of damage, otherwise to
be made in writing to the carrier within twenty-four hours from the time of delivery . Notice of loss due
to delay must be given in writing to the carrier within 30 days from the time the goods were ready for
delivery, or in case of non-delivery or misdelivery of shipment the written notice must be given within
30 days after the arrival at the port of discharge of the vessels on which the goods were received
in case of the failure of the vessel on which the goods were shipped to arrived at the port of
discharge, misdelivery must be presented in writing to the carrier within two months after the arrival
of the vessel of the port of discharge or in case of the failure of the vessel in which the goods were
shipped to arrive at the port of discharge written claims shall be made within 30 days of the time the
vessel should have arrived. The giving of notice and the filing of claims as above provided shall be
conditions precedent to the securing of the right of actions against the carrier for losses due to delay,
non-delivery, or misdelivery. In the case of damage to goods, the filing of the suit based upon claims
arising from damage, delay, non-delivery or mis-delivery shall be instituted within one year from the
date of the accrual of the right of action. Failure to institute judicial proceedings as herein provided
shall constitute a waiver of the claim or right of action, and no agent nor employee of the carrier shall
have authority to waive any of the provisions or requirements of this bill of lading. Any action by the
ship owner or its agents or attorneys in considering or dealing with claims where the provisions or
requirements of this bill of lading have not been complied with shall not be considered a waiver of
such requirements and they shall not be considered as waived except by an express
waiver. 1 (Emphasis Supplied)
In support of its petition, petitioner contends that it is unreasonable for the consignee Atlas Fertilizer
Corporation to be required to abide by the provisions of Stipulation No. 7 of the bill of lading. According to
petitioner, since the place of delivery was remote and inaccessible, the consignee cannot be expected to
have been able to immediately inform its main office and make the necessary claim for damages for the
losses and unrecovered spillages in the subject cargo.
Petitioner further argues that the contents of the bill of lading are printed in small letters that no one
would bother to read them, as they are difficult to read.
Finally, petitioner avers that from June 13 to 18, 1987, the vessel's Chief Officer supervised the
unloading of the shipment and thereafter signed a discharging report attesting to the fact of loss and
unrecovered spillages on the cargo. Thus, petitioner argues that respondent carrier's knowledge of the loss
and spillages was substantial compliance with the notice of claim required under Stipulation No. 7 of the bill
of lading. |||
Issue:
WON the stipulation prescribing definite time to raise any objection and file an action is valid
WON the small print of the conditions makes the bill of lading’s condition invalid. No, shipper is a regular shipper and deemed to
know the conditions.
Held:
The bill of lading defines the rights and liabilities of the parties in reference to the contract of carriage. Stipulations
therein are valid and binding in the absence of any showing that the same are contrary to law, morals, customs, public
order and public policy. Where the terms of the contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of the stipulations shall control.
In light of the foregoing, there can be no question about the validity and enforceability of Stipulation No. 7 in the
bill of lading. The twenty-four hour requirement under the said stipulation is, by agreement of the contracting parties,
a sine qua non for the accrual of the right of action to recover damages against the carrier. The wisdom of this kind of
proviso has been succinctly explained in Consunji v. Manila Port Service, where it was held:
Carriers and depositaries sometimes require presentation of claims within a short time after delivery as
a condition precedent to their liability for losses. Such requirement is not an empty formalism. It has a definite
purpose, i.e., to afford the carrier or depositary a reasonable opportunity and facilities to check the validity of the
claims while the facts are still fresh in the minds of the persons who took part in the transaction and the
document are still available. 6
Considering that a prompt demand was necessary to foreclose the possibility of fraud or mistake in ascertaining
the validity of claims, there was a need for the consignee or its agent to observe the conditions provided for in
Stipulation No. 7. Hence, petitioner's insistence that respondent carrier had knowledge of the damage because one of
respondent carrier's officers supervised the unloading operations and signed a discharging report, cannot be construed
as sufficient compliance with the aforementioned proviso. The Discharge Report is not the notice referred to in
Stipulation No. 7, hence, its accomplishment cannot be considered substantial compliance of the requirement
embodied therein. Moreover, a reading of the first paragraph of Stipulation No. 7 will readily show that upon the
consignee or its agent rests the obligation to make the necessary claim within the prescribed period and not merely rely
on the supposed knowledge of the damages by the carrier.
Petitioner also makes much of the fact that it had nothing to do with the preparation of the bill of lading. Worse,
according to petitioner, the bill of lading, particularly Stipulation No. 7, was printed in very small letters that no one
would be minded to closely examine the contents thereof and understand its legal implications. DSAEIT
We are not persuaded. A bill of lading is in the nature of a contract of adhesion, defined as one where one of
the parties imposes a ready-made form of contract which the other party may accept or reject, but which the latter
cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or
his "adhesion" thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal
footing. Nevertheless, these types of contracts have been declared as binding as ordinary contracts, the reason being
that the party who adheres to the contract is free to reject it entirely. 7

After it received the bill of lading without any objection, consignee Atlas Fertilizer Corporation was presumed to
have knowledge of its contents and to have assented to the terms and conditions set forth therein. The pronouncement
by this Court in Magellan Manufacturing Marketing Corp. v. Court of Appeals may be cited by analogy —
The holding in most jurisdictions has been that a shipper who receives a bill of lading without objection
after an opportunity to inspect it, and permits the carrier to act on it by proceeding with the shipment is presumed
to have accepted it as correctly stating the contract and to have assented to its terms. In other words, the
acceptance of the bill without dissent raises the presumption that all the terms therein were brought to the
knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake, he is estopped from
thereafter denying that he assented to such terms. 8 (Emphasis Supplied)
In this regard, we also quote with approval the lower court's view on the matter when it said:
It is very clear that the Bill of Lading provides for the time or period within which a claim should be
made or suit filed in Court. Plaintiff or Atlas Fertilizer Corporation failed on this score. Moreover, Atlas Fertilizer
Corporation could not claim ignorance of the contents of the Bill of Lading just because the printed letters are so
small that they are hard to read or that the shipper did not sign it for Atlas Fertilizer Corporation being a regular
shipper and a big corporation. Plaintiff is presumed to know the contents thereof for the reason that this is the
very document (Annex "A" of the complaint) where plaintiff relied its suit. 9
We are likewise not inclined to lend credence to petitioner's allegation that the lack of communications facilities
in the place of delivery prevented the consignee from making a prompt claim for recovery of damages as prescribed by
Stipulation No. 7. It is indeed hard to believe that Atlas Fertilizer Corporation, being an established corporation and a
regular shipper, would be so inept as not to have the necessary facilities to at least monitor, in the form of
communications equipment, the condition of its large shipment involving 32,000 bags of fertilizer. As pointed out by the
appellate court, at this day and age of advanced telecommunications and modern transportation, even in the year 1989,
the time limitation provided for in Stipulation No. 7 are just and reasonable.

Non-declaration of higher value but attached an invoice which includes value of the cargos.
SC: there is compliance of declaring higher value by way of reference to the invoice provided that
the corresponding fee is paid
ESLI argues that the value of the cargoes was not incorporated in the bills of
lading and that there was no evidence that the shipper had presented to the carrier in
writing prior to the loading of the actual value of the cargo, and, that there was a no
payment of corresponding (additional) freight (for the increase in the value claimed).
According to the New Civil Code, the law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss, destruction or
deterioration. 67 The Code takes precedence as the primary law over the rights and
obligations of common carriers with the Code of Commerce and COGSA applying
suppletorily. 68
The New Civil Code provides that a stipulation limiting a common carrier's liability to the
value of the goods appearing in the bill of lading is binding, unless the shipper or owner
declares a greater value. 69 In addition, 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. 70
COGSA, on the other hand, provides under Section 4, Subsection 5 that an amount
recoverable in case of loss or damage shall not exceed US$500.00 per package or per
customary freight unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading.
In line with these maritime law provisions, paragraph 13 of bills of lading issued by ESLI
to the shipper specifically provides a similar restriction:
The value of the goods, in calculating and adjusting any claims for which
the Carrier may be liable shall, to avoid uncertainties and difficulties in fixing value,
be deemed to the invoice value of the goods plus ocean freight and insurance, if
paid. Irrespective of whether any other value is greater or less, and any partial loss or
damage shall be adjusted pro rata on the basis of such value; provided, however, that
neither the Carrier nor the ship shall in any event be or become liable for any
loss, non-delivery or misdelivery of or damage or delay to, or in connection with the
custody or transportation of the goods in an amount exceeding $500.00 per
package lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, unless the nature of the goods and a
valuation higher than $500.00 is declared in writing by the shipper on delivery to
the Carrier and inserted in the bill of lading and extra freight is paid therein as
required by applicable tariffs to obtain the benefit of such higher valuation. In which
case even if the actual value of the goods per package or unit exceeds such declared
value, the value shall nevertheless be deemed to be the declared value and any
Carrier's liability shall not exceed such declared value and any partial loss or damage
shall be adjusted pro-rata on the basis thereof. The Carrier shall not be liable for any
loss or profit or any consequential or special damage and shall have the option of
replacing any lost goods and replacing o reconditioning any damage goods. No oral
declaration or agreement shall be evidence of a value different from that provided
therein.
The BILLS OF LADING REPRESENT the formal expression of the parties' rights,
duties and obligations. It is the best evidence of the intention of the parties which is to be
deciphered from the language used in the contract, not from the unilateral post
facto assertions of one of the parties, or of third parties who are strangers to the
contract. Thus, when the terms of an agreement have been reduced to writing, it is deemed to
contain all the terms agreed upon and there can be, between the parties and their successors
in interest, no evidence of such terms other than the contents of the written agreement.
As to the non-declaration of the value of the goods on the second bill of lading, we see
no error on the part of the appellate court when it ruled that there was a compliance of the
requirement provided by COGSA. THE DECLARATION REQUIREMENT DOES NOT
REQUIRE THAT ALL THE DETAILS MUST BE WRITTEN DOWN ON THE VERY BILL OF
LADING ITSELF. It must be emphasized that all the needed details are in the invoice, which
"contains the itemized list of goods shipped to a buyer, stating quantities, prices, shipping
charges," and other details which may contain numerous sheets. Compliance can be attained
by incorporating the invoice, by way of reference, to the bill of lading provided that the former
containing the description of the nature, value and/or payment of freight charges is as in this
case duly admitted as evidence.
"Neither is it conformable to plain principles of justice that a shipper may understate the
value of his property for the purpose of reducing the rate, and then recover a larger value in
case of loss. Nor does a limitation based upon an agreed value for the purpose of adjusting
the rate conflict with any sound principle of public policy." (Adams Express Company v.
Croninger)
The effect of admission of the genuineness and due execution of a document means that the
party whose signature it bears admits that he voluntarily signed the document or it was signed
by another for him and with his authority.
Facts:
Issue:
Held:
14. Package under COGSA

107. >>>Eastern Shipping v IAC
RE: Fire as fortuitous event:
Under Civil Code – not fortuitous thus liable if failed to exercise extraordinary diligence
Under COGSA – not liable as long as there was no fault on the part of the carrier.
In this case, there was actual fault on the part of the carrier, thus liable.
On the US $500 Per Package Limitation :
It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package
although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA, which is suppletory to the
provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's
liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of
the Carriage of Goods by Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as
much a part thereof as though placed therein by agreement of the parties.
If there is stipulation to the value of the goods in the BOL but there is a declared value in the insurance contract with an
insurance company – the amount to be paid will be the $500 per package limitation or the amount insured, whichever is
lower. IOW, the $500 is just the ceiling.
The 128 cartons and not the two (2) containers should be considered as the shipping unit.
MITSUI TEST (Mitsui & Co., Ltd. vs. American Export Lines, Inc.): 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 liability limitation provision of Carriage of
Goods by Sea Act.
Discussion of Atty Capanas:

