Module 2 Case Digests

Transportation Law | EH-306 | AY 2021 | Atty.
Edmar Lerios University of San Carlos - School of Law & Governance
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Transportation Law | EH-306 | AY 2021 | Atty. Edmar Lerios University of San Carlos - School of Law & Governance
LOADSTAR SHIPPING COMPANY, INCORPORATED and LOADSTAR INTERNATIONAL SHIPPING COMPANY, INCORPORATED,
1. Loadstar Shipping v. petitioners, vs. MALAYAN INSURANCE COMPANY, INCORPORATED, respondent. G.R. No. 185565. April 26, 2017 (This is resolution
Malayan Insurance, case)
G.R. No. 185565
(2017) Doctrine:
As common carriers, the petitioners are bound to observe extraordinary diligence in their vigilance over the goods they transport, as required
by the nature of their business and for reasons of public policy. "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."
Facts:
Loadstar International Shipping, Inc. (Loadstar Shipping) and Philippine Associated Smelting and Refining Corporation (PASAR) entered into a Contract of
Affreightment for domestic bulk transport of the latte’s copper concentrates which were loaded in Cargo Hold nos. 1 and 2 of M/V Bobcat, a marine vessel
owned by Loadstar International Shipping Co., Inc. (Loadstar International) and operated by Loadstar Shipping under a charter party agreement. The cargo was
insured with Malayan Insurance Company, Inc. The vessel’s chief officer on routine inspection found a crack on the starboard side of the main deck which caused
seawater to enter and wet the cargo. Upon inspection, the Elite Adjusters and Surveyor, Inc. confirmed that samples of copper concentrates from Cargo Hold
no. 2 were contaminated by sea water. Malayan alleges that in ruling in favor of Loadstar Shipping Company, the Court disregarded the conclusion of the Court
of Appeals that the petitioners acted as a common carrier; that there was a breach of the contract of affreightment; and that the petitioners failed to produce
evidence of a calamity to be exculpated from liability. (facts from 2014 case)
Malayan alleges that in ruling in favor of Loadstar Shipping Company, the Court disregarded the conclusion of the Court of Appeals that the
petitioners acted as a common carrier; that there was a breach of the contract of affreightment; and that the petitioners failed to produce
evidence of a calamity to be exculpated from liability.
The petitioners contend that the grounds raised by Malayan are no longer relevant because as found by the Court, Malayan did not adduce
proof of pecuniary loss to the insured Philippine Associated Smelting and Refining Corporation (PASAR). PASAR has not established by an
iota of evidence the amount of loss or actual damage it suffered by reason of seawater wettage of the 777.29 metric tons of copper
concentrates. In spite of no proof of loss, Malayan, with seeming hastiness, paid the claim of PASAR. According to the petitioners, Malayan
cannot make them answerable for its mistake in indemnifying PASAR.
Respondent’s Arguments:
Malayan contends that in Delsan Transport Lines, Inc. v. CA, the Court held that upon payment by the insurance company of the insurance
claim, the insurance company should be subrogated to the rights of the insured; it is not even necessary to present the insurance policy
because subrogation is a matter of equity.
Issues:
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1. Whether or not the respondent is correct in relying on the ruling of the Court in Delsan v. CA. (NO)
2. Whether or not PASAR and Loadstar should be held liable for the damages (NO)
3. Whether or not Loadstar exercise extraordinary negligence (NO)
Ruling:
1. NO. Delsan involved the sinking of a vessel which took down with it the entire cargo of fuel it was carrying. Hence, the fact of total loss
was completely and undisputedly established. The burden of proof was upon the common carrier to prove that it was not liable for the loss,
which it failed to discharge. It was only but logical for the Court to hold the common carrier liable to the insurance company that paid the
insured owner of the lost cargo as the latter's subrogee. In this case, the copper concentrates were delivered by the petitioners to the
consignee PASAR although part thereof was contaminated with seawater. PASAR did not simply reject the contaminated goods but claim
the value thereof from Malayan and bought back the goods which it already rejected. Malayan sought to recover the total value of the wet
copper concentrates from them. Malayan and PASAR's extraneous actuations are inconsistent with the alleged fact of total loss. Verily,
Delsan cannot be applied given the contradistinctive circumstances obtaining in this case.
2. NO. The Court declares that it is iniquitous to consider the value of the contaminated copper concentrates as the amount of damages
sustained by PASAR when there is no evidence to that effect. PASAR and Malayan were even able to come up and agree on a residual
value. It is also inequitable to consider the purchase price of US$90,000.00 as the actual residual value of the copper concentrates since
there is no showing that PASAR and Malayan objectively arrived at this amount. There is no explanation why Article 364 of the Code of
Commerce which calls for the valuation of experts was not observed by Malayan and PASAR in fixing the residual value of the copper
concentrates.
Neither can Malayan anchor its claim on the Evaluation Report presented by Elite Adjustors and Surveyors, Inc., assessing the total amount
of the loss. Nevertheless, Malayan paid PASAR using the said Evaluation Report as its basis, but ironically disputed this very same report in
fixing a residual value with PASAR. Even if the subject copper concentrates were indeed not contaminated, Malayan and PASAR would not
have fixed the residual value at only US$90,000.00. However, it does not escape the Court's notice that this price was derived through the
exclusion of the petitioners in the valuation and sale of the wet copper concentrates, despite their manifestation of willingness to participate
thereto Malayan was not able to prove the pecuniary loss suffered by PASAR for which the latter was indemnified. This is in line with the
principle that a subrogee steps into the shoes of the insured and can recover only if the insured likewise could have recovered.
3. NO. The petitioner Loadstar failed to comply with some of the terms of their contract of affreightment with PASAR. Their vessel was no
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longer seaworthy when it transported the copper concentrates. The petitioners failed to keep the cargo holds and hatches of MV Bobcat
clean and fully secured as agreed upon, which resulted in the wettage of the cargo.
As common carriers, the petitioners are bound to observe extraordinary diligence in their vigilance over the goods they transport, as required
by the nature of their business and for reasons of public policy. "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." When the copper concentrates
delivered were contaminated with seawater, the petitioners have failed to exercise extraordinary diligence in the carriage thereof.
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2. F.C. Fisher v. Yangco Doctrine:

Steamship, G.R. No.
L-8095 (1915) ● Common carriers in this jurisdiction cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of the traffic
in those goods unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and
necessary. Mere prejudice or whim will not suffice.
● The right to enter the public employment as a common carrier and to offer one's services to the public for hire does not carry with it the
right to conduct that business as one pleases, without regard to the interests of the public, and free from such reasonable and just
regulations as may be prescribed for the protection of the public from the reckless or careless indifference of the carrier as to the public
welfare and for the prevention of unjust and unreasonable discriminations of any kind whatsoever in the performance of the carrier's duties
as a servant of the public.
Facts:
Fisher is a stockholder in the Yangco Steamship Company. The directors of the company adopted a resolution which was thereafter ratified
and affirmed by the shareholders of the company, expressly declaring and providing that the classes of merchandise to be carried by the
company in its business as a common carrier do not include dynamite, powder or other explosives, and expressly prohibiting the officers,
agents and servants of the company from offering to carry, accepting for carriage said dynamite, powder or other explosives.
Then Acting Collector of Customs demanded and required of the company the acceptance and carriage of such explosives. He has refused
and suspended the issuance of the necessary clearance documents of the vessels of the company unless and until the company consents
to accept such explosives for carriage. Fisher was advised that should the company decline to accept such explosives for carriage, the
respondent Attorney-General of the Philippine Islands and the respondent prosecuting attorney of the city of Manila intend to institute
proceedings under the penal provisions of sections 4, 5, and 6 of Act No. 98 of the Philippine Commission against the company, its managers,
agents and servants.
Notwithstanding the demands of Fisher, the manager, agents and servants of the company decline and refuse the carriage of such explosives,
contending that the statute was invalid in so far as it imposes an obligation on common carriers to accept for carriage merchandise of a class
which it: (1) makes no public profession to carry; and (2) has expressly or impliedly announced its intention to decline to accept for carriage
from all shippers. Furthermore, it is invalid because it compels common carriers to engage in a business against their will, having their right
to elect at will a particular business denied from them, thereby denying their liberty.
Issue:
Whether the acts complained of had the effect of making or giving an "unreasonable or unnecessary preference or advantage" to any person,
locality or particular kind of traffic, or of subjecting any person, locality, or particular kind of traffic to any undue or unreasonable prejudice or
discrimination.
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Held:
Yes. Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is, therefore,
affected with a public interest, and is subject of public regulation.The right to enter the public employment as a common carrier and to offer
one's services to the public for hire does not carry with it the right to conduct that business as one pleases, without regard to the interests of
the public and free from such reasonable and just regulations as may be prescribed for the protection of the public from the reckless or
careless indifference of the carrier as to the public welfare and for the prevention of unjust and unreasonable discrimination of any kind
whatsoever in the performance of the carrier's duties as a servant of the public. However, the power to regulate is not a power to destroy,
and limitation is not the equivalent of confiscation.
There may be some vessels engaged in business as common carriers of merchandise, which for lack of suitable deck space or storage
rooms might be justified in declining to carry kerosene oil, gasoline, and similar products, even when offered for carriage securely packed in
cases; and few vessels are equipped to transport those products in bulk. But in any case of a refusal to carry such products which would
subject any person, locality or the traffic in such products to any prejudice or discrimination whatsoever, it would be necessary to hear
evidence before making an affirmative finding that such prejudice or discrimination was or was not unnecessary, undue or unreasonable.
There is no cause of action in this case as the complaint lacked the necessary allegations.
It was not alleged in the complaint that "dynamite, gunpowder and other explosives" can in no event be transported with reasonable safety
on board steam vessels engaged in the business of common carriers. It is not alleged that all, or indeed any of the defendant steamship
company's vessels are unsuited for the carriage of such explosives. It is not alleged that the nature of the business in which the steamship
company is engaged is such. as to preclude a finding that a refusal to accept such explosives on any of its vessels would subject the traffic
in such explosives to an undue and unreasonable prejudice and discrimination.
The traffic in dynamite, gunpowder and other explosives is vitally essential to the material and general welfare of the people of these Islands.
If dynamite, gunpowder and other explosives are to continue in general use throughout the Philippines, they must be transported by water
from port to port in the various islands which make up the Archipelago. We are satisfied therefore that the refusal by a particular vessel,
engaged as a common carrier of merchandise in the coastwise trade of the Philippine Islands, to accept any or all of these explosives for
carriage would constitute a violation of the prohibitions against discriminations penalized under the statute, unless it can be shown by
affirmative evidence that there is so real and substantial a danger of disaster necessarily involved in the carriage of any or all of these articles
of merchandise as to render such refusal a due or a necessary or a reasonable exercise of prudence and discretion on the part of the
shipowner.
Under Philippine statute, the mere fact that violent and destructive explosions can be obtained by the use of dynamite under certain conditions
would not be sufficient in itself to justify the refusal of a vessel, duly licensed as a common carrier of merchandise, to accept it for carriage,
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if it can be proven that in the condition in which it is offered for carriage there is no real danger to the carrier, nor reasonable ground to fear
that his vessel or those on board his vessel will be exposed to unnecessary and unreasonable risk in transporting it, having in mind the nature
of his business as a common carrier engaged in the coastwise trade in the Philippine Islands, and his duty as a servant of the public engaged
in a public employment. So also, if by the exercise of due diligence and the taking of reasonable precautions the danger of explosions can
be practically eliminated, the carrier would not be justified in subjecting the traffic in this commodity to prejudice or discrimination by proof
that there would be a possibility of danger from explosion when no such precautions are taken.
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3. Saludo v. CA, G.R. DOCTRINE: The extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods
No. 95536, March 23, thereto, but for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage.
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A common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the concomitant right to rely thereon. A carrier
has no obligation to inquire into the correctness or sufficiency of such information. The consequent duty to conduct an inspection thereof arises in the
event that there should be reason to doubt the veracity of such representations.
FACTS:
Involved in this case is the shipment of the remains of the deceased Crispina Galdo Saludo.
Pomierski and Son Funeral Home of Chicago embalmed the body, placed the body in a hermetically sealed casket, and brought it to the Continental
Mortuary Air Services. CMAS made the necessary arrangements such as flights, transfers, etc.
CMAS booked the shipment with Philippine Airlines (through its agent Air Care International), with Pomierski F.H. as the shipper, and Maria Saludo as
the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued with the following routing: Chicago to San Francisco (TWA Flight 121), SF to
Manila (PAL Flight No. 107), and MNL to Cebu (PAL Flight 149).
Upon Maria Saturnino’s arrival at San Francisco, she went to the TWA counter to inquire about her mother’s remains, but she was told they did not know
anything about it. It was later found out that the remains were mistakenly delivered to Mexico. The incident happened because there were two bodies at
the Chicago Airport terminal during that time and they were somehow switched, which lead to the remains of Crispina Saludo being sent on a plane to
Mexico City. The remains were later on sent to San Francisco from Mexico, and eventually arrived in Manila on October 30, 1976, a day after it was
expected to arrive.
Petitioners’ counsel informed Trans World Airlines (TWA) of the misshipment, eventual delay, and the discourtesy of its employees to the petitioners. A
letter was also sent to PAL stating that the petitioners were holding them accountable for the delay.
RTC and CA ruled in favor of the airline companies.
Petitioner’s argument: Petitioners allege that private respondents received the casketed remains of petitioners' mother on October 26, 1976, as
evidenced by the issuance of PAL Air Way-bill No. 079-01180454 by Air Care International as carrier's agent; and from said date, private respondents
were charged with the responsibility to exercise extraordinary diligence so much so that for the alleged switching of the caskets on October 27, 1976, or
one day after private respondents received the cargo, the latter must necessarily be liable. It is argued that since there is no clear evidence establishing
the fault of CMAS for the mix-up, private respondents are presumably negligent pursuant to Article 1735 of the Civil Code.
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Respondent’s argument: They deny having received the remains of Crispina Saludo on October 26, 1976 as alleged by petitioners.
ISSUE: Whether or not the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of respondent airline companies.
HELD: NO.
Under Article 1736 of the Civil Code, the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier.
This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the
right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance.
The Supreme Court concluded that the switching occurred or, more accurately, was discovered on October 27, 1976; and based on the above findings of
the Court of Appeals, it happened while the cargo was still with CMAS, well before the same was place in the custody of private respondents. PAL
Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the Cargo, but merely as a confirmation of the booking thus made for
the San Francisco-Manila flight scheduled on October 27, 1976.
The extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, but for such
duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage.
The body intended to be shipped as agreed upon was, really placed in the possession and control of PAL on October 28, 1976 and it was from that date
that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the
switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby, private respondents cannot be held liable.
Verily, no amount of inspection by respondent airline companies could have guarded against the switching that had already taken place. Private
respondents had no means of ascertaining whether the body therein contained was indeed that of Crispina Saludo, and they had no authority to unseal
and open the same nor did they have any reason or justification to resort thereto.
It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, or enter into contracts with it. Ordinarily, too,
it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents to carry them. But in the
absence of more definite information, the carrier has the right to accept shipper's marks as to the contents of the package offered for transportation and
is not bound to inquire particularly about them in order to take advantage of a false classification and where a shipper expressly represents the contents
of a package to be of a designated character, it is not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and
see for itself.
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A common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the concomitant right to rely thereon. A carrier
has no obligation to inquire into the correctness or sufficiency of such information. The consequent duty to conduct an inspection thereof arises in the
event that there should be reason to doubt the veracity of such representations.
In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper's representations. The airway bill expressly providing
that "carrier certifies goods received below were received for carriage," and that the cargo contained "casketed human remains of Crispina Saludo," was
issued on the basis of such representations. The reliance thereon by private respondents was reasonable and, for so doing, they cannot be said to have
acted negligently.
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4. Philippine Charter HAMOY, JOHN DANIEL

