You are on page 1of 35

Beta Sigma Lambda

Transportation Law Cases

Saludo vs. CA (GR 95536, 23 March 1992) Second Division, Regalado (J): 4 concur Facts: After the death of Crispina Galdo Saludo, mother of Aniceto G. Saludo Jr., Maria Salvacion Saludo, Leopoldo G. Saludo, and Saturnino G. Saludo, in Chicago, Illinois, on 23 October 1976, Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment of the remains from Chicago to the Philippines. The funeral home had the remains embalmed and secured a permit for the disposition of dead human body on 25 October 1976. Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on 26 October 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Galdo Saludo. On the same date, 26 October 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the shipment with PAL thru the carriers agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill 079-01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of 27 October 1976, and from San Francisco to Manila on board PAL Flight 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of 29 October 1976. In the meantime, Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines from Chicago to California, and with PAL from California to Manila. She then went to the funeral director of Pomierski Funeral Home who had her mothers remains and she told the director that they were booked with United Airlines. But the director told her that the remains were booked with TWA flight to California. This upset her, and she and her brother had to change reservations from UA to the TWA flight after she confirmed by phone that her mothers remains would be on that TWA flight. They went to the airport and watched from the look-out area. She saw no body being brought. So, she went to the TWA counter again, and she was told there was no body on that flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her cousin reached her that her mother was on the West Coast. Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her mothers remains. She was told they did not know anything about it. She then called Pomierski that her mothers remains were not at the West Coast terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains were on a place to Mexico City, that there were two bodies at the terminal, and somehow they were switched; he relayed this information to Miss Saludo in California; later

C.M.A.S. called and told him they were sending the remains back to California via Texas. The following day, 28 October 1976, the shipment or remains of Crispina Saludo arrived in San Francisco from Mexico on board American Airlines. This shipment was transferred to or received by PAL at 7:45 p.m. This casket bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F. Padagas for shipment to the Philippines. The shipment was immediately loaded on PAL flight for Manila that same evening and arrived in Manila on 30 October 1976, a day after its expected arrival on 29 October 1976. In a letter dated 15 December 1976, the counsel of the Saludos informed Trans World Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispina Saludo, and of the discourtesy of its employees to Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on 10 June 1977 addressed to Philippine Airlines (PAL), the Saludos stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable explanation be given. Both TWA and PAL denied liability. A damage suit was filed by the Saludos before the then Court of First Instance, Branch III, Southern Leyte, praying for the award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorneys fees and costs of suit. The trial court absolved the two airline companies of liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, denied the Saludos motion for reconsideration for lack of merit. Hence, the petition for review on certiorari. The Supreme Court affirmed the appealed decision, with the modification that an award or P40,000.00 as and by way of nominal damages is granted in favor of the Saludos to be paid by TWA. 1. Factual findings of the Court of Appeals binding upon the Supreme Court; Exceptions Only questions of law may be raised in a petition filed in the Supreme Court to review on certiorari the decision of the Court of Appeals. This being so, the factual findings of the Court of Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (h) where the findings of fact of the
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record. 2. Distinction between question of law and question of fact; Test to determine A question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts. One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact. 3. Issues warrant second look at facts Since it is the soundness of the inferences or conclusions that may be drawn from the factual issues which are being assayed, the Court finds that the issues raised in the present petition indeed warrant a second look if this litigation is to come to a reasonable denouement. A discussion seriatim of said issues will further reveal that the sequence of the events involved is in effect disputed. Likewise to be settled is whether or not the conclusions of the Court of Appeals subject of the review indeed find evidentiary and legal support. 4. Nature of bill of lading A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. The two-fold character of a bill of lading is all too familiar: it is a receipt as to the quantity and description of the goods shipped and a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument. 5. Designation of bill of lading immaterial The designation is immaterial. Such instrument may be called a shipping receipt, forwarders receipt and receipt for transportation. Freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading. 6. When bill of lading issued; Inverse order not prohibited by law Since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. However, except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill, of lading even prior to actual possession and control by the carrier of the cargo to be transported. There is no law which requires