The shipping container containing the containers if owned by the shipper, is considered additional containers. Hence, in
this case, if they were owned by the shipper, 130 containers will be multiplied by 500usd.
Facts:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern
Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila,
5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills
Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods
were insured against marine risk for their stated value with respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and
accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying
instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co., for US$46,583.00, and the 2 cases by respondent Dowa Fire
& Marine Insurance Co., Ltd., for US$11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The
respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were
thus subrogated unto the rights of the latter as the insured.
Issue:
The threshold issues in both cases are: (1) which law should govern — the Civil Code provisions on
Common carriers or the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show
negligence of the carrier? |||
Held:
On the Law Applicable

The law of the country to which the goods are to be transported governs the liability of the common carrier in case of
their loss, destruction or deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the
liability of Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters not regulated by said
Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special
laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof

Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound
to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each
case. 8 Common carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is due
to any of the following causes only:
"(1)Flood, storm, earthquake, lightning or other natural disaster or calamity;
xxx xxx xxx" 9

Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or
calamity." However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be
so as it arises almost invariably from some act of man or by human means. 10 It does not fall within the category of an
act of God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the actual
fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands
where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event,
considering that the law adopts a protective policy towards agriculture. 14
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.
In this case, the respective Insurers, as subrogees of the cargo shippers, have proven that the transported goods have
been lost. Petitioner Carrier has also proven that the loss was caused by fire. The burden then is upon Petitioner
Carrier to prove that it has exercised the extraordinary diligence required by law. In this regard, the Trial Court,
concurred in by the Appellate Court, made the following finding of fact: LexLib
"The cargoes in question were, according to the witnesses for the defendant, placed in hatches No. 2 and 3 of
the vessel. Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3;
that when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours
before the same was noticed; that carbon dioxide was ordered released and the crew was ordered to open the
hatch covers of No. 2 hold for commencement of fire fighting by sea water; that all of these efforts were not
enough to control the fire.
"Pursuant to Article 1733, common carriers are bound to observe extraordinary diligence in the vigilance over
the goods. The evidence of the defendant did not show that extraordinary vigilance was observed by the vessel
to prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show the
amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the
cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage.
Consequently, the crew could not have even explain what could have caused the fire. The defendant, in the
Court's mind, failed to satisfactorily show that extraordinary vigilance and care had been made by the crew to
prevent the occurrence of the fire. The defendant, as a common carrier, is liable to the consignees for said lack
of diligence required of it under Article 1733 of the Civil Code." 15

Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law,
Petitioner Carrier cannot escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is
required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause
of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the
occurrence of the disaster." This Petitioner Carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act. It is provided
therein that:
"Sec. 4(2).Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from.
'(b)Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx "

In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the
carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must
have started twenty-four (24) hours before the same was noticed;" and that "after the cargoes were stored in the
hatches, no regular inspection was made as to their condition during the voyage." The foregoing suffices to show that
the circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or its servants
were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results
from fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:

Petitioner Carrier avers that its liability if any, should not exceed US$500 per package as provided in section 4(5) of the
COGSA, which 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 bill of lading. This declaration if embodied in the bill of lading shall be prima facie
evidence, but all be conclusive on the carrier.
"By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount
than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the
figure above named. In no event shall the carrier be liable for more than the amount of damage actually
sustained."
xxx xxx xxx

Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
"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."
It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount
per package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA, which is
suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision
limiting the carrier's liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of
lading. The provisions of the Carriage of Goods by Sea Act on limited liability are as much a part of a bill of lading as
though physically in it and as much a part thereof as though placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 17 limiting the
carrier's liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods.
Hence, Petitioner Carrier's liability should not exceed US$500 per package, or its peso equivalent, at the time of
payment of the value of the goods lost, but in no case "more than the amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the
amount of the insurance coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by
respondent Court. The goods were shipped in 28 packages (Exhibit "C-2"). Multiplying 28 packages by $500 would
result in a product of $14,000 which, at the current exchange rate of P20.44 to US$1, would be P286,160, or "more
than the amount of damage actually sustained." Consequently, the aforestated amount of P256,039 should be upheld. LLjur
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which
is likewise the insured value of the cargo (Exhibit "H") and which amount was affirmed to be paid by respondent Court.
However, multiplying seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US$1 (US$3,500
x P20.44) would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts,
and not P92,361.75.
In G.R. NO. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to
DOWA, which was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package,
is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the
Appellate Court also limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to
NISSHIN. It multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and
explained that "since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was
correct in awarding said amount only for the 128 cartons, which amount is less than the maximum limitation of the
carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the
shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and
the shipper of floor covering brought action against the vessel owner and operator to recover for loss of
ingots and floor covering, which had been shipped in vessel-supplied containers. The U.S. District Court for
the Southern District of New York rendered judgment for the plaintiffs, and the defendant appealed. The
United States Court of Appeals, Second Division, modified and affirmed holding that:
"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 liability limitation provision of Carriage of
Goods by Sea Act. Carriage of Goods by Sea Act, . . . 4(5), 46 U.S.C.A. . . . 1304(5).
"Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-
furnished containers whose contents are disclosed should be treated as packages, the interest in
securing international uniformity would suggest that they should not be so treated. Carriage of Goods
by Sea Act, . . . 4(5), 46 U.S.C.A. . . . 1304(5).
". . . After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as
a package is inconsistent with the congressional purpose of establishing a reasonable minimum level
of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):
Although this approach has not completely escaped criticism, there is, nonetheless,
much to commend it. It gives needed recognition to the responsibility of the courts to
construe and apply the statute as enacted, however great might be the temptation to
'modernize' or reconstitute it by artful judicial gloss. If COGSA's package limitation scheme
suffers from internal illness, Congress alone must undertake the surgery. There is, in this
regard, obvious wisdom in the Ninth Circuit's conclusion in Hartford that technological
advancements, whether or not forseeable by the COGSA promulgators, do not warrant a
distortion or artificial construction of the statutory term 'package.' A ruling that these large
reusable metal pieces of transport equipment qualify as COGSA packages — at least where,
as here, they were carrier-owned and supplied — would amount to just such a distortion.
Certainly, if the individual crates or cartons prepared by the shipper and containing
his goods can rightly be considered 'packages' standing by themselves, they do not suddenly
lose that character upon being showed in a carrier's container. I would liken these containers
to detachable stowage compartments of the ship. They simply serve to divide the ship's
overall cargo stowage space into smaller, more serviceable loci. Shippers' packages are
quite literally 'stowed' in the containers utilizing stevedoring practices and materials
analogous to those employed in traditional on board stowage. LLpr
"In Yeramex International v. S.S. Tando, 1977 A.M.C. 1807 (E.D. Va.), rev'd on other grounds, 595 F
2d 943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks' reasoning in
Matsushita and similarly rejected the functional economics test. Judge Kellam held that when rolls of
polyester goods are packed into cardboard cartons which are then placed in containers, the cartons
and not the containers are the packages.
"xxx xxx xxx"

The case of Smithgreyhound v. M/V Eurygenes 18 followed the Mitsui test:

"Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which
were then placed by the shipper into a carrier-furnished container. The number of cartons was
disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the
cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier
could limit its liability to $500 per container if the bill of lading failed to disclose the number of cartons
or units within the container, or if the parties indicated, in clear and unambiguous language, an
agreement to treat the container as the package."
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third
World Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in Fordham
International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
"2 Containers.
"(128) Cartons)
==========
"Men's Garments Fabrics and Accessories Freight Prepaid.
"Say: Two (2) Containers Only."
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number
of cartons or units, as well as the nature of the goods, and applying the ruling in
the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be
considered as the shipping unit subject to the $500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not.
Usually, however, containers are provided by the carrier. 19 In this case, the probability is that they were so
furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so
packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation in fine
print:
"11.(Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of
Lading are not already packed into container(s) at the time of receipt, the Carrier shall be at liberty to
pack and carry them in any type of container(s)."
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading,
meaning that the goods could probably fit in two (2) containers only. It cannot mean that the shipper had
furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have sufficed. and
if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the
interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already
prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is drawn up by
the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its
witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given full opportunity to present its evidence but it failed to do so. On
this point, the Trial Court found:
"xxx xxx xxx

"Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27,
1978, when its answer was prepared and filed in Court, until September 26, 1978, when the pre-trial
conference was conducted for the last time, the defendant had more than nine months to prepare its
evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan,
served upon the plaintiff on August 25th, just two days before the hearing set for August 27th,
knowing fully well that it was its undertaking on July 11th that the deposition of the witnesses would
be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the
defendant's motion for postponement, for which reason it deserves no sympathy from the Court in
that regard. The defendant has told the Court since February 16, 1979, that it was going to take the
deposition of its witnesses in Japan. Why did it take until August 25, 1979, or more than six months,
to prepare its written interrogatories. Only the defendant itself is to blame for its failure to adduce
evidence in support of its defenses.
xxx xxx xxx" 22

Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it
was denied due process when the Trial Court rendered its Decision on the basis of the evidence adduced.
What due process abhors is absolute lack of opportunity to be heard. 24
On the Award of Attorney's Fees:

Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award
by the Trial Court of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No. 69044, and
P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of
P5,000.00 would be more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is
affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall
pay the Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28)
packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the
legal rate from the date of the filing of the Complaint on June 13, 1978, plus P5,000 as attorney's fees, and
the costs.
2)In G.R. No. 71478, the judgment is hereby affirmed.
SO ORDERED.
Narvasa, Cruz, Feliciano and Gancayco, JJ., concur.
(Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, G.R. No. L-69044, L-71478, [May 29, 1987],
|||
234 PHIL 455-475)

(Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, G.R. No. L-69044, L-71478, [May 29, 1987], 234 PHIL
|||
455-475)
108. Belgian Overseas Chartering v Phil. First Ins. Co.

Issue: even the shipper did not declare a higher value, but since the it inserted words "L/C No.90-02447" the shipper
argued that particular is found in the bill of lading, that already indicated that the value of the cargo is higher as the
value
Whether the insertion of LC No - the insertion indicating the no of LC did not affect the value. It was made only for the
convenience of the bank and the shipper to process the payment.
Bill of lading is separate from Letter of Credit arrangements.