Insurance v.
Unknown Vessel,
G.R. No. 161833 Doctrine
(2005)
The statement in the Bill of Lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of defects
in the merchandise. Case law has it that such statement will create a prima facie presumption only as to the external condition and not to
that not open to inspection.
Facts
J. Trading Co loaded four units of parts and accessories in the Pusan, Korea Port on the vessel MV National Honor represented in the
Philippines by its agent, National Shipping Corp of the Philippines (NSCP). The shipment was for delivery to Manila. Samhwa Inter-Trans Co,
the freight forwarder, issued the bill of lading, which contained that the goods were received in good order, in the name of the shipper,
consigned to the order of Metrobank and the ultimate consignee Blue Mono International (BMICI). The shipment was contained in two
wooden crates, Crate No. 1 and Crate No. 2.
The MV National Honor arrived in Manila International Container Terminal (MICT). The International Container Terminal Services (ICTSI),
the arrastre operator of MICT, who had received the cargo list and bill of lading, knew the contents of the crates. The crates were then
discharged by ICTSI. The inspector of NSCP, then checked the cargo and found them all to be in good condition. The stevedore of ICTSI, then
proceeded to fasten sling cables to the sides of Crate 1 pursuant to the normal procedure, but when the crate was hoisted up by the crane,
the slings snapped and the crate fell, resulting in extensive damage to the shipment. JRM Inc., the customs broker of BMICI, then delivered
the cargo in the damaged condition. BMICI confirmed that the same could no longer be used, and the survey of the shipment showed that
the packing of the shipment was insufficient, and that three or four slings bypassing the center of the crate should have been used instead
of the two slings attached to the side, considering that heavy equipment was inside the crate.
BMICI sued NCSP, ICTSI and its insurer PCIC separately. PCIC paid the claim of $61K and was issued a subrogation receipt for Php1.7M. PICI
then sued the Unknown owner of the vessel MV National Honor, NSCP and ICTSI pursuant to such subrogation, claiming that the loss was
due to the fault and negligence of the defendants. ICTSI, in its counterclaim and cross-claim against NSCP, claimed that the loss was due to
the defective wooden battens of the shipment and the insufficient packing of the shipper. During trial, ICTSI’s safety inspector testified that
the wooden battens were not strong enough to carry the weight of the cargo, and that because the stevedores were illiterate, if there were
no markings on the crate as to where the slings should be placed, the stevedores would merely put the slings on the sides. He concluded
that the damage was due to the failure of the shipper to use strong materials for the wooden battens and to place appropriate markings
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around the middle of the crate to show where the slings should have gone. ICTSI also submitted a report showing that the damage could
also be due to the insufficient packing of the cargo.
The trial court dismissed the complaint, finding that the loss of Crate 1 was due to the internal defect and weakness of the wooden crates.
On appeal with the CA, this was affirmed in toto, and the court held that the evidenced showed that the loss was due to an excepted cause
– the character of the goods or defects in the packing or in the containers and the failure of the shipper to indicate signs to notify the
stevedores that extra care should be employed in handling the shipment. In effect, it was the shipper’s fault for not using stronger materials
and indicating an arrow where the slings should have gone in the middle of the cargo. The CA concluded that common carriers are not
absolute insurers against all risks in the transport of the goods.
Petitioner’s Argument
PICI asserts that the mere proof of receipt by the carrier of the goods in good condition evidenced by the bill of lading and the arrival in the
destination in bad order makes out a prima facie case against it, and that ICTSI, the arrastre operator, should have been held liable under
the presumption of fault and negligence for its failure to show that it exercised extraordinary diligence. It should have been ITCSI’s duty to
put three to four cables on the crate to prevent damage to the cargo, especially since they knew the kind and character of the contents of
the crate. Thus, the mishandling of ICTSI showed its lack of extraordinary diligence required from a common carrier
Respondent’s Argument
NSCP counters that even if ICTSI is held liable, it should not be held liable with it since the arrastre is in charge of discharging the cargo. ICTSI
asserts that it was merely a depository and not a common carrier and thus was not obliged to exercise extraordinary diligence, especially
since the loss was due to insufficient packing and the weak materials used in the wooden battens.
Issue
Whether or not the respondents, specifically ICTSI, are liable for the loss of the cargo.
Ruling
No. PICI is correct in stating that common carriers from the nature of their business and for reasons of public policy, are mandated to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the
circumstances of each case. And while PICI is correct in asserting that when the goods shipped arrive in bad condition, a presumption arises
against the carrier, the presumption of negligence does not apply to the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
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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.
In order to exculpate himself from liability, the carrier needs to prove any of the forecited causes by a preponderance of evidence, and if it
is able to do this, the burden is then shifted to the shipper to prove that the carrier was negligent. In this case, the trial court held that the
loss of the cargo was due to the negligence of the shipper for failure to use strong wooden battens that could support the weight of the
equipment, properly mark the crate with arrows so the stevedores would know where to install the cable slings and pack the crate
sufficiently. This finding of fact was affirmed by the CA, which declared that the case fell under the cause of the character of the goods or
defects in the packing or in the containers.
The Court agrees, finding that PICI failed to counter ICTSI’s evidence. ICTSI could not be expected to know that the wooden battens were
too weak to support the weight of the cargo, and that the center, being made of weak materials, needed to be supported with bypassing
cables, especially since there were no signs on the crate instructing the installment of the slings in that manner. The statement in the Bill
of Lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of defects in the merchandise, but
case law has it that such statement will create a prima facie presumption only as to the external condition and not to that not open to
inspection, such as the strength of the materials used in the wooden batten and the sufficiency of the packaging inside the crate. ICTSI is
not liable. Petition is denied.
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5. Eastern Shipping Lines, Inc. Cubillan