that the delivery of the goods for carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter. 7. Receipt a prima facie evidence of delivery to carrier Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence. 8. Bill of lading vis--vis estoppel An airway bill estops the carrier from denying receipt of goods of the quantity and quality described in the bill. However, a bill of lading may contain constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. However, as between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts. Between the consignor of goods and a receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital. 9. Explanation overcoming presumption that remains were delivered and received by TWA and PAL Herein, Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on 26 October 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Galdo Saludo. On the same date, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the shipment with PAL thru the carriers agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill 079- 01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of 27 October 1976, and from San Francisco to Manila on board PAL Flight 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of 29 October 1976.

Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

10. PALs explanation On 26 October 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight PR-107 leaving San Francisco for Manila on 27 October 1976. PAL Airway Bill 079-01180454 was issued, not as evidence of receipt of delivery of the Cargo on 26 October 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on 27 October 1976. Actually, it was not until 28 October 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 7:45 p.m. on said date. 11. Article 1736 NCC; Period where extraordinary responsibility observed by common carrier; When delivery made Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti. 12. PAL and TWA not liable for switching of caskets prior to their receipt of agreed cargo While the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage; only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked. Herein, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on 28 October 1976 and it was from that date that TWA and PAL became responsible for the agreed cargo under their undertakings in PAL Airway Bill 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them., and subsequent events caused thereby, TWA and PAL cannot be held liable. 13. TWA without authority, even prohibited, to verify contents of casket When the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of

determining its actual contents, since the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had to rely on the information furnished by the shipper regarding the cargos content. Neither could Air Care International and/or TWA open the casket for further verification, since they were not only without authority to do so, but even prohibited. 14. Pomierski & Son delivered casket to CMAS, and not to TWA It was not to TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of Crispina Saludo. TWA would have no knowledge therefore that the remains of Crispina Saludo were not the ones inside the casket that was being presented to it for shipment. TWA would have to rely on the representations of C.M.A.S. The casket was hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have opened such sealed casket just for the purpose of ascertaining whose body was inside and to make sure that the remains inside were those of the particular person indicated to be by C.M.A.S. TWA had to accept whatever information was being furnished by the shipper or by the one presenting the casket for shipment.And so as a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill 079-ORD-01180454, the airway bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was transshipped from Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila. The foregoing points at C.M.A.S. as the one responsible for the switching or mix-up of the two bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo and a oneday delay in the delivery thereof to its destination. 15. Right of carrier to require good faith on part of persons delivering goods; Right of carrier to know contents when it has reasonable ground to suspect goods are dangerous or of illegal character It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, and enter into contracts with it, and inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value. 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; and its failure to do so cannot defeat the shippers right to recovery of the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier has the right to
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

accept shippers 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. However, where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods. 16. Common carrier entitled to fair representation of nature and value of goods to be carried; Right of carrier to conduct an inspection 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, and further noting at this juncture that 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. Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that constitutes the basis of the common carriers liability. 17. CMAS classified as forwarder, is an agent of the shipper and not of the carrier While the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for TWA and PAL would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction. It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of Saludo for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carriers agent, Air Care International. With its functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the freight but receives compensation from the shipper as his agent. 18. CMAS is actual culprit The facts of the case would point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS liability is the Saludos letter to and demanding