12. ID.; ID.; ID.; STIPULATION LIMITING COMMON CARRIERS LIABILITY TO A CERTAIN SUM, UNLESS
OWNER DECLARES A GREATER VALUE IS SANCTIONED BY LAW; CONDITIONS; RATIONALE. — 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 value — is sanctioned by law. 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. The rationale for, this rule is to bind the shippers by their agreement to the value (maximum valuation) of their
goods.
13. ID.; ID.; ID.; PART OF THE BILL OF LADING AS THOUGH PHYSICALLY IN IT AND AGREED UPON BY
THE PARTIES; CASE AT BAR. — 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. 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. 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. 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. In the case before us, there was no stipulation in the Bill of Lading 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. (IOW: Indicating the Letter
of Credit Number cannot be considered as have declared a higher vaue)
14. ID.; ID.; ID.; COMMON CARRIERS' OBLIGATION ARISING FROM CONTRACT OF TRANSPORTATION
NOT NEGATED BY DISCREPANCY BETWEEN AMOUNT INDICATED IN INVOICE AND AMOUNT IN BILL OF
LADING. — 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. That
notation was made only for the convenience of the shipper and the bank processing the Letter of Credit. In Keng Hua
Paper Products v. Court of Appeals, 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 vis-à-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."
15. ID.; ID.; ID.; TERM "PACKAGE," EXPLAINED; CASE AT BAR. — 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. In Eastern Shipping
Lines, Inc. v. Intermediate Appellate Court we explained the meaning of package: "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.
15. As receipt
109. Asian Terminals v Simon Enterprises
Shipper's weight quality and quantity.
Shipper's load and count

The CA misapprehended the following facts.
First, petitioner ATI is correct in arguing that the respondent failed to prove that the subject shipment suffered actual
shortage, as there was no competent evidence to prove that it actually weighed 3,300 metric tons at the port of origin.
Though it is true that common carriers are presumed to have been at fault or to have acted negligently if the goods
transported by them are lost, destroyed, or deteriorated, and that the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption, 21 the plaintiff must still, before the burden is shifted to the defendant, prove that the
subject shipment suffered actual shortage. This can only be done if the weight of the shipment at the port of origin and its
subsequent weight at the port of arrival have been proven by a preponderance of evidence, and it can be seen that the former
weight is considerably greater than the latter weight, taking into consideration the exceptions provided in Article 1734 22of the Civil
Code.
In this case, respondent failed to prove that the subject shipment suffered shortage, for it was not able to establish that the
subject shipment was weighed at the port of origin at Darrow, Louisiana, U.S.A. and that the actual weight of the said shipment was
3,300 metric tons. CSaITD
The Berth Term Grain Bill of Lading 23 (Exhibit "A"), the Proforma Invoice 24 (Exhibit "B"), and the Packing List 25 (Exhibit
"C"), being used by respondent to prove that the subject shipment weighed 3,300 metric tons, do not, in fact, help its cause.
The Berth Term Grain Bill of Lading states that the subject shipment was carried with the qualification "SHIPPER'S
WEIGHT, QUANTITY AND QUALITY UNKNOWN," meaning that it was transported with the carrier having been oblivious of the
weight, quantity, and quality of the cargo. This interpretation of the quoted qualification is supported by Wallem Philippines Shipping,
Inc. v. Prudential Guarantee & Assurance, Inc., 26 a case involving an analogous stipulation in a bill of lading, wherein the Supreme
Court held that:
Indeed, as the bill of lading indicated that the contract of carriage was under a "said to weigh" clause, the shipper is
solely responsible for the loading while the carrier is oblivious of the contents of the shipment. (Emphasis supplied)
Similarly, International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co., Inc., 27 explains the
meaning of clauses analogous to "Shipper's weight, quantity and quality unknown" in this manner:
This means that the shipper was solely responsible for the loading of the container, while the carrier was oblivious
to the contents of the shipment . . . . The arrastre operator was, like any ordinary depositary, duty-bound to take good
care of the goods received from the vessel and to turn the same over to the party entitled to their possession, subject to
such qualifications as may have validly been imposed in the contract between the parties. The arrastre operator
was not required to verify the contents of the container received and to compare them with those declared by the
shipper because, as earlier stated, the cargo was at the shipper's load and count . . . . (Italics in the original; emphasis
supplied)
Also, Bankers & Manufacturers Assurance Corporation v. Court of Appeals 28 elucidates thus:

[T]he recital of the bill of lading for goods thus transported [i.e., transported in sealed containers or "containerized"]
ordinarily would declare "Said to Contain", "Shipper's Load and Count", "Full Container Load", and the amount or quantity
of goods in the container in a particular package is only prima facie evidence of the amount or quantity . . . . DCcHAa
A shipment under this arrangement is not inspected or inventoried by the carrier whose duty is only to
transport and deliver the containers in the same condition as when the carrier received and accepted the containers
for transport . . . . (Emphasis supplied)
Hence, as can be culled from the above-mentioned cases, the weight of the shipment as indicated in the bill of lading is not
conclusive as to the actual weight of the goods. Consequently, the respondent must still prove the actual weight of the subject
shipment at the time it was loaded at the port of origin so that a conclusion may be made as to whether there was indeed a shortage
for which petitioner must be liable. This, the respondent failed to do.
The Proforma Invoice militates against respondent's claim that the subject shipment weighed 3,300 metric tons. The
pertinent portion of the testimony of Mr. Jose Sarmiento, respondent's Claims Manager, is narrated below:
Atty. Rebano:You also identified a while ago, Mr. Witness Exhibit B, the invoice. Why does it state as description of the
cargo three thousand metric tons and not three thousand three hundred?
A: Usually there is a contract between the supplier and our company that embodied [sic] in the letter credit [sic] that they have
the option to ship the cargo plus or minus ten percent of the quantity.
xxx xxx xxx
Q: So, it is possible for the shipper to ship less than ten percent in [sic] the quantity stated in the invoice and it will
still be a valid shipment. Is it [sic] correct?
A: It [sic] is correct but we must be properly advised and the commercial invoice should indicate how much they sent to
us. 29 (Emphasis supplied)
The quoted part of Mr. Sarmiento's testimony not only shows uncertainty as to the actual weight of the shipment, it also
shows that assuming respondent did order 3,300 metric tons of U.S. Soybean Meal from Contiquincybunge Export Company, and
also assuming that it only received 3,100.137 metric tons, such volume would still be a valid shipment because it is well within the
10% allowable shortage. Note that Mr. Sarmiento himself mentioned that the supplier has the option to "ship the cargo plus or minus
ten percent of the quantity." 30 cCHITA
Notably also, the genuineness and the due execution of the Packing List, the Berth Term Grain Bill of Lading, and the
Proforma Invoice, were not established.
Wallem Philippines Shipping, Inc., 31 is instructive on this matter:
We find that the Court of Appeals erred in finding that a shortage had taken place. Josephine Suarez, Prudential's
claims processor, merely identified the papers submitted to herin connection with GMC's claim (Bill of Lading BEDI/1
(Exh. "B"), Commercial Invoice No. 1401 issued by Toepfer International Asia Pte, Ltd. (Exh. "C"), SGS Certificate of Quality
(Exh. "F-1"), and SGS Certificate of Weight (Exh. "F-3")). Ms. Suarez had no personal knowledge of the contents of the
said documents and could only surmise as to the actual weight of the cargo loaded on M/V Gao Yang . . . .
xxx xxx xxx
Ms. Suarez's testimony regarding the contents of the documents is thus hearsay, based as it is on the
knowledge of another person not presented on the witness stand.
Nor has the genuineness and due execution of these documents been established. In the absence of clear,
convincing, and competent evidence to prove that the shipment indeed weighed 4,415.35 metric tons at the port of
origin when it was loaded on the M/V Gao Yang, it cannot be determined whether there was a shortage of the shipment
upon its arrival in Batangas. (Emphasis supplied)
As in the present case, Mr. Sarmiento merely identified the three above-mentioned exhibits, but he had no personal
knowledge of the weight of the subject shipment when it was loaded onto the M/V "Tern" at the port of origin. His testimony as
regards the weight of the subject shipment as described in Exhibits "A," "B," and "C" must then be considered as hearsay, 32for it was
based on the knowledge of a person who was not presented during the trial in the RTC. aSDCIE
The presumption that the Berth Term Grain Bill of Lading serves as prima facie evidence of the weight of the cargo has
been rebutted, there being doubt as to the weight of the cargo at the time it was loaded at the port of origin. Further, the fact that the
cargo was shipped with the arrangement "Shipper's weight, quantity and quality unknown," indeed means that the weight of the
cargo could not be determined using as basis the figures written on the Berth Term Grain Bill of Lading. This is in line with Malayan
Insurance Co., Inc. v. Jardine Davies Transport Services, Inc., 33 where we said:
The presumption that the bill of lading, which petitioner relies upon to support its claim for
restitution, constitutes prima-facie evidence of the goods therein described was correctly deemed by the appellate court
to have been rebutted in light of abundant evidence casting doubts on its veracity.
That MV Hoegh undertook, under the bill of lading, to transport 6,599.23 MT of yellow crude sulphur on a "said to
weigh" basis is not disputed. Under such clause, the shipper is solely responsible for the loading of the cargo while the carrier
is oblivious of the contents of the shipment. Nobody really knows the actual weight of the cargo inasmuch as what is written on
the bill of lading, as well as on the manifest, is based solely on the shipper's declaration.
The bill of lading carried an added clause — the shipment's weight, measure, quantity, quality, condition,
contents and value unknown. Evidently, the weight of the cargo could not be gauged from the bill of lading. (Italics in
the original; emphasis supplied)
The respondent having failed to present evidence to prove the actual weight of the subject shipment when it was loaded
onto the M/V "Tern," its cause of action must then fail because it cannot prove the shortage that it was alleging. Indeed, if the
claimant cannot definitively establish the weight of the subject shipment at the point of origin, the fact of shortage or loss cannot be
ascertained. The claimant then has no basis for claiming damages resulting from an alleged shortage. Again, Malayan Insurance
Co., Inc., 34 provides jurisprudential basis:
In the absence of clear, convincing and competent evidence to prove that the cargo indeed weighed, albeit
the Bill of Lading qualified it by the phrase "said to weigh," 6,599.23 MT at the port of origin when it was loaded onto
the MV Hoegh, the fact of loss or shortage in the cargo upon its arrival in Manila cannot be definitively established. The
legal basis for attributing liability to either of the respondents is thus sorely wanting. (Emphasis supplied) caTIDE
Second, as correctly asserted by petitioner ATI, the shortage, if any, may have been due to the inherent nature of the
subject shipment or its packaging since the subject cargo was shipped in bulk and had a moisture content of 12.5%.
It should be noted that the shortage being claimed by the respondent is minimal, and is an indication that it could be due to
consolidation or settlement of the subject shipment, as accurately observed by the petitioner. A Kansas State University study on the
handling and storage of soybeans and soybean meal 35 is instructive on this matter. Pertinent portions of the study reads:
Soybean meal is difficult to handle because of poor flow ability and bridging characteristics. Soybean meal tends to settle
or consolidate over time. This phenomenon occurs in most granular materials and becomes more severe with increased
moisture, time and small particle size . . . .
xxx xxx xxx
Moisture is perhaps the most important single factor affecting storage of soybeans and soybean meal. Soybeans contain
moisture ranging from 12% to 15% (wet basis) at harvest time . . . .
xxx xxx xxx
Soybeans and soybean meal are hygroscopic materials and will either lose (desorb) or gain (adsorb) moisture from
the surrounding air. The moisture level reached by a product at a given constant temperature and equilibrium relative
humidity (ERH) is its equilibrium moisture content (EMC) . . . . (Emphasis supplied)
As indicated in the Proforma Invoice mentioned above, the moisture content of the subject shipment was 12.5%. Taking into
consideration the phenomena of desorption, the change in temperature surrounding the Soybean Meal from the time it left wintertime
Darrow, Louisiana, U.S.A. and the time it arrived in Manila, and the fact that the voyage of the subject cargo from the point of loading
to the point of unloading was 36 days, the shipment could have definitely lost weight, corresponding to the amount of moisture it lost
during transit.
cCTIaS
The conclusion that the subject shipment lost weight in transit is bolstered by the testimony of Mr. Fernando Perez, a Cargo
Surveyor of L.J. Del Pan. The services of Mr. Perez were requested by respondent. 36 Mr. Perez testified that it was possible for the
subject shipment to have lost weight during the 36-day voyage, as it was wintertime when M/V "Tern" left the United States and the
climate was warmer when it reached the Philippines; hence the moisture level of the Soybean Meal could have
changed. 37 Moreover, Mr. Perez himself confirmed, by answering a question propounded by the RTC, that loss of weight of the
subject cargo cannot be avoided because of the shift in temperature from the colder United States weather to the warmer Philippine
climate. 38
More importantly, the 199.863 metric-ton shortage that respondent alleges is a minimal 6.05% of the weight of the entire
Soy Bean Meal shipment. Taking into consideration the previously mentioned option of the shipper to ship 10% more or less than the
contracted shipment, and the fact that the alleged shortage is only 6.05% of the total quantity of 3,300 metric tons, the alleged
percentage loss clearly does not exceed the allowable 10% allowance for loss, as correctly argued by petitioner. The alleged loss, if
any, not having exceeded the allowable percentage of shortage, the respondent then has no cause of action to claim for shortages.
Third, we agree with the petitioner ATI that respondent has not proven any negligence on the part of the former.
As petitioner ATI pointed out, a reading of the Survey Report of Del Pan Surveyors 39 (Exhibits "D" to "D-4" of respondent)
would not show any untoward incident or negligence on the part of petitioner ATI during the discharging operations.
Also, a reading of Exhibits "D", "D-1", and "D-2" would show that the methods used in determining whether there was a
shortage are not accurate.
Respondent relied on the Survey Reports of Del Pan Surveyors to prove that the subject shipment suffered loss. The
conclusion that there was a shortage arose from an evaluation of the weight of the cargo using the barge displacement method. This
is a type of draught survey, which is a method of cargo weight determination by ship's displacement calculations. 40 The basic
principle upon which the draught survey methodology is based is the Principle of Archimedes, i.e., a vessel when floating in water,
will displace a weight of water equal to its own weight. 41 It then follows that if a weight of cargo is loaded on (or unloaded from) a
vessel freely floating in water, then the vessel will sink (or float) into the water until the total weight of water displaced is equal to the
original weight of the vessel, plus (or minus) the cargo which has been loaded (or unloaded) and plus (or minus) density variation of
the water between the starting survey (first measurement) and the finishing survey (second measurement). 42 It can be seen that this
method does not entail the weighing of the cargo itself, but as correctly stated by the petitioner, the weight of the shipment is being
measured by mere estimation of the water displaced by the barges before and after the cargo is unloaded from the said barges. SAcaDE
In addition, the fact that the measurements were done by Del Pan Surveyors in prevailing slight to slightly rough sea
condition 43 supports the conclusion that the resulting measurement may not be accurate. A United Nations study on draught
surveys 44 in fact states that the accuracy of draught surveys will be dependent upon several factors, one of which is the weather and
seas condition in the harbor.
Also, it can be seen in respondent's own Exhibit "D-1" that the actual weight of the cargo was established by weighing 20%
of the cargo. Though we recognize the practicality of establishing cargo weight through random sampling, we note the discrepancy in
the weights used in the determination of the alleged shortage.
Exhibit "D-1" of respondent states that the average weight of each bag is 52 kilos. A total of 63,391 bags 45 were discharged
from the barges, and the tare weight 46 was established at 0.0950 kilos. 47 Therefore, if one were to multiply 52 kilos per bag by
63,391 bags and deduct the tare weight of 0.0950 kilos multiplied by 63,391 bags, the result would be 3,290,309.65 kilos, or
3,290.310 metric tons. This would mean that the shortage was only 9.69 metric tons, if we suppose that respondent was able to
establish that the shipment actually weighed 3,300 metric tons at the port of loading.
However, the computation in Exhibit "D-2" would show that Del Pan Surveyors inexplicably used 49 kilos as the weight per
bag, instead of 52 kilos, therefore resulting in the total net weight of 3,100,137 kilos or 3,100.137 metric tons. This was the figure
used as basis for respondent's conclusion that there is a shortage of 199.863 metric tons. 48
These discrepancies only lend credence to petitioner ATI's assertion that the weighing methods respondent used as bases
are unreliable and should not be completely relied upon.
Considering that respondent was not able to establish conclusively that the subject shipment weighed 3,300 metric tons at
the port of loading, and that it cannot therefore be concluded that there was a shortage for which petitioner should be responsible;
bearing in mind that the subject shipment most likely lost weight in transit due to the inherent nature of Soya Bean Meal; assuming
that the shipment lost weight in transit due to desorption, the shortage of 199.863 metric tons that respondent alleges is a minimal
6.05% of the weight of the entire shipment, which is within the allowable 10% allowance for loss; and noting that the respondent was
not able to show negligence on the part of the petitioner and that the weighing methods which respondent relied upon to establish
the shortage it alleges is inaccurate, respondent cannot fairly claim damages against petitioner for the subject shipment's alleged
shortage. AcICHD
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated November 27, 2006 and Resolution
dated March 23, 2007 of the Court of Appeals in CA-G.R. CV No. 71210 are REVERSED AND SET ASIDE insofar as petitioner
Asian Terminals, Inc. is concerned. Needless to add, the complaint against petitioner docketed as RTC Manila Civil Case No. 96-
81101 is ordered DISMISSED.
16. Art 353. CC