v. CA and Mercantile
Insurance Company, Inc.
Issues:
GR No. 97412, July 12, 1994
1. Whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common
carrier, the arrastre operator and the customs broker
2. Whether the payment of legal interest on an award of loss or damage is to be computed from the time the complaint is filed or from
the date the decision appealed from is rendered
3. Whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%)
Facts
On December 1981, two fiber drum riboflavin were shipped from Japan using the ship owned by defendant. This shipment was insured under
a Marine Insurance Policy. Upon arrival to Manila, Metro Port discharged the shipment and noted that, except for one drum, the others were
in a bad order, which damage was unknown to plaintiff.
On january 1982, Allied Brokerage received the shipment from defendant with one drum opened and without seal. Allied then delivered the
shipment to consignee’s warehouse to which the latter excepted one drum to contain spillages, while the rest have adultered/fake contents.
After the plaintiff filed for claims but got refused to by the defendant, plaintiff was compelled to pay the consignee under the policy, thus,
plaintiff now has a right to subrogation against the defendants.
Arguments
Plaintiff: The consigned suffered loss/damage due to the fault and negligence of the defendant. They filed for claims but defendants refused
to pay.
Defendant: Eastern Shipping denied liability and alleged that shipment was discharged on good condition from them to Metro Port, thus,
any damage/loss was incurred after the shipment to the latter. Metroport alleged that shipment was already in bad condition when it was
turned to their custody. Allied said that plaintiff has no cause of action against them because shipment was already damaged or in bad
condition when it reached them, but nevertheless, they exercised extra ordinary care and diligence in handling the cargo.
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Ruling:
RTC: There can be no doubt that the shipment sustained loss/damage which were sustained while in the respective and/or successive
custody of defendants based on the Marine Cargo Survey Report. Defendants were ordered to jointly and severally pay plaintiff at 12% plus
cost and damages,
CA: affirmed in toto RTC’s judgement.
SC:
1. Yes. In Fireman's Fund Insurance vs. Metro Port Services (182 SCRA 455), we have explained in holding the carrier and the arrastre
operator liable in solidum: The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and
warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre
operator. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good
condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are
therefore charged with the obligation to deliver the goods in goods condition to the consignee.
We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and
necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule. The instant petition
has been brought solely by Eastern Shipping Lines which, being the carrier and not having been able to rebut the presumption of fault, is, in
any event, to be held liable in this particular case. In any case, Eastern’s liability is inevitable due to its failure to rebut presumption of
negligence whether there are others who are solidarily liable.
2 and 3
Legal interest to be paid is 6% on the amount due computed from the decision and 12% in lieu of SIX PERCENT (6%), shall be imposed on
such amount upon finality of this decision until the payment thereof.
There have been variances on the Court’s ruling as to the legal interest and and the date on when it will be computed. The cases can perhaps
be classified into two groups according to the similarity of the issues involved in the corresponding rulings rendered by the court:
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First group - the basic issue focus on the application of either the 6% (under the Art 2209 of the Civil Code) or 12% (under the Central Bank
Circular) interest per annum. The Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance of money,
goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the 6% interest under the
Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach of a delay in
the performance of obligations in general. a common time frame in the computation of the 6% interest per annum has been applied, i.e., from
the time the complaint is filed until the adjudged amount is fully paid.
Second group - Same legal interest as that of the first group but varried only on the commencement of the running of the legal period. The
case of Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a quo while American
Express International v. IAC, introduced a different time frame for reckoning the 6% interest by ordering it to be "computed from the finality
of (the) decision until paid." The Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of the decision
until the judgment amount is paid.
Courts are vested with discretion depending on the equities of each case, on the ward of interest, but the court suggests to follow the rules
of thumb for future guidance:
1. Title XVIII of CC - 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 damages.
2. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the
interest due should be: 1. that which may have been stipulated in writing, interest due shall itself earn legal interest from the
time it is judicially demanded. and 2. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed
from default (Art 1169 of the CC)
2. When a obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court 24 at the rate of 6% per annum. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date of the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained).
16
When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed
to be by then an equivalent to a forbearance of credit.
17
6. New World
International Data, Maria Liyan A.
Development (Phils.),
Inc. v. NYK-FILJAPAN New World International Devt. v. NYK-FilJapan, G.R. No. 171468 (2011)
Shipping Corp,
Doctrine: That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil Code, does not automatically
relieve the common carrier of liability. The latter had the burden of proving that the typhoon was the proximate and only cause of loss and
that it exercised due diligence to prevent or minimize such loss before, during, and after the disastrous typhoon.
Facts:
Petitioner New World International Development (Phils.), Inc. (New World) bought from DMT Corporation (DMT) through its agent, Advatech
Industries, Inc. (Advatech) three emergency generator sets worth US$721,500.00.
DMT shipped the generator sets by truck from Wisconsin, United States, to LEP Profit International, Inc. (LEP Profit) in Chicago, Illinois.
From there, the shipment went by train to Oakland, California, where it was loaded on S/S California Luna V59, owned and operated by NYK
Fil-Japan Shipping Corporation (NYK) for delivery to petitioner New World in Manila. NYK issued a bill of lading, declaring that it received
the goods in good condition.
NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72 that it also owned and operated. On its journey to
Manila, however, ACX Ruby encountered typhoon Kadiang whose captain filed a sea protest on arrival at the Manila South Harbor on October
5, 1993 respecting the loss and damage that the goods on board his vessel suffered.
Due to denial of liability for loss, New World instituted an action DMT, Advatech, LEP, LEP Profit, Marina (arrastre), Serbros (customs broker),
NYK and Seaboard, insurer of the generators.
RTC held the respondents were negligent but absolved them due to failure of New World to file a claim against vessel owner within 1 year
from the date the goods were delivered to the arrastre operator as provided under COGSA (should file October 7, only filed on October 11).
The CA modified the decision only holding the Seaboard liable under the insurance clause. Hence, this appeal by Seaboard and New World.
Petitioner’s Arguments:
New World asserts that the roles of respondents DMT, Advatech, LEP, LEP Profit, Marina and Serbros in handling and transporting its
shipment from Wisconsin to Manila collectively resulted in the damage to the same, rendering such respondents solidarily liable with NYK,
the vessel owner.
18
Respondent’s Arguments:
The arguments of DMT, Advatech, LEP, LEP Profit, Marina and Serbros were not included in the case; only the argument of the insurer was
provided.
Issue: (NO)
Whether or DMT, Advatech, LEP, LEP Profit, Marina, and Serbros who were at one time or another involved in handling the shipment liable
for damages.
Ruling:
NO. SC affirmed the decision of the RTC and CA held that based on the facts generator sets were totally damaged during the typhoon which
beset the vessel's voyage from Hong Kong to Manila and that it was her negligence in continuing with that journey despite the adverse
condition which caused petitioner New World's loss.That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of
the Civil Code, does not automatically relieve the common carrier of liability. The latter had the burden of proving that the typhoon was the
proximate and only cause of loss and that it exercised due diligence to prevent or minimize such loss before, during, and after the disastrous
typhoon. As found by the RTC and the CA, NYK failed to discharge this burden.
However, Section 3 (6) of the COGSA provides that the carrier and the ship shall be discharged from all liability in case of loss or damage
unless the suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. Hence, the
claim of New World was only against Seaboard, the insurer for being in bad faith and not honoring the insurance policy.
19
7. Torres-Madrid
Brokerage vs. Feb Facts:
Mitsui
A shipment of various electronic goods from Thailand and Malaysia arrived at the Port of Manila for Sony Philippines, Inc. (Sony). Sony
engaged Torres-Madrid Brokerage Inc (TMBI) in facilitating, processing, withdrawing and delivering the shipment to its warehouse in Binan,
Laguna. TMBI subcontracted BMT Trucking services since it did not own any delivery truck which Sony did not object to the arrangement.
There were 4 BMT trucks picked up by the shipment but only 3 trucks arrived at Sony’s warehouse. One truck was found abandoned. Both
the driver Rufo Reynaldo Lapesura and the shipment were missing. TMBI filed a complaint for “hijacking”. After being notified, Sony filed an
insurance claim with Mitsui, the insurer of the goods. Mitsue paid PHP7,293,386.23. After being subrogated to Sony’s rights, Mitsui sent a
demand letter to TMBI for payment of the lost goods.
TMBI impleaded BMT as it was due to BMT’s negligence as the proximate cause of the loss. Also, it added that in the event it is held liable
to Mitsui for the loss, it should be reimbursed by BMT.
Petitioner’s Argument/s:(LOST)
TMBI 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. Like the petitioner, BMT maintains that the hijacking was a fortuitous event — a force majeure — that
exonerates it from liability.
Respondent’s Arguments:(WON)
Mitsui adopts the CA's reasons to conclude that TMBI is a common carrier. It also points out Victor Torres' admission during the trial that
TMBI's brokerage service includes the eventual delivery of the cargo to the consignee. Mitsui invokes as well the legal presumption of
negligence against TMBI, pointing out that TMBI simply entrusted the cargo to BMT without adopting any security measures
Ruling of the lower court:
RTC found TMBI and Benjamin Manalastas jointly and solidarily liable to pay Mitsui the CA affirmed the RTC's decision but reduced the
award of attorney's fees to PHP200,000.
Issue:
Whether TMBI who provides a brokerage service a common carrier -YES
20
Rule:
A brokerage may be considered a common carrier if it also undertakes to deliver the goods for its customers
Application:
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. They are bound to observe extraordinary diligence in the vigilance
over the goods and in the safety of their passengers.
The law does not distinguish between ne whose principal business activity is the carrying of goods and one who undertakes this task is only
as an ancillary activity. Despite TMBI’s denial, we find the delivery of the goods is an integral, albeit ancillary, part of its brokerage service. It
admitted that it was contracted to facilitate, process, and clear the shipments from the customs authorities, withdraw them from the pier, then
transport and deliver them to Sony’s warehouse in Laguna. That TMBI does now own the truck and has to subcontract the delivery of its
clients’ goods is immaterial. Further, a robbery attended by “grave or irresistible force” is a fortuitous event that absolves the common carrier
from liability. However, TMBI failed to successfully establish that it had acted with extraordinary diligence.
(not anymore part of the issue but if you want to know the extent of liability of TMBI and BMT you can continue reading)
TMBI and BMT cannot be solidarily liable as TMBI’s liability did not stem from a quasi-delict but from its breach of contract or culpa contractual
while Mitsui’s action against BMT could only rise from quasidelict or culpa aquiliana. In this case, TMBI entered another contract of carriage
with BMT which failed to prove that it observed extraordinary diligence in the performance of its obligation to TMBI. So, TMBI is liable to
Mitsui. In turn, TMBI is entitled to reimbursement from BMT due to the latter’s own breach of contract with TMBI.
21
8. De Guzman v. CA, G.R.

No. L-47822 (1988) DE LOS REYES, ARIES MARIE
Doctrine: 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.
FACTS:
Respondent Ernesto Cendana is a junk dealer in Pangasinan. He utilized twotrucks which he owned for hauling the material to Manila for
resale. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing
establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates.
Pedro de Guzman a merchant and authorized dealer of General Milk Company contracted with respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse in Makati to petitioner's establishment in Urdaneta on or before 4 December 1970. Only 150 boxes of
Liberty filled milk were delivered to petitioner since the truck which carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.
Petitioner commenced action against private respondent in the CFI of Pangasinan, demanding payment of the lost goods.
Petitioner’s argument:
Petitioner demanded payment of P22,150.00 the claimed value of the merchandise , plus damages and attorney’s fees. He argued that the
latter failed to exercise extraordinary diligence required of him by the law so he should be liable for the value of the undelivered goods.
Respondent’s argument:
Respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss
having been due to force majeure.
CFI ruled in favor of petitioner De Guzman, finding respondent to be a common carrier and liable to petitioner. CA reversed the decision.
ISSUE:
Whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly characterized as a common carrier.
(YES, but not liable to the loss due to force majeur).
22
HELD:
Yes. Private respondent is a common carrier. However, he could not be held liable for the lost goods.
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. 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” and one who offers
services or solicits business only from a narrow segment of the general population.
So understood, 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:
“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,”
A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers.
Respondent is not liable for the lost goods within the purview of articles 1734 and 1735.The hijacking of the carrier's truck does not fall within
any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle
must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have
been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence. The duty of
extraordinary diligence in the vigilance over goods isgiven additional specification not only by Articles 1734 and 1735 but also by Article 1745.
Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to divest or to diminish such responsibility —
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." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."In the instant case,
armed men held up the second truck owned by private respondent which carried petitioner's cargo.
23
9. Compania Maritima v. (Dela Cuesta, Elycrisjoe M.)

CA, G.R. No. L-31379
(1988) Doctrine
The weights stated in the bill of lading are prima facie evidence of the amount received and the fact that the weighing was done by another
will not relieve the common carrier where it accepted such weight and entered it on the bill of lading.
The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are presumed to have been at fault or to have
acted negligently in case the goods transported by them are lost, destroyed or had deteriorated. To overcome the presumption of liability
for the loss, destruction or deterioration, the common carriers must prove that they observed extraordinary diligence as required in Art.
1733 of the Civil Code.
Facts
Private respondent Civil Engineer Vicente Concepcion is doing business under the name of Consolidated Construction with office address
in Manila. He contracted with Civil Aeronautics Administration (CAA) in 1964 for the construction of the Airport in Cagayan de Oro City,
Misamis Oriental.
Engr. Concepcion had to ship his construction equipment to Cagayan de Oro City. He negotiated petitioner, thru its collector (Pacifico
Fernandez) on August 28, 1964 for the shipment to Cagayan de Oro City of:
A. 1 unit of payloader;
B. 4 units of 6x6 Reo trucks; and
C. 2 pcs. of water tanks.
In the afternoon of September 1, 1964, MV Cebu in its voyage 316, where the equipment were loaded, arrived at Cagayan de Oro City.
The Reo trucks and water tanks were safely unloaded, but while the payloader was about 2 meters above the pier in the course of
unloading, the swivel pin of the heel block of the port of Hatch No. 2 gave way, causing the payloader to fall.
The payloader was damaged and was thereafter taken to the petitioner compound.
On September 7, 1964, Consolidated Construction wrote to petitioner Maritima to demand replacement of the payloader considering
complete loss of the equipment because of the extent of damage.
24
The payloader was shipped by the petitioner to Manila where it was weighed at the San Miguel Corporation. It was found out that the
payloader weighed 7.5 tons and NOT 2.5 tons as declared in the Bill of Lading. Petitioner denied the claim for damages and contended
that had Engr. Concepcion declared the actual weight of the payloader, damage to their ship as well as to his payloader could have been
prevented.
Engr. Concepcion filed an action for damages against the petitioner with the CFI of Manila, seeking to recover damages in the amount of
P41,225.00 allegedly suffered for 97 days that he was not able to employ a pay loader.
On April 24, 1968, CFI of Manila dismissed the complaint stating that the proximate cause of fall of the payloader was Engr. Concepcion's
act or omission in having misrepresented the weight of the payloader, which underdeclaration was intended to defraud Compania Maritima
of the payment of the freight charges and which likewise led the vessel's Chief Officer to use the heel block at hatch No. 2 in unloading the
payloader.
The Court of Appeals reversed the decision of CFI of Manila, and Compania Maritima was condemned to pay the damages of P24,652.07
and the payloader was declared abandoned.
Issue:
Whether or not the act of private respondent Engr. Concepcion in furnishing petitioner the inaccurate weight of 2.5 tons instead of the
payloader's weight of 7.5 tons was the proximate and only cause of the damage of the payloader, as would absolutely exempt petitioner
from liability for damages under Paragraph 3 of Article. 1734 of the Civil Code.
Ruling:
No. Petitioner seems to have overlooked the extraordinary diligence required of common carriers in the vigilance over the goods
transported by them by virtue of the nature of their business, which is impressed with a special public duty. The extraordinary diligence In
the vigilance of goods tendered for shipment requires the common carrier to know and follow the required precaution for avoiding damage
to or destruction of the goods entrusted to it for safe carriage and delivery.
Private respondent has sufficiently established the laxity and carelessness of the petitioner's crew in their methods of ascertaining the
weight of heavy cargoes as is customary among careful persons.
While it was the duty of the vessel's Chief Officer, Mr. Felix Pisang, to determine the weight of heavy cargo before accepting, he took the
bill of lading on its face value and presumed the same to be correct by merely "seeing" it. Acknowledging that there was "jumbo" in the MV
25
Cebu which has the capacity of lifting 20 to 25 ton cargoes, Mr. Pisang chose not to use I, because according to him, since the ordinary
boom has a capacity of 5 tons while the payloader was only 2.5 tons, he did not bother to use the "jumbo" anymore.
Even if petitioner chose not to take the necessary precaution to avoid damage by checking the correct weight of the payloader,
extraordinary care and diligence compel the use of the "jumbo" lifting apparatus as the most prudent course for petitioner.
26
10. Belgian Overseas v. (Delani, Beatriz)