an explanation from CMAS, regarding the statement of TWA and PAL laying the blame on CMAS for the incident, clearly allude to CMAS as the party at fault. This is tantamount to an admission by the Saludos that they consider TWA and PAL without fault, or is at the very least indicative of the fact that the Saludos entertained serious doubts as to whether TWA and PAL were responsible for the unfortunate turn of events. 19. Court cannot grant damages at expense of TWA and PAL; Possible liability of CMAS best deferred to another time and addressed to another forum The Saludos grief over the death of their mother was aggravated by the unnecessary inconvenience and anxiety that attended their efforts to bring her body home for a decent burial. But, as much as the Court would like to give them consolation for their undeserved distress, the Court is barred by the inequity of allowing recovery of the damages prayed for by them at the expense of TWA and PAL whose fault or negligence in the very acts imputed to them has not been convincingly and legally demonstrated. Neither was the Court prepared to delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and adjudication of the same is not what is presently at issue and is best deferred to another time and addressed to another forum. 20. Carrier did not undertake to carry cargo aboard any specified aircraft The carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway bill which provides that It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any specified aircraft or over any particular route or routes or to make connection at any point according to any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or routes of shipment, notwithstanding that the same may be stated on the face hereof. The shipper guarantees payment of all charges and advances. Hence, when TWA shipped the body on an earlier flight and on a different aircraft, it was acting well within its rights. TWA can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions thereof. 21. Terms clear, no interpretation needed The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual provisions. There is no ambiguity in the terms of the airway bill to warrant the application of the rules on interpretation of contracts and documents. 22. Interpretation of contracts The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law between them. When the terms of the agreement are clear and explicit, that
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. The various stipulations of a contract shall be interpreted together and such a construction is to be adopted as will give effect to all provisions thereof. A contract cannot be construed by parts, but its clauses should be interpreted in relation to one another. The whole contract must be interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily determine the character of a contract. The legal effect of the contract is not to be determined alone by any particular provision disconnected from all others, but in the ruling intention of the parties as gathered from all the language they have used and from their contemporaneous and subsequent acts. 23. Interpretative rule in Rules of Court applies only if there is inconsistency between written and printed words The interpretative rule in the Rules of Court that written words control printed words in documents may be considered only when there is inconsistency between the written and printed words of the contract. As previously stated, there was no ambiguity in the contract subject of this case that would call for the application of said rule. In any event, the contract has provided for such a situation by explicitly stating that the condition remains effective notwithstanding that the same (fixed time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof. Herein, the typewritten specifications of the flight, routes and dates of departures and arrivals on the face of the airway bill does not constitute a special contract which modifies the printed conditions at the back thereof. The typewritten provisions of the contract are to be read and understood subject to and in view of the printed conditions, fully reconciling and giving effect to the manifest intention of the parties to the agreement. 24. Statement on the face of the airway bill The statement on the face of the airway bill properly and completely reads Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof the goods then being in apparent good order and condition except as noted hereon. 25. Carrier not an insurer against delay in transportation of goods in absence of a special contract The oft-repeated rule regarding a carriers liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may

have arisen. This result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier is to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts. 26. Mendoza vs. PAL; Delayed delivery of air cargo In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: The carrier does not obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route of the shipment without any liability therefore, the Supreme Court ruled that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836). 27. Specification of flights does not constitute a special contract To countenance a postulate that the specification of the flights and dates of departures and arrivals constitute a special contract (that would prevail over the printed stipulations at the back of the airway bill) would unduly burden the common carrier for that would have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract by the simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have been ready or willing to assume had it been timely advised thereof. 28. Ordinary prudence required of person entering in contract The fact that the challenged condition 5 was printed at the back of the airway bill militate against its binding effect on the Saludos as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such additional condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract would prompt even a cursory examination of any such conditions, terms and/or stipulations. 29. Acceptance of bill of lading without dissent raises presumption that all terms brought to knowledge of shipper and agreed to by him The acceptance of a bill of lading without dissent raises a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him,
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance, under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the conditions there to be found. 30. When contract of adhesion void and unenforceable A contract of adhesion may be struck down as void and unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. 31. Ong Yiu vs. CA; Contracts of adhesion not entirely prohibited The case of Ong Yiu vs. Court of Appeals, et al. instructs that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. Herein, the Saludos, far from being the weaker party in the situation, duly signified their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be gainsaid that the Saludos were not without several choices as to carriers in Chicago with its numerous airways and airlines servicing the same. 32. Condition serves as insulation to liability when flight routes and schedules change; Changes should be justified Although Condition 5 of the airway bill is binding upon the parties to and fully operative in the present transaction, it does not mean, that the carriers can at all times whimsically seek refuge from liability in the exculpatory sanctuary of Condition 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves to insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the peculiar circumstances of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that specific routing and other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the carrier