110. Republic of the Phil v Lorenzo Shipping Corp
Facts:
Issue:
Held:
FIRST DIVISION
[G.R. No. 153563. February 7, 2005.]
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF HEALTH,

NATIONAL TRUCKING AND FORWARDING CORPORATION (NTFC), and
COOPERATIVE FOR AMERICAN RELIEF EVERYWHERE, INC. (CARE
Philippines), petitioners, vs. LORENZO SHIPPING CORPORATION, respondent.
DECISION
QUISUMBING, J : p
For review on certiorari are the Decision 1 dated January 16, 2002, of the Court of Appeals, in CA-
G.R. CV No. 48349, and its Resolution, 2 of May 13, 2002, denying the motion for reconsideration of herein
petitioner National Trucking and Forwarding Corporation (NTFC). The impugned decision affirmed in toto the
judgment 3 dated November 14, 1994 of the Regional Trial Court (RTC) of Manila, Branch 53, in Civil Case
No. 90-52102.
The undisputed facts, as summarized by the appellate court, are as follows:
On June 5, 1987, the Republic of the Philippines, through the Department of Health (DOH), and the
Cooperative for American Relief Everywhere, Inc. (CARE) signed an agreement wherein CARE would
acquire from the United States government donations of non-fat dried milk and other food products from
January 1, 1987 to December 31, 1989. In turn, the Philippines would transport and distribute the donated
commodities to the intended beneficiaries in the country. SCETHa
The government entered into a contract of carriage of goods with herein petitioner National Trucking
and Forwarding Corporation (NTFC). Thus, the latter shipped 4,868 bags of non-fat dried milk through herein
respondent Lorenzo Shipping Corporation (LSC) from September to December 1988. The consignee named
in the bills of lading issued by the respondent was Abdurahman Jama, petitioner's branch supervisor in
Zamboanga City.
On reaching the port of Zamboanga City, respondent's agent, Efren Ruste 4 Shipping Agency,
unloaded the 4,868 bags of non-fat dried milk and delivered the goods to petitioner's warehouse. Before
each delivery, Rogelio Rizada and Ismael Zamora, both delivery checkers of Efren Ruste Shipping Agency,
requested Abdurahman to surrender the original bills of lading, but the latter merely presented certified true
copies thereof. Upon completion of each delivery, Rogelio and Ismael asked Abdurahman to sign the
delivery receipts. However, at times when Abdurahman had to attend to other business before a delivery
was completed, he instructed his subordinates to sign the delivery receipts for him.
Notwithstanding the precautions taken, the petitioner allegedly did not receive the subject goods.
Thus, in a letter dated March 11, 1989, petitioner NTFC filed a formal claim for non-delivery of the goods
shipped through respondent.
In its letter of April 26, 1989, the respondent explained that the cargo had already been delivered to
Abdurahman Jama. The petitioner then decided to investigate the loss of the goods. But before the
investigation was over, Abdurahman Jama resigned as branch supervisor of petitioner. SDATEc
Noting but disbelieving respondent's insistence that the goods were delivered, the government
through the DOH, CARE, and NTFC as plaintiffs filed an action for breach of contract of carriage, against
respondent as defendant, with the RTC of Manila.
After trial, the RTC resolved the case as follows:
WHEREFORE, judgment is hereby rendered in favor of the defendant and against the
plaintiffs, dismissing the latter's complaint, and ordering the plaintiffs, pursuant to the defendant's
counterclaim, to pay, jointly and solidarily, to the defendant, actual damages in the amount of
P50,000.00, and attorney's fees in the amount of P70,000.00, plus the costs of suit.
SO ORDERED. 5
Dissatisfied with the foregoing ruling, herein petitioner appealed to the Court of Appeals. It faulted the
lower court for not holding that respondent failed to deliver the cargo, and that respondent failed to exercise
the extraordinary diligence required of common carriers. Petitioner also assailed the lower court for denying
its claims for actual, moral, and exemplary damages, and for awarding actual damages and attorney's fees
to the respondent. 6
The Court of Appeals found that the trial court did not commit any reversible error. It dismissed the
appeal, and affirmed the assailed decision in toto.
Undaunted, petitioner now comes to us, assigning the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO APPRECIATE AND APPLY
THE LEGAL STANDARD OF EXTRAORDINARY DILIGENCE IN THE SHIPMENT AND DELIVERY
OF GOODS TO THE RESPONDENT AS A COMMON CARRIER, AS WELL AS THE
ACCOMPANYING LEGAL PRESUMPTION OF FAULT OR NEGLIGENCE ON THE PART OF THE
COMMON CARRIER, IF THE GOODS ARE LOST, DESTROYED OR DETERIORATED, AS
REQUIRED UNDER THE CIVIL CODE.
II
THE COURT OF APPEALS GRAVELY ERRED WHEN IT SUSTAINED THE BASELESS AND
ARBITRARY AWARD OF ACTUAL DAMAGES AND ATTORNEY'S FEES INASMUCH AS THE
ORIGINAL COMPLAINT WAS FILED IN GOOD FAITH, WITHOUT MALICE AND WITH THE BEST
INTENTION OF PROTECTING THE INTEREST AND INTEGRITY OF THE GOVERNMENT AND
ITS CREDIBILITY AND RELATIONSHIP WITH INTERNATIONAL RELIEF AGENCIES AND DONOR
STATES AND ORGANIZATION. 7
The issues for our resolution are: (1) Is respondent presumed at fault or negligent as common carrier
for the loss or deterioration of the goods? and (2) Are damages and attorney's fees due respondent? TIHCcA
Anent the first issue, petitioner contends that the respondent is presumed negligent and liable for
failure to abide by the terms and conditions of the bills of lading; that Abdurahman Jama's failure to testify
should not be held against petitioner; and that the testimonies of Rogelio Rizada and Ismael Zamora, as
employees of respondent's agent, Efren Ruste Shipping Agency, were biased and could not overturn the
legal presumption of respondent's fault or negligence.
For its part, the respondent avers that it observed extraordinary diligence in the delivery of the goods.
Prior to releasing the goods to Abdurahman, Rogelio and Ismael required the surrender of the original bills of
lading, and in their absence, the certified true copies showing that Abdurahman was indeed the consignee of
the goods. In addition, they required Abdurahman or his designated subordinates to sign the delivery
receipts upon completion of each delivery.
We rule for respondent.
Article 1733 8 of the Civil Code demands that a common carrier observe extraordinary diligence over
the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which
persons of unusual prudence and circumspection use for securing and preserving their own property or
rights. 9 This exacting standard imposed on common carriers in a contract of carriage of goods is intended to
tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been
lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the
law to have been at fault or negligent. 10 However, the presumption of fault or negligence, may be overturned
by competent evidence showing that the common carrier has observed extraordinary diligence over the
goods. IcCDAS
In the instant case, we agree with the court a quo that the respondent adequately proved that it
exercised extraordinary diligence. Although the original bills of lading remained with petitioner, respondent's
agents demanded from Abdurahman the certified true copies of the bills of lading. They also asked the latter
and in his absence, his designated subordinates, to sign the cargo delivery receipts.
This practice, which respondent's agents testified to be their standard operating procedure, finds
support in Article 353 of the Code of Commerce:
ART. 353. . . .
After the contract has been complied with, the bill of lading which the carrier has issued shall
be returned to him, and by virtue of the exchange of this title with the thing transported, the
respective obligations and actions shall be considered cancelled, . . .
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed
by the carrier, because of its loss or of any other cause, he must give the latter a receipt for the
goods delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis
supplied)
Conformably with the aforecited provision, the surrender of the original bill of lading is not a condition
precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill
of lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices. This is what
respondent did.
We also note that some delivery receipts were signed by Abdurahman's subordinates and not by
Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael testified that Abdurahman
was always present at the initial phase of each delivery, although on the few occasions when Abdurahman
could not stay to witness the complete delivery of the shipment, he authorized his subordinates to sign the
delivery receipts for him. This, to our mind, is sufficient and substantial compliance with the requirements.
We further note that, strangely, petitioner made no effort to disapprove Abdurahman's resignation
until after the investigation and after he was cleared of any responsibility for the loss of the goods. With
Abdurahman outside of its reach, petitioner cannot now pass to respondent what could be Abdurahman's
negligence, if indeed he were responsible.
On the second issue, petitioner submits there is no basis for the award of actual damages and
attorney's fees. It maintains that its original complaint for sum of money with damages for breach of contract
of carriage was not fraudulent, in bad faith, nor malicious. Neither was the institution of the action rash nor
precipitate. Petitioner avers the filing of the action was intended to protect the integrity and interest of the
government and its relationship and credibility with international relief agencies and donor states. HcISTE
On the other hand, respondent maintains that petitioner's suit was baseless and malicious because
instead of going after its absconding employee, petitioner wanted to recoup its losses from respondent. The
trial court and the Court of Appeals were justified in granting actual damages and reasonable attorney's fees
to respondent.
On this point, we agree with petitioner.
The right to litigate should bear no premium. An adverse decision does not ipso facto justify an award
of attorney's fees to the winning party. 11 When, as in the instant case, petitioner was compelled to sue to
protect the credibility of the government with international organizations, we are not inclined to grant
attorney's fees. We find no ill motive on petitioner's part, only an erroneous belief in the righteousness of its
claim.
Moreover, an award of attorney's fees, in the concept of damages under Article 2208 of the Civil
Code, 12 requires factual and legal justifications. While the law allows some degree of discretion on the part
of the courts in awarding attorney's fees and expenses of litigation, the discretion must be exercised with
great care approximating as closely as possible, the instances exemplified by the law. 13 We have searched
but found nothing in petitioner's suit that justifies the award of attorney's fees.
Respondent failed to show proof of actual pecuniary loss, hence, no actual damages are due in favor
of respondent. 14
WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision and resolution of the
Court of Appeals in CA-G.R. CV No. 48349 dated January 16, 2002 and May 13, 2002 respectively, denying
petitioner's claim for actual, moral and exemplary damages are AFFIRMED. The award of actual damages
and attorney's fees to respondent pursuant to the latter's counterclaim in the trial court is DELETED.
SO ORDERED.
Davide, Jr., C.J., Ynares-Santiago, Carpio and Azcuna, JJ., concur.
||| (Republic v. Lorenzo Shipping Corp., G.R. No. 153563, [February 7, 2005], 491 PHIL 151-160)
111. Nedllyod Lijnen BV Rotterdam v Glow Laks Enterprises Ltd