Philippine First
Insurance, G.R. No. Doctrine
143133 (2002)
Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination constitutes prima facie
fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the destruction or the deterioration of the
goods happened, the carrier shall be held liable therefor.
Facts
CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for
transportation to Manila. Upon arrival at the port of Manila, the subject cargo was discharged. However, four (4) coils were found to be in bad
order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee
Philippine Steel Trading Corporation declared the same as total loss.
Despite receipt of a formal demand, petitioners Belgian Overseas Chartering and Shipping N.V. and Jardine Davies Transport Services, Inc
refused to submit to the consignee's claim. Consequently, Philippine First Insurance paid the consignee PSTC P506,086.50, and was
subrogated to the latter's rights and causes of action against the petitioners. Subsequently, PFI instituted this complaint for recovery of the
amount paid by them, to the consignee as insured.
The petitioners imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods,
or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or
their representatives. Moreover, they argued that their liability, if there be any, should not exceed the limitations of liability provided for in the
bill of lading and other pertinent laws. Finally, they averred that, in any event, they exercised due diligence and foresight required by law to
prevent any damage/loss to said shipment."
The RTC dismissed the Complaint for PSTC’s failure to prove its claims. On appeal, the CA reversed the trial court and ruled that the
petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence
imposed on common carriers. Likewise, it held that the petitioners’ claim that the loss or the deterioration of the goods was due to pre-
shipment damage was inadequately proven. Moreover, it opined that the notation "metal envelopes rust stained and slightly dented" placed
on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.
Issue
W/N the petitioners have overcome the presumption of negligence of a common carrier -NO
27
Held
Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and
vigilance with respect to the safety of the goods and the passengers they transport. Thus, common carriers are presumed to have been at
fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. Accordingly, they have the burden of proving that they observed such diligence to avoid
any liability.
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the
deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.
In the case at hand, the petitioners failed to rebut the prima facie presumption. The following facts prove the shipment in good order and
condition and the consequent damage to the four coils while in its possession.
1. As stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany.
2. Prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of both parties showed the steel
bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty.
3. Bad Order Tally Sheet No. 154979 issued by Jardine, stated that the four coils were in bad order and condition. Normally, a request
for a bad order survey is made in case there is an apparent or a presumed loss or damage.
4. The Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet
with fresh water.
5. Petitioners admitted in a letter addressed to Philippine Steel Coating Corporation that they were aware of the condition of the four
coils found in bad order and condition.
Likewise, petitioners failed to prove that they observed extraordinary diligence and precaution to avoid damage to or destruction of the goods
entrusted to it for safe carriage and delivery.
While the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading, there is no showing that petitioners
exercised due diligence to forestall or lessen the loss. The master of the vessel and his crew did not undertake any precautionary measures
to avoid possible deterioration of the cargo even though they were equipped with the proper knowledge of the nature of steel sheets in coils
and of the proper way of transporting them. Having failed to discharge the burden of proving that they have exercised the extraordinary
28
diligence required by law, petitioners cannot escape liability for the damage to the four (4) coils.
In addition, petitioners cannot rely on the exceptions provided under Art. 1734(4) of the Civil Code as none of these are present in the instant
case. It cannot be reasonably concluded that the damage to the four coils was due to the condition noted on the Bill of Lading.
Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved
of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition. Thus, petitioners have not
successfully proven the application of any of the aforecited exceptions in the present case.
29
Doctrine
11. Calvo v. UCPB, G.R. The rule is that if the defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary observation,
No. 148496 (2002) but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability
for damage resulting therefrom.
Facts
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc, a sole proprietorship customs broker. Petitioner
entered into a contract with San Miguel Corporation 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 Ermita, Manila. 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. From July 23 to July 25, 1990, petitioner, pursuant to her
contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila. 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.Respondent subrogee of SMC,
brought suit against petitioner in the RTC of Makati City.
RTC ruled that petitioner is a common carrier and must exercise extraordinary diligence:
RTC ruled that damages sustained by shipment is attributable to improper handling in transit presumably whilst in the custody of the broker.
Defendant did not present any evidence on what precaution she performed to prevent the said incident, hence the presumption is that the
moment the defendant accepts the cargo she shall perform such extraordinary diligence because of the nature of the cargo. Defendant is
supposed to exercise the extraordinary diligence required by law, hence the extraordinary responsibility 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 the right to receive the same.
CA affirmed RTC’s decision.
Petitioner’s contention: (NOT A COMMON CARRIER BUT A PRIVATE CARRIER)

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/s
30
1. Whether or not Virgines Calvo, a customs broker or warehouseman who offers his services to select clients a common
carrier.- YES
2. Whether or not the petitioner is liable for the damage goods.-YES
Held:
SC affirmed CA’s decision.
1. YES. De Guzman vs. CA dismissed the same contention. Under 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.
The article 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. It 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. We
think that Article 1732 deliberately refrained from making such distinctions.
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.
Thus, petitioner is a common carrier because the transportation of goods is an integral part of her business.
2. YES. Under Art.1733, common carriers, from the nature of their business and for reasons of public policy, are bound to observe
circumstances of each case.
In Compania Maritima vs. CA, SC defines the extraordinary diligence in the vigilance over the goods. It requires the common carrier
to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to
ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires.
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:
31
(4) The character of the goods or defects in the packing or in the containers.
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.
32
12. Asian Terminals v. Asian Terminals, Inc. v. Simon Enterprises, Inc., G.R. No. 177116, [February 27, 2013], - (FUENTES, IZELLE FELICE)
Simon Enterprises,
G.R. No. 177116 Doctrine: Though it is true that common carriers are presumed to have been at fault or to have acted negligently if the goods transported
(2013) 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, the plaintiff must still, before the burden is shifted to the defendant, prove that the subject shipment suffered
actual shortage
Facts:
Contiquincybunge Export Company loaded 6,843.700 metric tons of U.S. Soybean Meal in Bulk on board the vessel M/V “Sea Dream” at the
Port of Darrow, Louisiana, U.S.A., for delivery to the Port of Manila to respondent Simon Enterprises, Inc., as consignee. When the vessel
arrived at the South Harbor in Manila, the shipment was discharged to the receiving barges of petitioner Asian Terminals, Inc. (ATI), the
arrastre operator. Respondent later received the shipment but claimed having received only 6,825.144 metric tons of U.S. Soybean Meal, or
short by 18.556 metric tons. Contiquincybunge Export Company made another shipment to respondent and allegedly loaded on board the
vessel M/V “Tern” at the Port of Darrow, Louisiana, U.S.A. 3,300.000 metric tons of U.S. Soybean Meal in Bulk for delivery to respondent at
the Port of Manila. Respondent however, reported receiving only 3,100.137 metric tons instead of the manifested 3,300.000 metric tons of
shipment.
Respondent filed with the RTC Manila an action for damages against the unknown owner of the vessels M/V “Sea Dream” and M/V “Tern,”
its local agent Inter-Asia Marine Transport, Inc., and petitioner ATI alleging that it suffered the losses through the fault or negligence of the
said defendants. Petitioner ATI meanwhile alleged in its Answer that it exercised the required diligence in handling the subject shipment.
The RTC held petitioner ATI and its co-defendants solidarily liable to respondent for damages arising from the shortage. Upon appeal, the
Court of Appeals affirmed the RTC. It agreed with the findings of the trial court that the unknown owner of the vessel M/V “Tern” and Inter-
Asia Marine Transport, Inc. failed to establish that they exercised extraordinary diligence in transporting the goods or exercised due diligence
to forestall or lessen the loss as provided in Article 1742 of the Civil Code.
CA also ruled that petitioner ATI, as the arrastre operator, should be held jointly and severally liable with the carrier considering that petitioner
ATI’s stevedores were under the direct supervision of the unknown owner of M/V “Tern” and that the spillages occurred when the cargoes
were being unloaded by petitioner ATI’s stevedores.
Petitioner ‘s arguments:
1. Respondent failed to prove that the subject shipment suffered actual loss/shortage as there was no competent evidence to prove that it
33
actually weighed 3,300 metric tons at the port of origin.
2. Stipulations in the bill of lading that the cargo was carried on a "shipper’s weight, quantity and quality unknown" is not contrary to public
policy. Thus, herein petitioner cannot be bound by the quantity or weight of the cargo stated in the bill of lading.
3. Shortage/loss, if any, may have been due to the inherent nature of the shipment and its insufficient packing considering that the subject
cargo was shipped in bulk and had a moisture content of 12.5%.
4. Respondent failed to substantiate its claim for damages as no competent evidence was presented to prove the same.
5. Respondent has not presented any scintilla of evidence showing any fault/negligence on the part of herein petitioner.
Issue: W/N respondent may claim damages against petitioner ATI for the subject shipment’s alleged shortage - NO
Ruling
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, 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 of 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. 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 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.
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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., 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.
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%
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.
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13. Philippine Charter HAMOY, JOHN DANIEL