in the absence of specific routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due deference to the rights, interests and convenience of its customers. 33. Common carrier has implicit duty to carry property within reasonable time and guard against delay; Liability of carrier for unreasonable delay A common carrier undertaking to transport property has the implicit duty to carry and deliver it within a reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such neglect of duty. Herein, the delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of PAL and TWA. 34. TWA knew urgency of shipment and actually carried the remains on earlier flight Herein, TWA knew of the urgency of the shipment by reason of this notation on the lower portion of the airway bill: All documents have been certified. Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO. Accordingly, TWA took it upon itself to carry the remains of Crispina Saludo on an earlier flight, which it could do under the terms of the airway bill, to make sure that there would be enough time for loading said remains on the transfer flight on board PAL. 35. No showing that personnel treated the Saludos in humiliating or arrogant manner; What constitutes rude or discourteous conduct There was no showing of any humiliating or arrogant manner with which the personnel of both TWA and PAL treated the Saludos. Even their alleged indifference is not clearly established. The initial answer of the TWA personnel at the counter that they did not know anything about the remains, and later, their answer that they have not heard anything about the remains, and the inability of the TWA counter personnel to inform the Saludos of the whereabouts of the remains, cannot be said to be total or complete indifference to the latter. At any rate, it is any rude or discourteous conduct, malfeasance or neglect, the use of abusive or insulting language calculated to humiliate and shame passenger or bad faith by or on the part of the employees of the carrier that gives the passenger an action for damages against the carrier, and none of the above is obtaining in the present case. 36. Although not in bad faith, actuations of TWAs employees leave must to be desired The manner in which TWAs employees dealt with the Saludos was not grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay the basis for an award of the damages claimed. It must however, be pointed out that the lamentable actuations of TWAs employees leave much to be desired, particularly so in the face of the Saludos grief over the death of their mother,
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

exacerbated by the tension and anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable period of time what happened to her remains. 37. Airline companies admonished to require personnel to be more accommodating towards customers and general public; Contract of carriage different from other contractual relations, and is not a mere contract for transportation but also treatment with courtesy and consideration Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. A contract to transport passengers is quite different in kind and degree from any other contractual relation, and generates a relation attended with public duty. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of passengers. Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics for revenue. 38. Apathy not legally reprehensible but is morally deplorable Herein, the Saludos were not to be regaled with extra special attention. They were, however, entitled to the understanding and humane consideration called for by and commensurate with the extraordinary diligence required of common carriers, and not the cold insensitivity to their predicament. The airlines counter personnel were totally helpless about the situation. Common Sense could and should have dictated that they exert a little extra effort in making a more extensive inquiry, by themselves or through their superiors, rather than just shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern communications equipment readily available to them, which could have easily facilitated said inquiry and which are used as a matter of course by airline companies in their daily operations, their apathetic stance while not legally reprehensible is morally deplorable. 39. No attribution of discourtesy or indifference against PAL No attribution of discourtesy or indifference has been made against PAL by the Saludos and, in fact, Maria Saludo testified that it was to PAL that they repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mothers remains would be on the same flight to Manila with them.

40. When moral and exemplary damages, or attorneys fees, awarded Moral damages may be awarded for willful or fraudulent breach of contract or when such breach is attended by malice or bad faith. However, in the absence of strong and positive evidence of fraud, malice or bad faith, said damages cannot be awarded. Neither can, there be an award of exemplary damages nor of attorneys fees as an item of damages in the absence of proof that defendant acted with malice, fraud or bad faith. 41. Censurable conduct of TWA employees do not approximate dimensions of fraud, malice or good faith The censurable conduct of TWAs employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or societal culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience. 42. Award of nominal damages warranted; Articles 2221 and 2222 NCC The facts show that the Saludos right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. In the exercise of the Courts discretion, the Court find an award of P40,000.00 as nominal damages in favor of the Salufos to be a reasonable amount under the circumstances of the present case.