The carrier may be relieved from the responsibility for loss or damage to the goods upon actual or constructive delivery of
the same by the carrier to the consignee or to the person who has the right to receive them. 31 In sales, actual delivery has been
defined as the ceding of the corporeal possession by the seller, and the actual apprehension of the corporeal possession by the
buyer or by some person authorized by him to receive the goods as his representative for the purpose of custody or disposal. 32 By
the same token, there is actual delivery in contracts for the transport of goods when possession has been turned over to
the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. 33
In this case, there is no dispute that the custody of the goods was never turned over to the consignee or his agents but was
lost into the hands of unauthorized persons who secured possession thereof on the strength of falsified documents. The loss or the
misdelivery of the goods in the instant case gave rise to the presumption that the common carrier is at fault or negligent.
A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the
goods it transported. 34 When the goods shipped are either lost or arrived 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. 35 To overcome the presumption of negligence, the common carrier must establish by adequate proof that it
exercised extraordinary diligence over the goods. 36 It must do more than merely show that some other party could be
responsible for the damage. 37
In the present case, petitioners failed to prove that they did exercise the degree of diligence required by law over the goods
they transported. Indeed, aside from their persistent disavowal of liability by conveniently posing an excuse that their extraordinary
responsibility is terminated upon release of the goods to the Panamanian Ports Authority, petitioners failed to adduce sufficient
evidence they exercised extraordinary care to prevent unauthorized withdrawal of the shipments. Nothing in the New Civil Code,
however, suggests, even remotely, that the common carriers' responsibility over the goods ceased upon delivery thereof to
the custom authorities. To the mind of this Court, the contract of carriage remains in full force and effect even after the delivery of
the goods to the port authorities; the only delivery that releases it from their obligation to observe extraordinary care is the delivery to
the consignee or his agents. Even more telling of petitioners' continuing liability for the goods transported to the fact that the original
bills of lading up to this time, remains in the possession of the notify party or consignee. Explicit on this point is the provision of
Article 353 of the Code of Commerce which provides:
Article 353. The legal evidence of the contract between the shipper and the carrier shall be the bills of lading, by the
contents of which the disputes which may arise regarding their execution and performance shall be decided, no exceptions
being admissible other than those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to
him, and by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall
be considered cancelled, unless in the same act the claim which the parties may wish to reserve be reduced to
writing, with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because
of its loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same
effects as the return of the bill of lading.
While surrender of the original bill of lading is not a condition precedent for the common carrier to be discharged from its
contractual obligation, there must be, at the very least, an acknowledgement of the delivery by signing the delivery receipt, if
surrender of the original of the bill of lading is not possible. 38 There was neither surrender of the original copies of the
bills of lading nor was there acknowledgment of the delivery in the present case. This leads to the conclusion
that the contract of carriage still subsists and petitioners could be held liable for the breach thereof.
Petitioners could have offered evidence before the trial court to show that they exercised the highest degree of care and
caution even after the goods was turned over to the custom authorities, by promptly notifying the consignee of its arrival at the Port
of Cristobal in order to afford them ample opportunity to remove the cargoes from the port of discharge. We have scoured the
records and found that neither the consignee nor the notify party was informed by the petitioners of the arrival of the goods, a crucial
fact indicative of petitioners' failure to observe extraordinary diligence in handling the goods entrusted to their custody for transport.
They could have presented proof to show that they exercised extraordinary care but they chose in vain, full reliance to their cause on
applicability of Panamanian law to local jurisdiction.
It is for this reason that we find petitioners liable for the misdelivery of the goods. It is evident from the review of the records
and by the evidence adduced by the respondent that petitioners failed to rebut the prima facie presumption of negligence. We find
no compelling reason to depart from the ruling of the Court of Appeals that under the contract of carriage, petitioners are liable for
the value of the misdelivered goods.
112. Designer Baskets Inc v Air Sea Transport, Inc

A common carrier may release the
goods to the consignee even without
the surrender of the bill of lading.
This case presents an instance where an unpaid seller sues not only the buyer, but the carrier and the
carrier's agent as well, for the payment of the value of the goods sold. The basis for ASTI and ACCLI's liability, as
pleaded by DBI, is the bill of lading covering the shipment.
A bill of lading is defined as "a written acknowledgment 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 order." 53 It may also be defined as
"an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name
of the consignor, the terms of the contract of carriage, and agreeing or directing that the freight be delivered to
bearer, to order or to a specified person at a specified place. 54
Under Article 350 of the Code of Commerce, "the shipper as well as the carrier of the merchandise or
goods may mutually demand that a bill of lading be made." A bill of lading, when issued by the carrier to the
shipper, is the legal evidence of the contract of carriage between the former and the latter. It defines the rights and
liabilities of the parties in reference to the contract of carriage. The stipulations in the bill of lading are valid and
binding unless they are contrary to law, morals, customs, public order or public policy. 55
Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to DBI. This bill of lading
governs the rights, obligations and liabilities of DBI and ASTI. DBI claims that Bill of Lading No.
AC/MLLA601317 contains a provision stating that ASTI and ACCLI are "to release and deliver the
cargo/shipment to the consignee, . . ., only after the original copy or copies of the said Bill of Lading is or
are surrendered to them; otherwise they become liable to [DBI] for the value of the shipment." 56 Quite
tellingly, however, DBI does not point or refer to any specific clause or provision on the bill of lading
supporting this claim. The language of the bill of lading shows no such requirement. What the bill of lading
provides on its face is:
Received by the Carrier in apparent good order and condition unless otherwise indicated hereon, the
Container(s) and/or goods hereinafter mentioned to be transported and/or otherwise forwarded from the Place
of Receipt to the intended Place of Delivery upon and [subject] to all the terms and conditions appearing on
the face and back of this Bill of Lading. If required by the Carrier this Bill of Lading duly endorsed must
be surrendered in exchange for the Goods of delivery order. 57 (Emphasis supplied.)
There is no obligation, therefore, on the part of ASTI and ACCLI to release the goods only upon the
surrender of the original bill of lading.
Further, a carrier is allowed by law to release the goods to the consignee even without the latter's surrender
of the bill of lading. The third paragraph of Article 353 of the Code of Commerce is enlightening:
Article 353. The legal evidence of the contract between the shipper and the carrier shall be the bills
of lading, by the contents of which the disputes which may arise regarding their execution and performance
shall be decided, no exceptions being admissible other than those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued shall be
returned to him, and by virtue of the exchange of this title with the thing transported, the respective obligations
and actions shall be considered cancelled, unless in the same act the claim which the parties may wish to
reserve be reduced to writing, with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed
by the carrier, because of its loss or any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis
supplied.)
The general rule is that upon receipt of the goods, the consignee surrenders the bill of lading to the carrier
and their respective obligations are considered canceled. The law, however, provides two exceptions where the
goods may be released without the surrender of the bill of lading because the consignee can no longer return it.
These exceptions are when the bill of lading gets lost or for other cause. In either case, the consignee must issue a
receipt to the carrier upon the release of the goods. Such receipt shall produce the same effect as the surrender of
the bill of lading.
We have already ruled that the non-surrender of the original bill of lading does not violate the carrier's duty
of extraordinary diligence over the goods. 58 In Republic v. Lorenzo Shipping Corporation, 59 we found that the
carrier exercised extraordinary diligence when it released the shipment to the consignee, not upon the surrender of
the original bill of lading, but upon signing the delivery receipts and surrender of the certified true copies of the bills
of lading. Thus, we held that the surrender of the original bill of lading is not a condition precedent for a common
carrier to be discharged of its contractual obligation. DACcIH
Under special circumstances, we did not even require presentation of any form of receipt by the
consignee, in lieu of the original bill of lading, for the release of the goods. InMacam v. Court of Appeals, 60 we
absolved the carrier from liability for releasing the goods to the consignee without the bills of lading despite this
provision on the bills of lading:
"One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery
order." 61 (Citations omitted.)
In clearing the carrier from liability, we took into consideration that the shipper sent a telex to the carrier
after the goods were shipped. The telex instructed the carrier to deliver the goods without need of presenting the
bill of lading and bank guarantee per the shipper's request since "for prepaid shipt ofrt charges already fully paid
our end . . . ." 62 We also noted the usual practice of the shipper to request the shipping lines to immediately release
perishable cargoes through telephone calls.
Also, in Eastern Shipping Lines v. Court of Appeals, 63 we absolved the carrier from liability for releasing the
goods to the supposed consignee, Consolidated Mines, Inc. (CMI), on the basis of an Undertaking for Delivery of
Cargo but without the surrender of the original bill of lading presented by CMI. Similar to the factual circumstance in
this case, the Undertaking inEastern Shipping Lines guaranteed to hold the carrier "harmless from all demands,
claiming liabilities, actions and expenses." 64 Though the central issue in that case was who the consignee was in
the bill of lading, it is noteworthy how we gave weight to the Undertaking in ruling in favor of the carrier:
But assuming that CMI may not be considered consignee, the petitioner cannot be faulted for
releasing the goods to CMI under the circumstances, due to its lack of knowledge as to who was the real
consignee in view of CMI's strong representations and letter of undertaking wherein it stated that the bill of
lading would be presented later. This is precisely the situation covered by the last paragraph of Art. 353 of the
[Code of Commerce] to wit:
"If in case of loss or for any other reason whatsoever, the consignee cannot return
upon receiving the merchandise the bill of lading subscribed by the carrier, he shall give
said carrier a receipt of the goods delivered this receipt producing the same effects as the
return of the bill of lading." 65
Clearly, law and jurisprudence is settled that the surrender of the original bill of lading is not absolute; that
in case of loss or any other cause, a common carrier may release the goods to the consignee even without it.
Here, Ambiente could not produce the bill of lading covering the shipment not
because it was lost, but for another cause: the bill of lading was retained by DBI pending
Ambiente's full payment of the shipment. Ambiente and ASTI then entered into an
Indemnity Agreement, wherein the former asked the latter to release the shipment even
without the surrender of the bill of lading. The execution of this Agreement, and the
undisputed fact that the shipment was released to Ambiente pursuant to it, to our mind,
operates as a receipt in substantial compliance with the last paragraph of Article 353 of
the Code of Commerce.
Articles 1733, 1734, and 1735 of
the Civil Code are not applicable.
DBI, however, challenges the Agreement, arguing that the carrier released the goods pursuant to it,
notwithstanding the carrier's knowledge that the bill of lading should first be surrendered. As such, DBI claims that
ASTI and ACCLI are liable for damages because they failed to exercise extraordinary diligence in the vigilance over
the goods pursuant to Articles 1733, 1734, and 1735 of the Civil Code.66
DBI is mistaken.
Articles 1733, 1734, and 1735 of the Civil Code are not applicable in this case. The Articles state:
Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735,
and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set
forth in Articles 1755 and 1756.
Article 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.

Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article,
if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in Article
1733. HSCATc
Articles 1733, 1734, and 1735 speak of the common carrier's responsibility over the goods. They refer to
the general liability of common carriers in case of loss, destruction ordeterioration of goods and the presumption
of negligence against them. This responsibility or duty of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation, until the same are
delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive
them. 67 It is, in fact, undisputed that the goods were timely delivered to the proper consignee or to the one who was
authorized to receive them. DBI's only cause of action against ASTI and ACCLI is the release of the goods to
Ambiente without the surrender of the bill of lading, purportedly in violation of the terms of the bill of lading. We
have already found that Bill of Lading No. AC/MLLA601317 does not contain such express prohibition. Without any
prohibition, therefore, the carrier had no obligation to withhold release of the goods. Articles 1733, 1734, and 1735
do not give ASTI any such obligation.
The applicable provision instead is Article 353 of the Code of Commerce, which we have previously
discussed. To reiterate, the Article allows the release of the goods to the consignee even without his surrender of
the original bill of lading. In such case, the duty of the carrier to exercise extraordinary diligence is not violated.
Nothing, therefore, prevented the consignee and the carrier to enter into an indemnity agreement of the same
nature as the one they entered here. No law or public policy is contravened upon its execution.
Article 1503 of the Civil Code does
not apply to contracts for carriage
of goods.
In its petition, DBI continues to assert the wrong application of Article 353 of the Code of Commerce to its
Amended Complaint. It alleges that the third paragraph of Article 1503 of the Civil Code is the applicable provision
because: (a) Article 1503 is a special provision that deals particularly with the situation of the seller retaining the bill
of lading; and (b) Article 1503 is a law which is later in point of time to Article 353 of the Code of Commerce. 68 DBI
posits that being a special provision, Article 1503 of the Civil Code should prevail over Article 353 of the Code of
Commerce, a general provision that makes no reference to the seller retaining the bill of lading. 69
DBI's assertion is untenable. Article 1503 is an exception to the general presumption provided in the first
paragraph of Article 1523, which reads:
Article 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to
send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for
the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except
in the cases provided for in Articles 1503, first, second and third paragraphs, or unless a contrary
intent appears.
Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on
behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other
circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in the course of
transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller
responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in
which the seller knows or ought to know that it is usual to insure, the seller must give such notice to the buyer
as may enable him to insure them during their transit, and, if the seller fails to do so, the goods shall be
deemed to be at his risk during such transit. (Emphasis supplied.)
Article 1503, on the other hand, provides:
Article 1503. When there is a contract of sale of specific goods, the seller may, by the terms of
the contract, reserve the right of possession or ownership in the goods until certain conditions have been
fulfilled. The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods
to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his
agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But,
if except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the
goods, the seller's property in the goods shall be deemed to be only for the purpose of securing performance
by the buyer of his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are deliverable to order of the
buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the
seller thereby reserves a right to the possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill
of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading
he acquires no added right thereby. If, however, the bill of lading provides that the goods are deliverable to the
buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one
who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in
the goods, although the bill of exchange has not been honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the
facts making the transfer wrongful. (Emphasis supplied.) IDTSEH
Articles 1523 and 1503, therefore, refer to a contract of sale between a seller and a buyer. In particular,
they refer to who between the seller and the buyer has the right of possession or ownership over the goods subject
of the sale. Articles 1523 and 1503 do not apply to a contract of carriage between the shipper and the common
carrier. The third paragraph of Article 1503, upon which DBI relies, does not oblige the common carrier to withhold
delivery of the goods in the event that the bill of lading is retained by the seller. Rather, it only gives the seller a
better right to the possession of the goods as against the mere inchoate right of the buyer. Thus, Articles 1523 and
1503 find no application here. The case before us does not involve an action where the seller asserts ownership
over the goods as against the buyer. Instead, we are confronted with a complaint for sum of money and damages
filed by the seller against the buyer and the common carrier due to the non-payment of the goods by the buyer, and
the release of the goods by the carrier despite non-surrender of the bill of lading. A contract of sale is separate and
distinct from a contract of carriage. They involve different parties, different rights, different obligations and liabilities.
Thus, we quote with approval the ruling of the CA, to wit:
On the third assigned error, [w]e rule for the defendants-appellants [ASTI and ACCLI]. They are
correct in arguing that the nature of their obligation with plaintiff [DBI] is separate and distinct from
the transaction of the latter with defendant Ambiente. As carrier of the goods transported by plaintiff,
its obligation is simply to ensure that such goods are delivered on time and in good condition. In the
case [Macam v. Court of Appeals], the Supreme Court emphasized that "the extraordinary responsibility of the
common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person
who has the right to receive them." . . .
It is therefore clear that the moment the carrier has delivered the subject goods, its
responsibility ceases to exist and it is thereby freed from all the liabilities arising from the transaction.
Any question regarding the payment of the buyer to the seller is no longer the concern of the
carrier. This easily debunks plaintiff's theory of joint liability. 70 . . . (Emphasis supplied; citations omitted.)
The contract between DBI and ASTI is a contract of carriage of goods; hence, ASTI's liability should be
pursuant to that contract and the law on transportation of goods. Not being a party to the contract of sale between
DBI and Ambiente, ASTI cannot be held liable for the payment of the value of the goods sold. In this regard, we
cite Loadstar Shipping Company, Incorporated v. Malayan Insurance Company, Incorporated, 71 thus:
Malayan opposed the petitioners' invocation of the Philex-PASAR purchase agreement, stating that
the contract involved in this case is a contract of affreightment between the petitioners and PASAR, not the
agreement between Philex and PASAR, which was a contract for the sale of copper concentrates.
On this score, the Court agrees with Malayan that contrary to the trial court's disquisition, the
petitioners cannot validly invoke the penalty clause under the Philex-PASAR purchase agreement, where
penalties are to be imposed by the buyer PASAR against the seller Philex if some elements exceeding the
agreed limitations are found on the copper concentrates upon delivery. The petitioners are not privy to the
contract of sale of the copper concentrates. The contract between PASAR and the petitioners is a
contract of carriage of goods and not a contract of sale. Therefore, the petitioners and PASAR are
bound by the laws on transportation of goods and their contract of affreightment. Since the Contract of
Affreightment between the petitioners and PASAR is silent as regards the computation of damages, whereas
the bill of lading presented before the trial court is undecipherable, the New Civil Code and the Code of
Commerce shall govern the contract between the parties. 72 (Emphasis supplied; citations omitted.)
In view of the foregoing, we hold that under Bill of Lading No. AC/MLLA601317 and the pertinent law and
jurisprudence, ASTI and ACCLI are not liable to DBI. We sustain the finding of the CA that only Ambiente, as the
buyer of the goods, has the obligation to pay for the value of the shipment. However, in view of our ruling in Nacar
v. Gallery Frames, 73 we modify the legal rate of interest imposed by the CA. Instead of 12% per annum from the
finality of this judgment until its full satisfaction, the rate of interest shall only be 6% per annum.
WHEREFORE, the petition is DENIED for lack of merit. The August 16, 2007 Decision and the September
2, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 79790 are hereby AFFIRMED with
the MODIFICATION that from the finality of this decision until its full satisfaction, the applicable rate of interest shall
be 6% per annum.
17. Shippers Load and Count