Insurance v.
Unknown Vessel,
G.R. No. 161833 Doctrine
(2005) The statement in the Bill of Lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of defects
in the merchandise. Case law has it that such statement will create a prima facie presumption only as to the external condition and not to
that not open to inspection.
Facts
J. Trading Co loaded four units of parts and accessories in the Pusan, Korea Port on the vessel MV National Honor represented in the
Philippines by its agent, National Shipping Corp of the Philippines (NSCP). The shipment was for delivery to Manila. Samhwa Inter-Trans Co,
the freight forwarder, issued the bill of lading, which contained that the goods were received in good order, in the name of the shipper,
consigned to the order of Metrobank and the ultimate consignee Blue Mono International (BMICI). The shipment was contained in two
wooden crates, Crate No. 1 and Crate No. 2.
The MV National Honor arrived in Manila International Container Terminal (MICT). The International Container Terminal Services (ICTSI),
the arrastre operator of MICT, who had received the cargo list and bill of lading, knew the contents of the crates. The crates were then
discharged by ICTSI. The inspector of NSCP, then checked the cargo and found them all to be in good condition. The stevedore of ICTSI, then
proceeded to fasten sling cables to the sides of Crate 1 pursuant to the normal procedure, but when the crate was hoisted up by the crane,
the slings snapped and the crate fell, resulting in extensive damage to the shipment. JRM Inc., the customs broker of BMICI, then delivered
the cargo in the damaged condition. BMICI confirmed that the same could no longer be used, and the survey of the shipment showed that
the packing of the shipment was insufficient, and that three or four slings bypassing the center of the crate should have been used instead
of the two slings attached to the side, considering that heavy equipment was inside the crate.
BMICI sued NCSP, ICTSI and its insurer PCIC separately. PCIC paid the claim of $61K and was issued a subrogation receipt for Php1.7M. PICI
then sued the Unknown owner of the vessel MV National Honor, NSCP and ICTSI pursuant to such subrogation, claiming that the loss was
due to the fault and negligence of the defendants. ICTSI, in its counterclaim and cross-claim against NSCP, claimed that the loss was due to
the defective wooden battens of the shipment and the insufficient packing of the shipper. During trial, ICTSI’s safety inspector testified that
the wooden battens were not strong enough to carry the weight of the cargo, and that because the stevedores were illiterate, if there were
no markings on the crate as to where the slings should be placed, the stevedores would merely put the slings on the sides. He concluded
that the damage was due to the failure of the shipper to use strong materials for the wooden battens and to place appropriate markings
36
around the middle of the crate to show where the slings should have gone. ICTSI also submitted a report showing that the damage could
also be due to the insufficient packing of the cargo.
The trial court dismissed the complaint, finding that the loss of Crate 1 was due to the internal defect and weakness of the wooden crates.
On appeal with the CA, this was affirmed in toto, and the court held that the evidenced showed that the loss was due to an excepted cause
– the character of the goods or defects in the packing or in the containers and the failure of the shipper to indicate signs to notify the
stevedores that extra care should be employed in handling the shipment. In effect, it was the shipper’s fault for not using stronger materials
and indicating an arrow where the slings should have gone in the middle of the cargo. The CA concluded that common carriers are not
absolute insurers against all risks in the transport of the goods.
PICI asserts that the mere proof of receipt by the carrier of the goods in good condition evidenced by the bill of lading and the arrival in the
destination in bad order makes out a prima facie case against it, and that ICTSI, the arrastre operator, should have been held liable under
the presumption of fault and negligence for its failure to show that it exercised extraordinary diligence. It should have been ITCSI’s duty to
put three to four cables on the crate to prevent damage to the cargo, especially since they knew the kind and character of the contents of
the crate. Thus, the mishandling of ICTSI showed its lack of extraordinary diligence required from a common carrier
Respondent’s Argument
NSCP counters that even if ICTSI is held liable, it should not be held liable with it since the arrastre is in charge of discharging the cargo. ICTSI
asserts that it was merely a depository and not a common carrier and thus was not obliged to exercise extraordinary diligence, especially
since the loss was due to insufficient packing and the weak materials used in the wooden battens.
Issue
Whether or not the respondents, specifically ICTSI, are liable for the loss of the cargo.
Ruling
No. PICI is correct in stating that common carriers from the nature of their business and for reasons of public policy, are mandated to observe
circumstances of each case. And while PICI is correct in asserting that when the goods shipped arrive in bad condition, a presumption arises
against the carrier, the presumption of negligence does not apply to the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
37
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.
In order to exculpate himself from liability, the carrier needs to prove any of the forecited causes by a preponderance of evidence, and if it
is able to do this, the burden is then shifted to the shipper to prove that the carrier was negligent. In this case, the trial court held that the
loss of the cargo was due to the negligence of the shipper for failure to use strong wooden battens that could support the weight of the
equipment, properly mark the crate with arrows so the stevedores would know where to install the cable slings and pack the crate
sufficiently. This finding of fact was affirmed by the CA, which declared that the case fell under the cause of the character of the goods or
defects in the packing or in the containers.
The Court agrees, finding that PICI failed to counter ICTSI’s evidence. ICTSI could not be expected to know that the wooden battens were
too weak to support the weight of the cargo, and that the center, being made of weak materials, needed to be supported with bypassing
cables, especially since there were no signs on the crate instructing the installment of the slings in that manner. The statement in the Bill of
Lading, that the shipment was in apparent good condition, is sufficient to sustain a finding of absence of defects in the merchandise, but
case law has it that such statement will create a prima facie presumption only as to the external condition and not to that not open to
inspection, such as the strength of the materials used in the wooden batten and the sufficiency of the packaging inside the crate. ICTSI is
not liable. Petition is denied.
(Cuarteros, Lady Joyce)
Doctrine: Generally, common carriers are mandated to observe extraordinary diligence in the vigilance over the goods for
shipment. But once these goods are either lost, deteriorated or arrived in damaged condition, a presumption of negligence arises against
the carrier for its failure to observe that diligence. However, Article 1734 of the New Civil Code enumerates a closed list of 5 causes
when the presumption of negligence does not apply (natural disaster or calamity; act of the public enemy in war; act or omission of the
shipper or owner of the goods; character of the goods or defects in the packing; and order or act of competent public authority)
Facts:
J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment containing two wooden crates, namely, Crate No. 1 (one damaged) and Crate No.
2, complete and in good order condition. These crates contained heavy materials like: 1 unit of Lathe Machin; 1 unit Surface Grinder; and 1
unit Milling Machine – all w/ its complete parts and accessories. The same was boarded on the vessel MN "National Honor," represented by,
38
National Shipping Corporation of the Philippines (NSCP) (PH agent of the vessel/common carrier). Freight forwarder, Samhwa Inter-
Trans Co., Ltd., issued Bill of Lading in the name of the shipper consigned to the order of Metropolitan Bank and Trust Company with arrival
notice in Manila to ultimate consignee Blue Mono International Company, Incorporated (BMICI), Binondo, Manila. NSCP, for its part,
issued Bill of Lading in the name of the freight forwarder, as shipper, consigned to the order of Stamm International Inc., Makati, Philippines.
When the vessel arrived in MNL, the International Container Terminal Services, Incorporated (ICTSI) (arrastre operator) was furnished
with a copy of the crate cargo list and bill of lading, and it knew the contents of the crate. The checker-inspector of the NSCP, along with the
crew and the surveyor of the ICTSI, inspected the hatches, checked the cargo and found it in apparent good condition. The stevedore of the
ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was fastened on the mid- portion of the crate. 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 subsequently filed separate claims against the NSCP, the ICTSI, and its insurer, the PCIC. Only PCIC paid the claim. Hence, PCIC
– as subrogee, filed a Complaint for Damages against the "Unknown owner of the vessel M/V National Honor," NSCP and ICTS, inasmuch
as the damage was caused by the fault or negligence of the latter.
ICTS – It was PCIC's fault. The damage to the cargo could be attributed to insufficient packing and unbalanced weight distribution of the
cargo inside the crate as evidenced by the types and shapes of items found; neither was there any indication of an arrow in the middle portion
of the cargo where additional slings should be attached.
RTC: Respondents’ favor

· Loss of the shipment was due to the internal defect and weakness of the materials used in the fabrication of the crates (the middle
wooden batten had a hole (bukong- bukong); and· Rejected the certification of the shipper, stating that the shipment was
properly packed and secured, as mere hearsay and devoid of any evidentiary weight, the affiant not having testified.
CA: affirmed RTC in toto

· Loss of the shipment was due to an excepted cause — "[t]he character of the goods or defects in the packing or in the containers"
and the failure of the shipper to indicate signs to notify the stevedores that extra care should be employed in handling the
shipment;
· Shipper failed to use materials of stronger quality to support the heavy machines and to indicate an arrow in the middle portion
of the cargo where additional slings should be attached; and
· Common carriers are not absolute insurers against all risks in the transport of the goods.
P’s arguments before the SC:

· R’s SHOULD BE LIABLE in solidum to it, inasmuch as both are charged with the obligation to deliver the goods in good condition to its
consignee, BMICI!
39
· Mere proof of receipt of the shipment by the common carrier (to the carrier) in good order, and their arrival at the place of destination
in bad order makes out a prima facie case against it;
· A simple look at the manifesto of the cargo and the bill of lading would have alerted respondents of the nature of the cargo consisting
of thick and heavy machinery.
· Extra-care should have been made and extended in the discharge of the subject shipment. Had the respondent only bothered to check the list
of its contents, they would have been nervous enough to place additional slings and cables to support those massive machines, which were
composed almost entirely of thick steel, clearly intended for heavy industries.
· Not one among the respondents were cautious enough. Here lies the utter failure of the respondents to observed extraordinary diligence in
the handling of the cargo in their custody and possession.
Rs’ NSCP counter:

· If ever ICTSI is adjudged liable, it is not solidarity liable with it.
· Carrier cannot discharge directly to the consignee because cargo discharging is the monopoly of the arrastre."
· Liability, therefore, falls solely upon the shoulder of respondent ICTSI, inasmuch as the discharging of cargoes from the vessel was its exclusive
responsibility.
· It is merely a depository and not a common carrier; hence, it is not obliged to exercise extraordinary diligence.
· Loss/damage was caused by the failure of the shipper or his packer to place a sign on the sides and middle portion of the crate that extra care
should be employed in handling the shipment;
● As an alternative, it argued that if ever adjudged liable, its liability is limited only to P3,500.00 as expressed in the liability clause of Gate
Pass.
Issue:
WON CA committed serious error of law in not applying the statutory presumption of fault and negligence (NO)
Held:
NO, this is merely a rebuttable presumption. Here, respondents’ evidence succeeded in proving one of the aforecited causes (under
Art. 1734) claimed by it by a preponderance of evidence. Thus, when the burden of evidence was shifted to the shipper to prove
that the carrier is negligent – it failed to do so.
Case at bar falls under one of the causes 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 breakage of the crate was not due to the fault or negligence of ICTSI, but to the inherent defect and weakness of the materials
used in the fabrication of the said crate. Petitioner failed to adduce any evidence to counter that of respondent. It failed to rebut
the testimony of the checker-inspector of respondent, that the crates were sealed and that the contents thereof could not be seen
from the outside. While it is true that the crate contained machineries and spare parts, it cannot thereby be concluded that the respondents
40
knew or should have known that the middle wooden batten had a hole, or that it was not strong enough to bear the weight of the shipment.
There is no showing in the Bill of Lading that the shipment was in good order or condition when the carrier received the cargo, or that the
three wooden battens under the flooring of the cargo were not defective or insufficient or inadequate.
Under Bill of Lading issued by the respondent NSCP and accepted by the petitioner, the latter represented and warranted that the goods
were properly packed and disclosed in writing the "condition, nature, quality or characteristic that may cause damage, injury or detriment to
the goods." Absent any signs on the shipment requiring the placement of a sling cable in the mid-portion of the crate, the respondent ICTSI
was not obliged to do so. The statement in the Bill of Lading, that the shipment was in apparent good condition, is sufficient to sustain a
finding of absence of defects in the merchandise. Case law has it that such a statement will create a prima facie presumption only as to the
external condition and not to that not open to inspection.
41
JACOBO, JO
14. Ganzon v. CA, G.R.
No. L-48757 (1988) DOCTRINE: By the act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier owned by
Ganzon, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Hence, Ganzon’s
extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. The common carrier could have been
exempted from any liability had he been able to prove that he observed extraordinary diligence in the vigilance over the goods in his
custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event or to force majeure.
FACTS:
The private respondent instituted in the Court of First Instance of Manila an action against the petitioner for damages based on culpa
contractual.
Tumambing contracted the services of Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the
lighter LCT “Batman”. Pursuant to the agreement, Ganzon sent his lighter “Batman” to Mariveles where it docked. Tumambing delivered the
scrap iron to Filomeno Niza, captain of the lighter, for loading which was done within the same day.
When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from
Tumambing (note: extortion). Tumambing resisted the shakedown and after a heated argument between them, Advincula drew his gun and
fired at Tumambing, because of which he sustained physical injuries.
After sometime, the loading of the scrap iron was resumed. Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain
Niza and his crew to dump the scrap iron where the lighter was docked. The rest was brought to the compound of NASSCO. Rub issued a
receipt stating that the Municipality of Mariveles had taken custody of the scrap iron.
CA Ruling: (1) Petitioner is guilty of breach of contract of transportation and imposed liability against him commencing from the time the
scrap was placed in his custody and control. (2) Held petitioner liable for the acts of his employees in dumping the scrap into the sea despite
that it was ordered by the local government official without his participation.
Petitioner’s argument: (LOST) Insists that the scrap iron had not been unconditionally placed under his custody and control to make him liable.
However, he completely agrees with the respondent Court's finding that on December 1, 1956, the private respondent delivered the scraps to
Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his employees, actually received the scraps is freely admitted.
42
(LOST) Additionally, petitioner maintains that he is exempt from any liability because the loss of the scraps was due mainly to the intervention of
the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article 1174 of the Civil Code.
ISSUES: WON Ganzon is guilty of breach of contract of transportation
HELD: Yes.
By the act of delivery of Tumambing, the scraps were unconditionally placed in the possession and control of the common carrier owned by
Ganzon, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Hence, Ganzon’s
extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary
responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to
receive them; the fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as
the goods remained in the custody and control of the carrier, albeit still unloaded.
Ganzon has failed to show that the loss of the scraps was due to any of the causes enumerated in Art. 1734, namely:
(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.
Hence he is presumed to have been at fault or to have acted negligently. He could have been exempted from any liability had he been able
to prove that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the
case, or that the loss was due to an unforeseen event or to force majeure, but he failed to do so.
Petitioner changed his theory to caso fortuito, however this is not applicable. In any case, the intervention of the municipal officials was not
of a character that would render impossible the fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey the illegal
order to dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such
force or intimidation as to completely overpower the will of the petitioner's employees. Mere difficulty in the fulfillment of the obligation is not
considered force majeure.
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FACTS:
15. Samar Mining v. Samar Mining Company, Inc. imported1 crate of welded wedge wire sieves shipped through Nordeutscher Lloyd
Nordeutscher, G.R. Bill of Lading No. 18:
No. L-28673 (1984) transshipped at port of discharge: davao
Section 1, paragraph 3 of Bill of Lading No. 18
The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter ship's tackle to be
loaded or after the goods leave ship's tackle to be discharged, transshipped or forwarded ...
Section 11:
Whenever the carrier or m aster may deem it advisable or in any case where the goods are placed at carrier's disposal at or consigned to a
point where the ship does not expect to load or discharge, the carrier or master may, without notice, forward the whole or any part of the
goods before or after loading at the original port of shipment, ... This carrier, in making arrangements for any transshipping or forwarding
vessels or means of transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper and without
any other responsibility whatsoever even though the freight for the whole transport has been collected by him. ... Pending or during
forwarding or transshipping the carrier may store the goods ashore or afloat solely as agent of the shipper and at risk and expense of the
goods and the carrier shall not be liable for detention nor responsible for the acts, neglect, delay or failure to act of anyone to whom the
goods are entrusted or delivered for storage, handling or any service incidental thereto
When the goods arrived in the port of Davao, it was delivered in good order and condition to the bonded warehouse of AMCYL but it was
not delivered and received by Samar Mining Company, Inc.
Samar filed a claim against Nordeutscher and C.F. Sharp who brought in AMCYL as third party defendant
RTC: favored Samar