Planters Products vs. CA (GR 101503, 15 September 1993) First Division, Bellosillo (J): 2 concur, 1 on leave, 1 took no part Facts: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation of New York, USA, 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V Sun Plum owned by Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, USA, to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading KP-1 signed
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V Sun Plum pursuant to the Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Riders to the aforesaid charter-party starting from paragraph 16 to 40 were attached to the pre-printed agreement. Addenda 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by the charterers representative and found fit to take a load of urea in bulk pursuant to paragraph 16 of the charter-party. After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with 3 layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessels boom. PPI unloaded the cargo from the holds into its steel-bodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-party (which provided for an FIOS clause). The hatches remained open throughout the duration of the discharge. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignees warehouse located some 50 meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. PPIs warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the fertilizer. It took 11 days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th). A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the outturn of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been

contaminated with dirt. SSA explained that they were not able to respond to the consignees claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this request was denied by them because they had nothing to do with the discharge of the shipment. On 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The court a quo however sustained the claim of PPI against the carrier for the value of the goods lost or damaged. On appeal, the Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged. PPI appealed by way of petition for review. The Supreme Court dismissed the petition; affirmed the assailed decision of the Court of Appeals, which reversed the trial court; and consequently, dismissed Civil Case 98623 of the then CFI, now RTC, of Manila; with costs against PPI. 1. Charter party defined A charter-party is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. 2. Types of charter parties Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. 3. Kinds of contract of affreightment Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charterparty provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ships stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship. 4. Common or public carrier defined; Scope of definition The term common or public carrier is defined in Article 1732 of the Civil Code. The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

as a public employment and not as a casual occupation. 5. Distinction between common or public carrier, and private or special carrier The distinction between a common or public carrier and a private or special carrier lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. 6. Extraordinary diligence required of common carriers (Article 1733); Ordinary diligence required of private carriers Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry. In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. 7. Common carriers presumed negligent in case of loss, etc. of goods; No presumption in private carriers In case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier. 8. Kyosei Kisen Kabushiki Kaisha a common carrier, remained as so in charter party Kyosei Kisen Kabushiki Kaisha, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When PPI chartered the vessel M/V Sun Plum, the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner, the charterer is a stranger to the crew and to the ship. Thus, a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. 9. When charter party converts common carrier to private carrier It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the

particular voyage covering the charter-party is concerned. 10. Reliance on case of Home Insurance vs. American Steamship misplaced The carriers heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowner from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers. 11. American rule as to shipper carrying special cargo not applicable in the Philippines; Stricter interpretation of admiralty laws The rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in Philippine jurisdiction, for the Court has observed that the growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers. 12. Observations of Raoul Colinvaux, the learned barrister-at-law As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collussion occur; and the same difficulty in discovering the truth as to what has taken place arises . . . 13. Burden of proof in an action for recovery of damages against a common carrier In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability. 14. Carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence (1) The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the 4 hatches of the vessel were
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

10

cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ships holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with 3 layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ships boom. (2) It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. When M/V Sun Plum docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. Verily, the presumption of negligence on the part of respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. 15. Period which carrier was to observe degree of diligence; Limitation clause of FIOS meaning The period during which the carrier was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessels holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the consignee, but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard GENCON time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. 16. When common carriers not liable for loss, destruction or deterioration of goods Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the character of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons.

17. Characteristics of urea Urea is a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed 80 degrees centigrade. 18. Expected risks of bulk shipping (1) In unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed normal or tolerable. The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process. (2) The dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value. (3) The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in bulk, thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it. 19. Hull of vessel in good condition; Improbable that sea water seep in vessels hold It was highly improbable for sea water to seep into the vessels holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V Sun Plum in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignees warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged bad order cargo as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo. 20. Variable weather condition a risk of loss or damage which owner or shipper of goods has to face Herein, it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignees warehouse. Bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage; more so, with a variable weather condition prevalent during its unloading. This
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

11

is a risk the shipper or the owner of the goods has to face.