113. Marina Port Services Inc. v American Home Assurance Corp
Facts:
Issue:
Held:
DEL CASTILLO, J : p
This Petition for Review on Certiorari 1 filed pursuant to Rule 45 of the Rules of Court assails the
December 29, 2011 Decision 2 and May 8, 2012 Resolution 3 of the Court of Appeals (CA) in CA G.R.
CV No. 88321, which granted the appeal filed therein by respondent American Home Assurance
Corporation (AHAC) and reversed and set aside the October 17, 2006 Decision 4 of the Regional Trial
Court (RTC), Pasig City, Branch 271 dismissing AHAC's Complaint 5 for Damages against petitioner
Marina Port Services, Inc. (MPSI).
Factual Antecedents
On September 21, 1989, Countercorp Trading PTE., Ltd. shipped from Singapore to the
Philippines 10 container vans of soft wheat flour with seals intact on board the vessel M/V Uni Fortune.
The shipment was insured against all risks by AHAC and consigned to MSC Distributor (MSC).
Upon arrival at the Manila South Harbor on September 25, 1989, the shipment was discharged in
good and complete order condition and with safety seals in place to the custody of the arrastre operator,
MPSI. After unloading and prior to hauling, agents of the Bureau of Customs officially broke the seals,
opened the container vans, and examined the shipment for tax evaluation in the presence of MSC's
broker and checker. Thereafter, the customs inspector closed the container vans and refastened them
with safety wire seals while MSC's broker padlocked the same. MPSI then placed the said container
vans in a back-to-back arrangement at the delivery area of the harbor's container yard where they were
watched over by the security guards of MPSI and of the Philippine Ports Authority.
On October 10, 1989, MSC's representative, AD's Customs Services (ACS), took out five
container vans for delivery to MSC. At the compound's exit, MPSI issued to ACS the corresponding gate
passes for the vans indicating its turn-over of the subject shipment to MSC. However, upon receipt of the
container vans at its warehouse, MSC discovered substantial shortages in the number of bags of flour
delivered. Hence, it filed a formal claim for loss with MPSI. ASEcHI
From October 12 to 14, 1989 and pursuant to the gate passes issued by MPSI, ACS took out the
remaining five container vans from the container yard and delivered them to MSC. Upon receipt, MSC
once more discovered substantial shortages. Thus, MSC filed another claim with MPSI.
Per MSC, the total number of the missing bags of flour was 1,650 with a value of P257,083.00.
MPSI denied both claims of MSC. As a result, MSC sought insurance indemnity for the lost
cargoes from AHAC. AHAC paid MSC the value of the missing bags of flour after finding the latter's claim
in order. In turn, MSC issued a subrogation receipt in favor of AHAC.
Thereafter, AHAC filed a Complaint 6 for damages against MPSI before the RTC.
Ruling of the Regional Trial Court
AHAC averred in its Complaint that the partial loss of the bags of flour was due to the fault or
negligence of MPSI since the loss happened while the shipment was still in MPSI's custody.
MPSI, on the other hand, disclaimed any liability. It essentially maintained in its Answer 7 that the
bags of flour were inside sealed container vans when it received the same; that it handled the subject
shipment with the diligence required of it; and, that the container vans were turned over by it to MSC in
the same condition that they were in at the time of their discharge from the vessel. MPSI likewise
countered that the failure of MSC to request for a bad order survey belied the latter's claim for loss.
Trial then ensued.
On October 17, 2006, the RTC rendered a Decision 8 dismissing AHAC's Complaint. It held that
while there was indeed a shortage of 1,650 sacks of soft wheat flour, AHAC's evidence failed to clearly
show that the loss happened while the subject shipment was still under MPSI's responsibility. Hence, the
dispositive portion of the RTC Decision:
WHEREFORE, premises considered, the complaint is hereby DISMISSED.
SO ORDERED. 9
Ruling of the Court of Appeals
Aggrieved, AHAC appealed to the CA.
In its Decision 10 dated December 29, 2011, the CA stressed that in a claim for loss filed by a
consignee, the burden of proof to show due compliance with the obligation to deliver the goods to the
appropriate party devolves upon the arrastre operator. In consonance with this, a presumption of fault or
negligence for the loss of the goods arises against the arrastre operator pursuant to Articles 1265 11 and
1981 12 of the Civil Code.In this case, the CA found that MPSI failed to discharge such burden and to
rebut the aforementioned presumption. Thus, it was held liable to AHAC for the value of the missing
bags of flour, viz.:
We conclude that . . . MPSI was negligent in the handling and safekeeping of the subject
shipment. It did not create and implement a more defined, concrete and effective measure to
detect, curb and prevent the loss or pilferage of cargoes in its custody. This is manifested by the
fact that [MPSI] never took any action to address such complaint even after it received the formal
claim of loss in the first five (5) vans. As a consequence, more bags of flour were eventually lost or
pilfered in the remaining container vans that were still in [MPSI's] custody at that time. Case law
tells us that negligence is that conduct which creates undue risk of harm to another, the failure to
observe that degree of care, precaution and vigilance which the circumstance[s] justly demand,
whereby that other person suffers injury. Clearly, [MPSI] breached its arrastre obligations to the
consignee for it failed to deliver said bags in good and complete condition.
In view of MPSI's failure to exercise that degree of diligence, precaution and care the law
[requires] of arrastre operators in the performance of their duties to the consignee, [MPSI] is legally
bound to reimburse [AHAC] for the value of the missing bags of flour that it paid to MSC pursuant
to the insurance policy. 13
In view of the same, the said court disposed of the appeal in this wise:
WHEREFORE, premises considered, the appeal is GRANTED. The Decision of the

Regional Trial Court of Pasig City, Branch 271 dated 17 October 2006 is REVERSED and SET
ASIDE. Appellee Marina Port Services, Inc. is ORDERED to pay appellant, American Home
Assurance Corporation, the sum of Two Hundred Fifty Seven Thousand and Eighty Three Pesos
(PhP257,083.00) with interest thereon at Six percent (6%) [per annum] from the filing of this
complaint on 24 September 1990 until the decision becomes final and executory, and thereafter, at
the rate of twelve (12) percent [per annum] until fully paid, and additionally, to pay the . . . sum of
Fifty Thousand Pesos (PhP50,000.00) as attorney's fees.
SO ORDERED. 14
MPSI moved for reconsideration but the CA denied the same in its Resolution 15 dated May 8,
2012.
Hence, the present recourse.
Issue
The core issue to be resolved in this case is whether MPSI is liable for the loss of the bags of
flour. ITAaHc
Our Ruling
There is merit in the Petition.
Albeit involving factual questions,
the Court shall proceed to resolve
this case since it falls under several
exceptions to the rule that only
questions of law are proper in a
petition for review on certiorari.
At the outset, it is evident that the resolution of the instant case requires the scrutiny of factual
issues which are, however, outside the scope of the present petition filed pursuant to Rule 45 of the
Rules of Court. However, the Court held in Asian Terminals, Inc. v. Philam Insurance Co., Inc. 16 that:
But while it is not our duty to review, examine and evaluate or weigh all over again the probative
value of the evidence presented, the Court may nonetheless resolve questions of fact when the
case falls under any of the following exceptions:
(1) when the findings are grounded entirely on speculation, surmises, or
conjectures; (2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of fact are conflicting;
(6) when in making its findings the Court of Appeals went beyond the issues of the
case, or its findings are contrary to the admissions of both the appellant and the
appellee; (7) when the findings are contrary to those of the trial court; (8) when the
findings are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioner's main
and reply briefs are not disputed by the respondent; and (10) when the findings of
fact are premised on the supposed absence of evidence and contradicted by the
evidence on record. 17
The Court finds that the instant case falls under the aforementioned second, fourth, fifth, and
seventh exceptions. Hence, it shall proceed to delve into factual matters essential to the proper
determination of the merits of this case.
Several well-entrenched legal principles
govern the relationship of an arrastre
operator and a consignee.
The relationship between an arrastre operator and a consignee is similar to that between a
warehouseman and a depositor, or to that between a common carrier and the consignee and/or the
owner of the shipped goods. 18 Thus, an arrastre operator should adhere to the same degree of diligence
as that legally expected of a warehouseman or a common carrier 19 as set forth in Section 3 [b] of the
Warehouse Receipts [Act]20 and Article 1733 of the Civil Code.21 As custodian of the shipment
discharged from the vessel, the arrastre operator must take good care of the same and turn it over to the
party entitled to its possession. 22
In case of claim for loss filed by a consignee or the insurer as subrogee, 23 it is the arrastre
operator that carries the burden of proving compliance with the obligation to deliver the goods to the
appropriate party. 24 It must show that the losses were not due to its negligence or that of its
employees. 25 It must establish that it observed the required diligence in handling the
shipment. 26 Otherwise, it shall be presumed that the loss was due to its fault. 27 In the same manner, an
arrastre operator shall be liable for damages if the seal and lock of the goods deposited and delivered to
it as closed and sealed, be broken through its fault. 28 Such fault on the part of the arrastre operator is
likewise presumed unless there is proof to the contrary. 29
MPSI was able to prove delivery of the
shipment to MSC in good and complete
condition and with locks and seals intact.
It is significant to note that MPSI, in order to prove that it properly delivered the subject shipment
consigned to MSC, presented 10 gate passes marked as Exhibits 4 to 13. 30 Each of these gate passes
bore the duly identified signature 31 of MSC's representative which serves, among others, as an
acknowledgement that:
Issuance of [the] Gate Pass constitutes delivery to and receipt by consignee of the goods as
described above in good order and condition, unless an accompanying B.O. certificate duly issued
and noted on the face of [the] Gate Pass appears. 32
As held in International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance
Co., Inc., 33 the signature of the consignee's representative on the gate pass is evidence of receipt of the
shipment in good order and condition. 34
Also, that MPSI delivered the subject shipment to MSC's representative in good and complete
condition and with lock and seals intact is established by the testimonies of MPSI's employees who were
directly involved in the processing of the subject shipment. Mr. Ponciano De Leon testified that as MPSI's
delivery checker, he personally examined the subject container vans and issued the corresponding gate
passes that were, in turn, countersigned by the consignee's representative. MPSI's other witness, Chief
Claims Officer Sergio Icasiano (Icasiano), testified that the broker, as the consignee's representative,
neither registered any complaints nor requested for an inspection, to wit: CHTAIc
RE-DIRECT EXAMINATION:
Atty. Laurente
xxx xxx xxx
Q [A]fter receipt by the broker of the container van containing the cargo, do you require the broker to
issue you a report or certification as to the appearance of the container van?
A [W]e only rely on the gate pass.
Q [A]nd you don't place there "the padlock is still intact or the wirings still intact"?
A [I]t is stated in the gate pass, your Honor.
xxx xxx xxx
Q [A]nd the findings [are counter-signed] by the representative of the broker also on the same date?
A [Y]es, your honor. 35
xxx xxx xxx
RE-CROSS EXAMINATION
Atty. Laino
q [B]ut did you not say that in the gate pass it is stated there as to the external appearance of the
container van?
a [T]here was no indication of any inspection of the container van . . . meaning the container vans
were all in good condition, sir.

q [Y]ou said a [while] ago that you did not receive any complaint for broken seals, is it not?
a [Y]es, sir.
q [B]ut the complaint that you received indicates that there were losses.
a [W]e did not receive any complaint from the broker, sir.
q [I]f the broker will complain they have to file a request for inspection of the cargo so that they will
know if there [are] shortages . . . .
a [Y]es, sir.
[C]ourt
q [A]nd if the broker would notice or detect [something] peculiar, the way the door of the container
van appears whether close[d] or not, they have to request for an inspection[?]
a [Y]es, your honor.
q [O]r in the absence of the padlock or wirings, the broker will request for an inspection[?]
a [Y]es, your honor[;] they can require for the examination of the cargo.
q [B]ut there was no request at all by the broker?
a [T]here was none, your Honor. 36
Verily, the testimonies of the aforementioned employees of MPSI confirm that the container vans,
together with their padlocks and wirings, were in order at the time the gate passes were issued up to the
time the said container vans were turned over to ACS. cHDAIS
AHAC justifies the failure of ACS to immediately protest the alleged loss or pilferage upon initial
pick-up of the first batch of container vans. According to it, ACS could not have discovered the loss at
that moment since the stripping of container vans in the pier area is not allowed. The Court cannot,
however, accept such excuse. For one, AHAC's claim that stripping of the container vans is not allowed
in the pier area is a mere allegation without proof. It is settled that "[m]ere allegations do not suffice; they
must be substantiated by clear and convincing proof." 37 For another, even assuming that stripping of the
container vans is indeed not allowed at the pier area, it is hard to believe that MSC or its representative
ACS has no precautionary measures to protect itself from any eventuality of loss or pilferage. To recall,
ACS's representative signed the gate passes without any qualifications. This is despite the fact that such
signature serves as an acknowledgment of ACS's receipt of the goods in good order and condition. If
MSC was keen enough in protecting its interest, it (through ACS) should have at least qualified the
receipt of the goods as subject to inspection, and thereafter arrange for such an inspection in an area
where the same is allowed to be done. However, no such action or other similar measure was shown to
have been undertaken by MSC. What is clear is that ACS accepted the container vans on its behalf
without any qualification. As aptly observed by the RTC:
During [the] period of turn-over of goods from the arrastre to [ACS], there had been no protest on
anything on the part of consignee's representative . . . . Otherwise, the complaint would have been
shown [on] the gate passes. In fact, each gate pass showed the date of delivery, the location of
delivery, the truck number of the truck used in the delivery, the actual quantity of goods delivered,
the numbers of the safety wires and padlocks of the vans and the signatures of the receiver. More
importantly, the gate passes bared the fact that the shipments were turned-over by [MPSI] to [ACS]
on the same dates of customs inspections and turnovers. 38
There being no exception as to bad order, the subject shipment, therefore, appears to have been
accepted by MSC, through ACS, in good order. 39 "It logically follows [then] that the case at bar presents
no occasion for the necessity of discussing the diligence required of an [arrastre operator) or of the
theory of [its] prima facie liability . . ., for from all indications, the shipment did not suffer loss or damage
while it was under the care . . . of the arrastre operator . . . ." 40
Even in the light of Article 1981,
no presumption of fault on the
part of MPSI arises since it was
not sufficiently shown that the