Nordeutscher and C.F. Sharp laible but may enforce judgment against AMCYL
ISSUE: W/N the stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the same are not in
its actual custody is valid
HELD: YES. Reversed
Article 1736. 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, without prejudice to the provisions of article 1738. - applicable
Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a
warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or otherwise dispose of them. - no applicable since article contemplates a situation
where the goods had already reached their place of destination and are stored in the warehouse of the carrier
Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-
44
performance, the principal may suffer.

Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should
prefer his own.
Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for
the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating the person and the person appointed was notoriously incompetent or
insolvent
Article 1909. The agent is responsible not only for fraud, but also for negligence which shall be judged with more or less rigor by the
courts, according to whether the agency was or was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the Philippines. Neither is
there any showing of notorious incompetence or insolvency on the part of AMCYT, which acted as appellant's substitute in storing the
goods awaiting transshipment
45
LANTERNA, SHIED FAISAH M.

16. The Philippine Doctrine:
American General Common carriers, from the nature of their business and for reasons of public policy, are mandated to observe extraordinary diligence in the
Insurance v. MCG vigilance over the goods and for the safety of the passengers transported by them. Thus, as a general rule, common carriers are presumed
Marine Services, G.R. to have been at fault or negligent if the goods transported by them are lost, destroyed or if the same deteriorated. However, a common carrier
No. 135645 (2002) may be absolved from liability where the loss, destruction or deterioration of the goods is due to a natural disaster or calamity, but it must be
shown that such natural disaster or calamity was the proximate and only cause of the loss.
Facts:
San Miguel Corporation insured several beer bottle cases with petitioner Philippine American General Insurance Company. The cargo was
loaded on board the M/V Peatheray Patrick-G to be transported from Mandaue City to Bislig, Surigao del Sur. The weather was calm when
the vessel started its voyage. However, the M/V Peatheray Patrick-G listed and subsequently sunk off the following day, and as a
consequence thereof, the cargo belonging to San Miguel Corporation was lost. San Miguel Corporation then claimed the amount of its loss
from the petitioner.
Upon petitioner's request, a surveyor went to the area where the vessel was cast ashore, to investigate the circumstances surrounding the
loss of the cargo. In his report, he stated that the vessel was structurally sound and that he did not see any damage or crack thereon. He
concluded that the proximate cause of the listing and subsequent sinking of the vessel was the shifting of ballast water from starboard to
portside. Thereafter, petitioner paid San Miguel Corporation the full amount of their insurance contract.
Petitioner, as subrogee of San Miguel Corporation, filed with the RTC of Makati City a case for collection against private respondents to
recover the amount it paid to San Miguel Corporation for the loss of the latter's cargo. Meanwhile, the Board of Marine Inquiry has exonerated
the captain and crew of the ill-fated vessel for any administrative liability. It found that the cause of the sinking of the vessel was the existence
of strong winds and enormous waves which is a fortuitous event that could not have been foreseen at the time the vessel left the port, and
that said fortuitous event was the proximate and only cause of the vessel's sinking.
The trial court found private respondents solidarily liable for the loss of San Miguel Corporation's cargo and ordered them to pay the petitioner.
Private respondents appealed to the CA, which reversed the ruling of the RTC. It held that private respondents could not be held liable for
the loss of San Miguel Corporation's cargo because said loss occurred as a consequence of a fortuitous event, and that such fortuitous event
was the proximate and only cause of the loss.
Petitioner’s contentions: (a) In reversing and setting aside the decision of the trial court on the basis of the findings of the Board of Marine
Inquiry, the appellate court decided the case at bar not in accord with law or with the applicable decisions of the honorable court; (b) In
reversing the trial court's decision, the appellate court gravely erred in contradicting and in disturbing the findings of the former; and (c) The
appellate court gravely erred in reversing the decision of the trial court and in dismissing the complaint.
46
Issue:
Whether private respondents are liable for failing to exercise due diligence to prevent the loss of the cargo.
Held:
NO.
Common carriers, from the nature of their business and for reasons of public policy, are mandated to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them. Owing to this high degree of diligence required of them,
common carriers, as a general rule, are presumed to have been at fault or negligent if the goods transported by them are lost, destroyed or
if the same deteriorated.
However, this presumption of fault or negligence does not arise in the cases enumerated under Article 1734 of the Civil Code, to wit: (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.
In order that a common carrier may be absolved from liability where the loss, destruction or deterioration of the goods is due to a natural
disaster or calamity, it must further be shown that such natural disaster or calamity was the proximate and only cause of the loss; there must
be "an entire exclusion of human agency from the cause of the injury or the loss."
Moreover, even in cases where a natural disaster is the proximate and only cause of the loss, a common carrier is still required to exercise
due diligence to prevent or minimize loss before, during and after the occurrence of the natural disaster, for it to be exempt from liability under
the law for the loss of the goods. If a common carrier fails to exercise due diligence — or that ordinary care which the circumstances of the
particular case demand — to preserve and protect the goods carried by it on the occasion of a natural disaster, it will be deemed to have
been negligent, and the loss will not be considered as having been due to a natural disaster.
The findings of the Board of Marine Inquiry indicate that the attendance of strong winds and huge waves while the M/V Peatheray Patrick-G
was sailing was indeed fortuitous. A fortuitous event has been defined as one which could not be foreseen, or which though foreseen, is
inevitable.
In the case at bar, it was adequately shown that before the M/V Peatheray Patrick-G left the port of Mandaue City, the Captain confirmed
that the weather condition would permit the safe travel of the vessel. Thus, he could not be expected to have foreseen the unfavorable
weather condition that awaited the vessel. It was the presence of the strong winds and enormous waves which caused the vessel to
accumulate water, list, keel over, and consequently lose the cargo contained therein. As such, there was no error on the part of the Court of
Appeals in relying on the factual findings of the Board of Marine Inquiry, for such factual findings, being supported by substantial evidence
47
are persuasive, considering that said administrative body is an expert in matters concerning marine casualties.
Ultimately, since the presence of strong winds and enormous waves was shown to be the proximate and only cause of the sinking of the M/V
Peatheray Patrick-G and the loss of the cargo belonging to San Miguel Corporation, private respondents cannot be held liable for the said
loss.
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LIM, MARVI IRISH A.

17. Lu Do & Lu YM v.
Binamira, G.R. No. L- Doctrine:
9840 (1957) Parties are allowed to mitigate their liabilities by way of stipulation.
Facts:
Delta Photo Supply Company of New York shipped on board the M/S "FERNSIDE" at New York, U.S.A., six cases of films and/or photographic
supplies consigned to the order of respondent, Binamira. For this shipment, Bill of Lading No. 29 was issued. The ship arrived at the port of
Cebu. Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to unload its cargo and upon checking, the cargo was
not damaged. The shipment was placed in the possession and custody of the arrastre operator of the port.. The arrastre operator of the port,
Binamira, also has a checker who determined the cargo was also not damage when it was unloaded.
Three days after the goods were unloaded from the ship, respondent took the cases and hired 2 surveyors. This is because the cases showed
signs of pilferage. Thereafter, it was determined that some films and photographic supplies were missing valued at P324.63.
Argument of CA: The Court of Appeals ruled that the carrier is responsible for the loss. The common carrier has the legal duty to deliver
goods to a consignee in the same condition in which it received. A carrier is presumed to have been at fault and to have acted negligently,
unless it could prove that it observed extraordinary diligence in the care and handling of the goods Such presumption and the liability of the
carrier attach until the goods are delivered actually or constructively, to the consignee, or to the person who has a right to receive them.
delivery to the customs authorities is not the delivery contemplated by Article 1736 because, in such a case, the goods are then still in the
hands of the Government and their owner could not exercise dominion. This presumption was not rebutted by the carrier.
Argument of the Carrier: The carrier now contended that Court of Appeals erred not only in the interpretation of the law but because it also
ignored the provisions of the bill of lading covering the shipment wherein it was stipulated that the responsibility of the carrier is limited only
to losses that may occur while the cargo is still under its custody and control.
Issue:
Whether the carrier can still be held liable under the law? No
Held:
Interpretation of the law
Common carrier is responsible for the loss, destruction or deterioration of the goods it assumes to carry from one place to another unless
the same is due to any of the causes mentioned in Article 1734 of the new Civil Code, and that, if the goods are lost, destroyed or deteriorated,
49
for causes other than those mentioned, the common carrier is presumed to have been at fault or to have acted negligently, unless it proves
that it has observed extraordinary diligence in their care (Article 1735, Idem.), and that this extraordinary liability lasts from the time the goods
are placed in the possession of the carrier until they are delivered to the consignee, or "to the person who has the right to receive them"
(Article 1736, Idem.), but these provisions only apply when the loss, destruction or deterioration takes place while the goods are in the
possession of the carrier, and not after it has lost control of them.
Effect of Bill of Lading
Further, While delivery of the cargo to the customs authorities is not delivery to the consignee or “to the person who has a right to receive
them” as contemplated by law because in such case the goods are still in the hands of the government and the owner cannot exercise
dominion over them, the parties may agree to limit the liability of the carrier considering that the goods still have to go through the inspection
of the customs authorities before they are actually turned over to the consignee. Thus, the carrier loses control of the goods because of a
custom regulation and it is unfair that it be made responsible for what may happen during the interregnum.
50
LLABAN, MAEGAN
18. Eastern Shipping ISSUES:
Lines v. IAC, G.R. No. 1. Which law is applicable, the Civil Code provisions on Common Carriers or the Carriage of Goods by Sea Act?
L-69044 (1987) 2. Who has the burden of proof to show negligence of the carrier? It is petitioner-carrier’s contention that in accordance with COGSA, when
loss of fire is established, burden of proof on negligence shifts to the shipper.
3. Will loss caused by fire exempt the carrier from liability?
4. What is the extent of the carrier's liability?
FACTS: En route from Kobe, Japan to Manila, M/S Asiatica, the vessel owned by petitioner carrier, Eastern Shipping Lines caught fire and
sank, resulting in the total loss of ship and cargo. The crew did not know what caused the fire. When they noticed the smoke, there was
already a big fire which might have started twenty-four (24) hours before they became aware of it. 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.
See details below:
G.R. No. L-69044

Insurer 1 – Development Insurance and Surety Corporation
Cargo and Consignee 1a – 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming
Mills Co., Inc.
Cargo and Consignee 1b – 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc.
G.R. No. 71478

Insurer 2 – Nisshin Fire & Marine Insurance Co
Cargo and Consignee 2 – 128 cartons of garment fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel
Corporation
Insurer 3 – Dowa Fire & Marine Insurance Co., Ltd.

Cargo and Consignee 3 – Two cases of surveying instruments consigned to Aman Enterprises and General Merchandise.
ARGUMENTS:
51
Eastern Shipping- claims that the loss of the vessel by fire exempts it from liability under the phrase “natural disaster or calamity”. The fire
which caused the sinking of the ship is an exempting circumstance under Section 4 (2)(b) of the COGSA.
Development Insurance (private respondent)- was subrogated to the rights of the consignee/insured, seeks to recover the amount it has
paid to the insured. It imputes unseaworthiness of the ship and the non-observance of extraordinary diligence by petitioner-carrier.
RULING:
1. 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. As the cargoes were transported from Japan to the Philippines, the liability of petitioner-carrier is governed
primarily by the Civil Code. However, in all matters not regulated by the Civil Code, the rights and obligations of common carriers shall be
governed by the Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the
provisions of the Civil Code.
2. In accordance with the New Civil Code, the burden of proving that it has exercised the extraordinary diligence required by law, after
finding that transported goods were lost caused by fire falls upon the carrier.
3. No. Fire may not be considered a natural disaster or calamity like those enumerated in Article 1734 as it arises almost
invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by
lightning or by other natural disaster or calamity.
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 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.
4. Since there was actual fault on the part of the carrier, it is liable for the loss. Article 1749 allows the limitation of liability. Although the
Code expressly permits a stipulation limiting the liability of a carrier it does not of itself limit the liability to a fixed amount per package.
Thus, the COGSA which is suppletory to the provisions of the Civil Code, supplements by establishing a statutory provision limiting the
carrier’s liability in the absence of a declaration of a higher value of goods, which should not exceed US$500 per package.
52
Montecalvo, Rose Ann G.

19. Pan American World
Airways v. IAC, G.R. Doctrine: If the passenger's journey involves an ultimate destination or stop in a country other than the country of departure the
No. 70462 (1988) Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or
personal injury and in respect... of loss of or damage to baggage.
Facts:
On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of the plaintiffs Sotang Bastos and Archer Production while in
San Francisco, Califonia and Primo Quesada of Prime Films, San Francisco, California, entered into an agreement whereby the former, for
and in consideration of the amount of US $2,500.00 per picture, bound himself to supply the latter with three films. 'Ang Mabait, Masungit at
ang Pangit,' 'Big Happening with Chikiting and Iking,' and 'Kambal Dragon' for exhibition in the United States. It was also their agreement
that plaintiffs would provide the necessary promotional and advertising materials for said films on or before May 30, 1978. On May 18, 1978,
plaintiff Pangan obtained from defendant Pan Am's Manila Office, through the Your Travel Guide, an economy class airplane ticket with No.
0269207406324 for passage from Manila to Guam on defendant's Flight No. 842 of May 27,1978, upon payment by said plaintiff of the
regular fare.
On May 27, 1978, two hours before departure time plaintiff Pangan was at the defendant's ticket counter at the Manila International Airport
and presented his ticket and checked in his two luggages, for which he was given baggage claim tickets. The two luggages contained the
promotional and advertising materials, the clutch bags, barong tagalog and his personal belongings. Subsequently, Pangan was informed
that his name was not in the manifest and so he could not take Flight No. 842 in the economy class. Since there was no space in the economy
class, plaintiff Pangan took the first class because he wanted to be on time in Guam to comply with his commitment, paying an additional
sum of $112.00.
When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two luggages did not arrive with his flight, as a consequence of
which his agreements with Slutchnick and Quesada for the exhibition of the films in Guam and in the United States were cancelled. Thereafter,
he filed a written claim for his missing luggages. Upon arrival in the Philippines, Pangan contacted his lawyer, who made the necessary
representations to protest as to the treatment which he received from the employees of the defendant and the loss of his two luggages
Defendant Pan Am assured plaintiff Pangan that his grievances would be investigated and given its immediate consideration. Due to the
defendant's failure to communicate with Pangan about the action taken on his protests, the present complaint was filed by the plaintiff. CFI
held the petitioner liable which was affirmed by the IAC.
In assailing the decision of the Intermediate Appellate Court petitioner assigned the following errors:
1. The respondent court erred as a matter of law in affirming the trial court's award of actual damages beyond the limitation of liability set
forth in the Warsaw Convention and the contract of carriage.
2. The respondent court erred as a matter of law in affirming the trial court's award of actual damages consisting of alleged lost profits in the
face of this Court's ruling concerning special or consequential damages as set forth in Mendoza v. Philippine Airlines
Issue: Whether or not petitioner should be held liable for the lost luggage of the defendant
53
Held:
NO. On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends that its liability for the lost baggage of
private respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter did not declare a higher value for his baggage and pay the
corresponding additional charges. In view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as stipulated
at the back of the ticket. At this juncture, in order to rectify certain misconceptions, the Court finds it necessary to state that the Court of
Appeal's reliance on a quotation from Northwest Airlines, Inc. v. Cuenca [G.R. No. L22425, August 31, 1965, 14 SCRA 1063] to sustain the
view that "to apply the Warsaw Convention which limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases of contractual
breach of carriage ** is against public policy" is utterly misplaced, to say the least. Thus, it is quite clear that the Court never intended to, and
in fact never did, rule against the validity of provisions of the Warsaw Convention. Consequently, by no stretch of the imagination may said
quotation from Northwest be considered as supportive of the appellate court's statement that the provisions of the Warsaw Convention limited
a carrier's liability are against public policy.
The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of Appeals, awarding private respondents
damages as and for lost profits when their contracts to show the films in Guam and San Francisco, California were cancelled. In the absence
of a showing that petitioner's attention was called to the special circumstances requiring prompt delivery of private respondent Pangan's
luggages, petitioner cannot be held liable for the cancellation of private respondents' contracts as it could not have foreseen such an
eventuality when it accepted the luggages for transit. he evidence reveals that the proximate cause of the cancellation of the contracts was
private respondent Pangan's failure to deliver the promotional and advertising materials on the dates agreed upon. For this petitioner cannot
be held liable. Private respondent Pangan had not declared the value of the two luggages he had checked in and paid additional charges.
Neither was petitioner privy to respondents' contracts nor was its attention called to the condition therein requiring delivery of the promotional
and advertising materials on or before a certain date. With the Court's holding that petitioner's liability is limited to the amount stated in the
ticket, the award of attorney's fees, which is grounded on the alleged unjustified refusal of petitioner to satisfy private respondent's just and
valid claim, loses support and must be set aside.
54
Doctrine: The common carrier’s duty to exercise due diligence over the goods to be transported starts from the moment such goods are
20. Sarkies Tours v. CA, unconditionally placed in their possession. This includes the putting of baggage in the baggage compartment of a bus, regardless if freight
G.R. No. 108897 charge was collected.
(1997)
Facts:
On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila on her way to Legazpi City. Her brother Raul helped her load
three pieces of luggage containing all of her optometry review books, materials and equipment, trial lenses, trial contact lenses, passport and
visa, as well as her mother Marisol's U.S. immigration (green) card, among other important documents and personal belongings.
Her belongings were kept in the baggage compartment of the bus, but during a stopover at Daet, it was discovered that only one bag
remained in the open compartment. The others, including Fatima's things, were missing and might have dropped along the way. Some of
the passengers suggested retracing the route of the bus to try to recover the lost items, but the driver ignored them and proceeded to Legazpi
City.
Fatima immediately reported the incident to the petitioner’s office in Legazpi and later on, to its head office in Manila. Petitioner, however,
merely offered her P1,000.00 for each piece of luggage lost, which she turned down.
After returning to Bicol, disappointed but not defeated, mother and daughter asked assistance from the radio stations and even from
Philtranco bus drivers who plied the same route on August 31st. The effort paid off when one of Fatima's bags was recovered. Marisol further
reported the incident to the National Bureau of Investigation's field office in Legazpi City and to the local police.
On September 20, 1984, respondents, through counsel, formally demanded satisfaction of their complaint from petitioner. In a letter dated
October 1, 1984, the latter apologized for the delay and said that "a team has been sent out to Bicol for the purpose of recovering or at least
getting the full detail" of the incident.
After more than nine months of fruitless waiting, respondents decided to file the case below to recover the value of the remaining lost items,
as well as moral and exemplary damages, attorney's fees and expenses of litigation.
Respondent's claim: the loss was due to petitioners’ failure to observe extraordinary diligence in the care of Fatima's luggage and that
petitioner dealt with them in bad faith from the start.
Petitioner's claim: Disowned any liability for the loss on the ground that Fatima allegedly did not declare any excess baggage upon boarding
the bus.
The Trial Court ruled in favor of the respondents and the same was adopted by the Court of Appeals. However, CA deleted the award of
55
moral and exemplary damages.
Issue:
Whether the petitioner has observed extraordinary diligence in the vigilance over the goods of its passengers
Held:
The SC held that Sarkies Tours was liable for the luggage loss.
In its letter dated October 1, 1984, petitioner tacitly admitted its liability by apologizing to respondents and assuring them that efforts were
being made to recover the lost items.
The records also reveal that respondents went to great lengths just to salvage their loss. The incident was reported to the police, the NBI,
and the regional and head offices of the petitioner. Marisol even sought the assistance of Philtranco bus drivers and the radio stations. To
expedite the replacement of her mother's lost U.S. immigration documents, Fatima also had to execute an affidavit of loss.
The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of the baggage compartment of its bus
were securely fastened. As a result of this lack of care, almost all of the luggage was lost, to the prejudice of the paying passengers.
Clearly, the petitioner was remiss in its obligation. 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 the goods . . . transported by them," and this liability "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 person who has a right to receive them," unless the loss is due to any of the
excepted causes under Article 1734 thereof.
The Supreme Court reinstated the award of moral and exemplary damages in the amount of 20,000 each.
56
Doctrine
21. Alitalia v. IAC (192
SCRA 9) (1990) The Warsaw Convention does not operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the
extent of that liability. It should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or
destruction, loss or damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith,
recklessness, or otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and there is
otherwise no special or extraordinary form of resulting injury.
Facts
Dr. Felipa Pablo, an associate professor in UP was invited to take part at meeting organized by the United Nations in Ispra, Italy. She
accepted the invitation and booked a passage on petitioner airline, ALITALIA. She arrived in Milan on the day before the meeting.
However, she was told by the ALITALIA personnel that her luggage was delayed as it was in one of the succeeding flights from Rome to
Milan. Her luggage consisted of two (2) suitcases: one contained her clothing and other personal items; the other, her scientific papers,
slides and other research material. But the other flights arriving from Rome did not have her baggage on board. Desperate, she went to
Rome to try to locate her bags. But her baggage could not be found. Completely distraught and discouraged, she returned to Manila
without attending the meeting in Ispra, Italy. Her suitcases was only located and forwarded to Ispra a day after her scheduled appearance
at the UN meeting. They would not be returned to Dr. Pablo until 11 months later.
Back in Manila, she demanded that ALITALIA make reparations for the damages she suffered. She was offered free airline tickets, but she
rejected the offer and commenced an action against the airline. The CFI rendered a judgement in favor of Dr. Pablo, ordering ALITALIA to
pay her 20,000 as nominal damages and 5,000 pesos for attorney’s fees.
CA not only affirmed the decision, it also increased the award of nominal damages to 40,000. It found that the award was too little to make
up for Dr. Pablo’s frustration and disappointment in not being able to appear at said conference; and for the embarrassment and
humiliation she suffered from the academic community for failure to carry out an official mission for which she was singled out by the
faculty to represent her institution and the country.
ALITALI appealed to the SC on Certiorari.
Argument of ALITALIA:
ALITALIA alleges that the Warsaw Convention should have been applied to limit ALITALIA’s liability and that there is no warrant in fact or
in law for the award to Dr. Pablo of nominal damages and attorney's fees.
The Warsaw Convention makes an air carrier liable for damages for:
● the death, wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft or in the course
57
of its operations of embarking or disembarking;