container vans were re-opened
or that their locks and seals were
broken for the second time.
Indeed, Article 1981 of the Civil Code also mandates a presumption of fault on the part of the
arrastre operator as follows:
Article 1981. When the thing deposited is delivered closed and sealed, the depositary must
return it in the same condition, and he shall be liable for damages should the seal or lock be broken
through his fault.
Fault on the part of the depositary is presumed, unless there is proof to the contrary.
As regards the value of the thing deposited, the statement of the depositor shall be
accepted, when the forcible opening is imputable to the depositary, should there be no proof to the
contrary. However, the courts may pass upon the credibility of the depositor with respect to the
value claimed by him.
When the seal or lock is broken, with or without the depositary's fault, he shall keep the
secret of the deposit.
However, no such presumption arises in this case considering that it was not sufficiently shown
that the container vans were re-opened or that their locks and seals were broken for the second time. As
may be recalled, the container vans were opened by a customs official for examination of the subject
shipment and were thereafter resealed with safety wires. While this fact is not disputed by both parties,
AHAC alleges that the container vans were re-opened and this gave way to the alleged pilferage. The
Court notes, however, that AHAC based such allegation solely on the survey report of the Manila
Adjuster & Surveyors Company (MASCO). As observed by the RTC:
AHAC . . . claim[s] that there were two instances when the seals were broken. [First], when
the customs officer examined the shipment and had it resealed with safety wires. [Second], when
the surveyor and consignee's broker visually inspected the shipment and allegedly found the safety
wires of the customs officer to have been detached and missing which they then replaced. This
second instance is only upon their say so as there is no . . . documentary or testimonial proof on
the matter [other] than the [MASCO] survey report. 41
However, the person who prepared the said report was not presented in court to testify on the same.
Thus, the said survey report has no probative value for being hearsay. "It is a basic rule that evidence,
whether oral or documentary, is hearsay, if its probative value is not based on the personal knowledge of
the witness but on the knowledge of another person who is not on the witness stand." 42 Moreover, "an
unverified and unidentified private document cannot be accorded probative value. It is precluded
because the party against whom it is presented is deprived of the right and opportunity to cross-examine
the person to whom the statements or writings are attributed. Its executor or author should be presented
as a witness to provide the other party to the litigation the opportunity to question its contents. Being
mere hearsay evidence, failure to present the author of the letter renders its contents suspect and of no
probative value." 43
ISHCcT
There being no other competent evidence that the container vans were reopened or that their
locks and seals were broken for the second time, MPSI cannot be held liable for damages due to the
alleged loss of the bags of flour pursuant to Article 1981 of the Civil Code.
At any rate, the goods were shipped
under "Shipper's Load and Count"
arrangement. Thus, protection
against pilferage of the subject
shipment was the consignee's
lookout.
At any rate, MPSI cannot just the same be held liable for the missing bags of flour since the
consigned goods were shipped under "Shipper's Load and Count" arrangement. "This means that the
shipper was solely responsible for the loading of the container, while the carrier was oblivious to the
contents of the shipment. Protection against pilferage of the shipment was the consignee's lookout. The
arrastre operator was, like any ordinary depositary, duty-bound to take good care of the goods received
from the vessel and to turn the same over to the party entitled to their possession, subject to such
qualifications as may have validly been imposed in the contract between the parties. The arrastre
operator was not required to verify the contents of the container received and to compare them with
those declared by the shipper because, as earlier stated, the cargo was at the shipper's load and count.
The arrastre operator was expected to deliver to the consignee only the container received from the
carrier." 44
All told, the Court holds that MPSI is not liable for the loss of the bags of flour.
WHEREFORE, the Petition is GRANTED. The Decision dated December 29, 2011 and
Resolution dated May 8, 2012 of the Court of Appeals in CA-G.R. CV No. 88321 are REVERSED AND
SET ASIDE. The Decision dated October 17, 2006 of the Regional Trial Court, Branch 271, Pasig City in
Civil Case No. 90-54517 is REINSTATED and the Complaint in the said case isDISMISSED.
SO ORDERED.
Carpio, Brion, Mendoza and Leonen, JJ., concur.
||| (Marina Port Services, Inc. v. American Assurance Corp., G.R. No. 201822, [August 12, 2015])
Another case:
Arts 1733 to 1754 will be applied if the carrier is private.
114. (important) Phil American Gen Insurance Company vs Sweetlines GR87434 Aug5 19992
Stipulation in Bill of lading: "there is time frame of 30 days for file notice of claim AND 60 days prescriptive period"
SC: Shorten period for filing suit is not reasonable and in fact has been generally recognized practice in shipping industry.
If no notice: Apply 366 of Code of Commerce

E. ACTIONS and DAMAGES
1. Basis of cause of action

115. Sanico et al v Colipano
Facts:
Issue:
Held:
18. Application of rule on substitution

116. Sulpicio Lines Inc v Sesante (see also damages)
Facts:
Issue:
Held:
19. Interest of the injured party

117. Cathay Pacific Airways v Sps Fuentebella (see also damages)
Facts:
Issue:
Held:
20. Solidary Liability

118. Construction Development Corp of the Phil v Estrella
Facts:
Issue:
Held:
119. Loadmasters Customs Services Inc v Glodel Brokerage Corp

Facts:
Issue:
Held:
120. Torres-Madrid Brokerage Inc v FEB Mitsui Marine Insurance Co

Facts:
Issue:
Held:
21. Notice of Claim

121. Phil Charter Insurance v Chemoil Lighterage
Facts:
Issue:
Held:
122. Aboitiz Shipping Corp v Insurance Co. of North America

Facts:
Issue:
Held:
123. UCPB Gen Insurance Co. Inc v Aboitiz Shipping Corp

Facts:
Issue:
Held:
22. Damages
124. Victory Liner Inc v Rosalito Gammad
Facts:
Issue:
Held:
125. Sps. Ong v CA

Facts:
Issue:
Held:
126. Northwest Airlines v Steven Chiong

Facts:
Issue:
Held:
127. Japan Airlines v Jesus Simangan

Facts:
Issue:
Held:
128. Phil Airlines Inc v CA

Facts:
Issue:
Held:
129. Canada, doing business under the name and style of Hi-Ball Freight Services v All Commodities
Marketing Corporation
Facts:
Issue:
Held:
130. Sulpicio Lines Inc v Curso

Facts:
Issue:
Held:
131. Sps Cruz v Sun Holidays Inc

Facts:
Issue:
Held:
132. Heirs of Jose Marical Ochoa v G&S Transport Corporation

Facts:
Issue:
Held:
133. Philtranco Service Enterprises Inc. v Paras

Facts:
Issue:
Held:
134. Malayan Insurance Co Inc v Philippines First Insurance Co

Facts:
Issue:
Held:
135. Sps. Pereña v Sps Zarate

Facts:
Issue:
Held:
136. Philippine Airlines Inc v Lim

Facts:
Issue:
Held:
137. Cathay Pacific Airways v Reyes

Facts:
Issue:
Held:
138. Nacar v Gallaery Frames - [on interest; modifying Easter Shipping Lines Inc v CA because of
BSP 799]
(same ruling in Unkown Owner of MV China Joy v Asian Terminals Inc and Pinewood Marine Inc v EMCO Plywood
Corporation) (reiterated in the The Manila Banking Corporation v Bases Conversion and Development Authority)
Facts:
Issue:
Held:
139. Seven Brothers Shipping Corp v DMC-Construction Resources Inc

Facts:
Issue:
Held:
140. Bernales v Nothwest Airlines

Facts:
Issue:
Held:
141. Cathay Pacific Airways Ltd v Sps Fuentebella

Facts:
Issue:
Held:
142. Sulpicio Lines Inc. v Sestante

Facts:
Issue:
Held:
143. Ramos v China Southern Airlines

Facts:
Issue:
Held:
144. Sps. Fernando v Northwest Airlines

Facts:
Issue:
Held:
145. Loadstar Shipping Co v Malayan Insurance

Facts:
Issue:
Held:
146. Sps. Estrada v Philippine Rabbit Bus Lines

Facts:
Issue:
Held:
147. Darines v Quiñones

Facts:
Issue:
Held:
148. Sanico v Colipano

Facts:
Issue:
Held:

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DANIEL AND DOMINIC ONG ELECTION LAW CASES 2018 (OUTLINE OF ATTY.

2. MOF Co. Inc.v Shin Yang Brokerage Corporation

Ruling of the Court of Appeals – against MOF

3. Dangwa Transpo Co. v CA

Who makes the offer?

How about habalhabal? Does angkas have a permit from LTFRB?

4. Korean Airlines Co. v CA

5. Cathay Pacific Airways v Reyes (DAN)

[RE: Relationship between Respondents and Sampaguita Travel]

The negligence of Sampaguita Travel renders it also liable for damages.

[RE: Effect/s of the misunderstanding of Cathay and Travel Agent]

[RE: Contract entered between Respondents and the Travel Agency]

The negligence of Sampaguita Travel renders it also liable for damages.

[Issues regarding damages]

6. >>>> LRTA v Navidad (DAN)

[Security Guard’s liability]

a) P44,830.00 as actual damages;

7. Ramos v China Southern Airlines (DAN)

There is no doubt that petitioners are entitled to actual or compensatory damages.

8. Sps. Fernando v Northwest Airlines (DAN)

Arrival at Los Angeles Airport on December 20, 2001

A contract of carriage is defined as one whereby a certain person or association of persons

Fernandos in the amount of P3,000,000.00.

Public service (under CA 146)

ISSUE: 1. WON private respondent is a common carrier

HELD: 1. Private respondent is a common carrier.

The Civil Code defines "common carriers" in the following terms:

10. Planters Products Inc v CA

HELD: Petitioner was indeed a common carrier.

The hijacking was not due to force majeure.

proof of extraordinary diligence made the presumption conclusive against her.

ISSUE:WON petitioners were negligent

WON damages can be awarded and in the positive, up to what extent

13. >>First Phil. Industrial Corp v CA

14. Loadstar Shipping Co v CA

15. Calvo v UCPB Gen Insurance Terminal Services Inc

16. >Asia Lighterage and Shipping Inc.

17. AF Sanchez Brokerage v CA

ISSUE: WON petitioner is a common carrier.

18. ?Schmitz Transport and Brokerage Corp v Transport Venture

19. Phil Charter v MV National Honor

20. Lea Mer Industries Inc. v Malayan Insurance Co. Inc.

21. Loadstar Shipping v Pioneer Asia

(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;

(5) Order or act of competent public authority

22. Cebu Salvage Corp v Phil Home Assurance Corp

23. Sps. Cruz v Sun Holidays

24. Unsworth Transport International (Phis) Inc v CA

BONUS TOPIC – REMEDIAL LAW

25. >Sps. Pereña v Sps Zarate

3rd issue – amount of damages not excessive (mental anguish, etc.)

RULING: PETITION HAS NO MERIT

> PUBLIC USE VIS-À-VIS COMMON CARRIERS

2. AWARD FOR LOSS OF EARNING CAPACITY IS NOT SPECULATIVE

26. Westwind Shipping Corporation v UCPB General Insurance Co

RULING: PETITIONS LACK MERIT – BOTH LIABLE

RULING: PETITION HAS NO MERIT

28. Torres-Madrid Brokerage Inc v FEB Mitsui Marine Insurance Co.

30. National Steel Corp v CA

31. Valenzuela Hardwood and Industrial Supply v CA

32. FGU Insurance Corp v GP Sarmiento Trucking Corp