● the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took place during the carriage
by air;" and
● delay in the transportation by air of passengers, luggage or goods.
The convention purport to limit the liability of the carriers. Among other things, it limits the liability of the carrier in the carriage of registered
baggage and cargo to 250 francs per kilogramme.
Argument of Dr. Pablo:
She is entitled to the higher nominal damages set by the court of appeal for the profound distress, anxiety, panic and despair she suffered
from the incident
Issue:
Whether the Warsaw Convention can restrict compensation for the injury suffered by Dr. Pablo.
Ruling:
No.
The Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the
extent of that liability. Such a proposition is not borne out by the language of the Convention. Moreover, slight reflection readily leads to the
conclusion that it should be deemed a limit of liability only in those cases where the cause of the death or injury to person, or destruction,
loss or damage to property or delay in its transport is not attributable to or attended by any wilful misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise no special or
extraordinary form of resulting injury.
In short, the convention’s provisions do not regulate or exclude liability for other breaches of contract by the carrier or misconduct of its
officers and employees, or for some particular or exceptional type of damage. Otherwise, an air carrier would be exempt from any liability
for damages, even if absolutely refuses in bad faith to comply with a contract of carriage, which is absurd. It is in this sense that the
convention has been applied or ignored, depending on the peculiar facts presented by each case.
In Pan American World Airways, Inc. v. I.A.C., the Warsaw Convention was applied as regards the limitation on the carrier's liability, there
being a simple loss of baggage without any otherwise improper conduct on the part of the officials or employees of the airline or other
special injury sustained by the passenger. On the other hand, the Warsaw Convention has been held inapplicable where there was
58
satisfactory evidence of malice or bad faith attributable to its officers and employees. Thus, an air carrier was sentenced to pay not only
compensatory but also moral and exemplary damages, and attorney's fees where its employees rudely put a passenger holding a first-
class ticket in the tourist or economy section, or ousted a brown Asiatic from the plane to give his seat to a white man, or gave the seat of a
passenger with a confirmed reservation to another, or subjected a passenger to extremely rude, even barbaric treatment, as by calling him
a "monkey."
In this case, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline, and Dr. Pablo's luggage
was eventually returned to her without appreciable damage. Nevertheless, some special species of injury was caused to Dr. Pablo
because she was unable to read the paper and make the scientific presentation that she had painstakingly labored over, at the prestigious
international conference, to attend which she had traveled hundreds of miles, because of the mistake of ALITALIA, to her chagrin and
embarrassment and the disappointment and annoyance of the organizers. The opportunity to claim the honor and distinction of presenting
in a UN convention was irretrievably lost to her because of Alitalia's breach of its contract. There was a breach of contract of carriage, to be
sure. There is no doubt that Dr. Pablo underwent profound distress and anxiety, which gradually turned to panic and dispair.
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed by the
Warsaw Convention for delay in the transport of baggage. She is not entitled to be compensated for loss or damage to her baggage.
However, she is entitled to nominal damages. The SC agreed that CA correctly set the amount thereof to 40,000.
59
(Reah Shyne Refil)

22. Delsan Transport
Lines v. American Doctrine
Homes, G.R. No. Vigilance over the Goods: The extraordinary responsibility of common carrier lasts from the time the goods are unconditionally placed in the
149019 (2006) 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 a person who has the right to receive them.
Facts
Delsan received on board the vessel it owned and operates, MT Larusan, a shipment consisting of 1,986.627 K/l diesel oil at the Bataan
Refinery Corp. for transportation and delivery to the bulk depot in Bacolod City of CAltex, pursuant to a Contract of Affreightment. The
shipment was insured by respondent AHAC, through its local agent American-International Underwriters, Inc. (Phils), against all risks under
Inland Floater Policy and Marine Risk Note.
The shipment arrived in Bacolod City. The unloading operations immediately commenced and the discharging of the diesel oil started at
about 1:30 PM of the same day. However, the discharging had to be stopped at about 10:30PM because it was discovered that the port bow
mooring of the vessel was intentionally cut or stolen. Since there was nothing holding the vessel, it drifted westward, dragged and stretched
the flexible rubber hose attached to the riser, broke the elbow into pieces, severed completely the rubber hose connected to the tanker from
the main delivery line at sea bed level and caused the diesel oil to spill into the sea. To avoid further spillage, the vessel's crew tried water
flushing to clear the line of the diesel oil but to no avail. The tanker signaled a “red light” which meant stop pumping. The shore tender,
unaware of what happened, did not shut the storage tank gate valve because he thought the vessel would resume pumping anytime. This
caused the diesel oil that was earlier discharged from the vessel into the shore tank to backflow. There was no available pump boat thus the
vessel could not send somebody ashore to inform the people at the depot about what happened. Only when a gauger and an assistant
surveyor from Caltex boarded the vessel almost an hour later did they find out what happened. Then the duo immediately went ashore to
close the shore tank gate valve. Caltex suffered loss of diesel oil due to spillage at 113.788 k/l while some 435.081 k/l thereof backflowed
from the shore tank. When Caltex sought recovery of the loss from Delsan, the latter refused to pay. AHAC, as insurer, paid Caltex for the
spillage(pursuant to Marine Risk) and for the backflow of the diesel oil(pursuant to Inland Floater Policy)
Delsan argued that it should be absolved from liability for the loss of its cargo on two grounds.
1. The loss through spillage was partly due to the contributory negligence of Caltex.
2. The loss through backflow should not be borne by Delsan because it was already delivered to Caltex's shore tank. (Delsan insists that
when the diesel oil entered into the tank of Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex.)
Issue
1. WON the loss through spillage was partly due to the contributory negligence of Caltex thus the common carrier(Delsan) is not liable
2. WON Delsan should not borne the loss through backflow since it was already delivered to Caltex’s shore tank
60
3. WON there was legally a complete delivery of the diesel oil to Caltex when it entered into the tank of Caltex on shore
Held
1. No. It had been established (both in RTC and CA) that the proximate cause of the spillage and backflow of the diesel oil was due to
the severance of the port bow mooring line of the vessel and the failure of the shore tender to close the storage tank gate valve even
as a check on the drain cock showed that there was still a product on the pipeline. The actuation of the gauger and the escort surveyor,
both personnel from the Caltex Bulk Depot, negates the allegation that Caltex was remiss in its duties. The crew of the vessel should
have promptly informed the shore tender that the port mooring line was cut off. However, Delsan did not do so on the lame excuse
that there was no available banca. As it is, Delsan's personnel signaled a "red light" which was not a sufficient warning because such
signal only meant that the pumping of diesel oil had been finished. Neither did the blowing of whistle suffice considering the distance
of more than 2 kilometers between the vessel and the Caltex Bulk Depot, aside from the fact that it was not the agreed signal. Had
the gauger and the escort surveyor from Caltex Bulk Depot not gone aboard the vessel to make inquiries, the shore tender would
have not known what really happened. The crew of the vessel should have exerted utmost effort to immediately inform the shore
tender that the port bow mooring line was severed. Delsan, as the owner of the vessel, was obliged to prove that the loss was caused
by one of the excepted causes if it were to seek exemption from responsibility. Unfortunately, it miserably failed to discharge this
burden by the required quantum of proof.
2. No. The subject cargo was still in the custody of Delsan because the discharging thereof has not yet been finished when the backflow
occurred. Since the discharging of the cargo into the depot has not yet been completed at the time of the spillage when the backflow
occurred, there is no reason to imply that there was actual delivery of the cargo to the consignee.
3. No. The extraordinary responsibility of 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 a person who has the right to receive them. 8 The discharging of oil products to Caltex Bulk Depot has not yet been finished,
Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to guard and preserve the
goods, a duty incident to its having the goods transported.
61
Doctrine
23. Mendoza v. PAL, G.R. Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right of prompt delivery, unless
No. L-3678 (1952) such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties.
Facts
Jose Mendoza was the owner of the Cita Theater in Naga, Camarines Sur. Appellant, taking advantage of the fiesta or town holiday of the
City of Naga,held on September 17 and 18, yearly, which was usually attended by many people,decided to exhibit a film which would fit the occasion
and have a special attraction and significance to the people attending said fiesta. A month before the holiday, he contracted with the LVN pictures,
Inc.,a movie producer in Manila for him to show during the town fiesta the Tagalog film entitled "Himala ng Birhen '' or Miracle of the Virgin. He
made extensive preparations including advertisements.
On September 17, 1948, LVN pictures delivered to the defendant Philippine Airlines (PAL a can containing the film "Himala ng Birhen ''
consigned to the Cita Theater. However, For reasons not explained by the defendant,but which would appear to be the fault of its employees or
agents, this can of film was not unloaded at PiliAir Port a little after four o'clock in the afternoon of September 17th and it was brought back to
Manila. Mendoza received it on September 20 and exhibited the film but he had missed his opportunity to realize a large profit as he expected for
the people after the fiesta had already left for their towns.
Consequently, Mendoza brought this action against the PAL. The lower court held that PAL is not liable.
Issue
(1) WON l'vlendoza, PAL,and LVN Pictures entered into a contract of transportation.
(2) WON PAL may be held liable for damages.
Held
(1) Yes,they entered into a contract of transportation.
Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right of prompt delivery,unless
such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties.In
62
the present case, the findings of the trial court which as already stated, are accepted by the parties and which we must accept are to the effect
that the LVN Pictures Inc. and Jose Mendoza on one side, and the defendant company on the other,entered into a contract of transportation.
Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the stipulations of the delivery to Mendoza as
consignee. His demand for the delivery of the can of film to him at the Pili Air Port may be regarded as a notice of his acceptance of the stipulation
of the delivery in his favor contained in the contract of carriage,such demand being one of the fulfillment of the contract of carriage and delivery.
In this case he also made himself a party to the contract, or at least has come to court to enforce it. His cause of action must necessarily be
founded on its breach.
(2) No, PAL may not be held liable for damages. The trial court correctly found that the defendant company could not have foreseen the
damages that would be suffered by Mendoza upon failure to deliver the can of film on the 17th of September, 1948 for the reason that the plans
of Mendoza to exhibit that film during the town fiesta and his preparations, specially the announcement of said exhibition by posters and
advertisement in the newspaper,were not called to the defendant's attention.
In the similar case of Chapman vs.Fargo, a New York case,it was held: "but before defendant could be held to special damages, such as the present
alleged loss of profits on account of clelay or failure of delivery,it must have appeared that he had notice at the time of delivery to him of the
particular circumstances attending the shipment, and which probably would lead to sudl special loss if he defaulted."
The decision appealed from is affirmed.
-NOTHING FOLLOWS-
63

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Transportation Law | EH-306 | AY 2021 | Atty.

Edmar Lerios University of San Carlos - School of Law & Governance

3. Whether or not Loadstar exercise extraordinary negligence (NO)

2. F.C. Fisher v. Yangco Doctrine:

RTC and CA ruled in favor of the airline companies.

4. Philippine Charter HAMOY, JOHN DANIEL

2. Act of the public enemy in war, whether international or civil;

5. Eastern Shipping Lines, Inc. Cubillan

CA: affirmed in toto RTC’s judgement.

Ruling of the lower court:

Whether TMBI who provides a brokerage service a common carrier -YES

8. De Guzman v. CA, G.R.

9. Compania Maritima v. (Dela Cuesta, Elycrisjoe M.)

B. 4 units of 6x6 Reo trucks; and

C. 2 pcs. of water tanks.

10. Belgian Overseas v. (Delani, Beatriz)

CA affirmed RTC’s decision.

Petitioner’s contention: (NOT A COMMON CARRIER BUT A PRIVATE CARRIER)

actually weighed 3,300 metric tons at the port of origin.

13. Philippine Charter HAMOY, JOHN DANIEL

2. Act of the public enemy in war, whether international or civil;

(Cuarteros, Lady Joyce)

RTC: Respondents’ favor

CA: affirmed RTC in toto

P’s arguments before the SC:

Rs’ NSCP counter:

ISSUES: WON Ganzon is guilty of breach of contract of transportation

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

RTC: favored Samar

HELD: YES. Reversed

performance, the principal may suffer.

(1) When he was not given the power to appoint one;

LANTERNA, SHIED FAISAH M.

LIM, MARVI IRISH A.

Effect of Bill of Lading

See details below:

G.R. No. L-69044

G.R. No. 71478

Insurer 3 – Dowa Fire & Marine Insurance Co., Ltd.

Montecalvo, Rose Ann G.

moral and exemplary damages.

of its operations of embarking or disembarking;

Argument of Dr. Pablo:

(Reah Shyne Refil)

(2) WON PAL may be held liable for damages.

The decision appealed from is affirmed.

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