entitled to recover the value of the goods at the time they should have been delivered to him. 2. The nature of delay in the present case The interval which elapsed between the date when the merchandise should have been delivered and the presentation of the complaint was approximately 11 months. The delay which ensued between the date when the merchandise should have been delivered and the date when it was finally tendered was close to 2 years and 4 months. The time which passed between the date when the merchandise should have been delivered and the date when the defense of tender was set up, was over 3 years. 3. No prior case with the similar facts No case coming either from the local forum or from foreign jurisdictions which exactly fits the facts has been found. (But Behn, Meyer & Co., vs. Banco Espaol-Filipino [1908], 11 Phil., 253, and Yangco vs. Meerkamp & Company, R. G. No. 15498, 1 can be noted.) 4. Corpus Juris, Volume 10, p. 272 as to delay and conversion Volume 10, Corpus Juris, at page 272, is authority for this: . . . A demand and a refusal to deliver is sometimes essential to show a conversion. Even after demand, if the goods are tendered before suit brought, the consignee cannot refuse to receive the goods and sue for conversion, his sole remedy being an action for damages resulting from the delay. Hutchinsons Treatise on the Law of Carriers (third edition, vol. 2, p. 717) contains this: Though the carrier may delay ever so long, the owner cannot charge him with a conversion, or for value of the goods, if they are safely kept, unless they have been demanded of the carrier and their delivery refused, . . . relying on Hamilton vs. Chicago, Milwaukee & St. Paul Railway Company ([1897]), 103 Iowa, 325). 5. Liability for conversion vs. liability for damages Where property in the hands of a common carrier is not delivered within a reasonable time after it has reached its destination, the carrier, in the absence of any legal exemption and after demand has been made and delivery refused, is liable for a conversion of the property. The consignee, under such circumstances, may elect to waive all title to the property and sue for the conversion, and after he has done so, a subsequent tender by the carrier will not be available for it as a defense. A tender of the property, to be effectual, must have been made within the time in which the defendant was entitled to deliver it and the plaintiff bound to receive it. The tender made was not until long after the lapse of this period, and, not being accepted, is no bar to plaintiffs right to recover. When the defendant tendered the goods to plaintiff before this action was commenced, and plaintiff refused to receive them. His action, then, was not for conversion, but for damages

Mariano Uy Chaco Sons & Co. vs. Admiral Line (GR 22134, 17 October 1924) Second Division, Malcolm (J): 6 concur Facts: Mariano Uy Chaco Sons & Co. alleges that upon arrival of the S. S. Satsuma at the power of Manila on 22 June 1920, there were short-delivered one case of varnish and paint remover and 50 bales of oakum, for the conversion of which Admiral Line is liable. Admiral Line, on the other hand, claims that the merchandise had been delayed, had been found, and delivery thereof had been tendered and rejected. The merchandise should have been landed on 22 June 1920. Not having been delivered either on that day or any subsequent day before 21 May 1921, and all efforts to secure satisfaction from the carrier having failed, the complaint was presented on the date last mentioned. It was amended on 12 July 1921. Answer in the form of a general denial was interposed by Admiral Line on 11 August 1921. The first amended answer was filed on 18 February 1922. Formal tender of the goods was made by Admiral Line on 7 October 1922. Efforts at compromise having failed, Mariano Uy Chaco Sons & Co. moved on 27 April 1923, for the assignment of the case for hearing. On 14 August 1923, Admiral Line offered its second amended answer in which the claim now advanced was first announced, saying That since the institution of this action, etc. One week later, on 21 August 1923, the trial commenced. After trial, the trial court ruled in favor of Mariano Uy Chaco Sons & Co. requiring Admiral Line to pay for the value of the case of varnish and paint remover, P22.80, for the value of the 50 bales of oakum, P700, for the freight, P195.50, and for the insurance, P18, or a total of P936.30, with legal interest and costs. The Supreme Court affirmed the judgment with costs. 1. Delay in delivery vs. Conversion Mere delay in the delivery of goods by a common carrier, no matter how long continued, is not a conversion thereof, but is only a breach of the contract of carriage. Therefore, where a carrier fails to deliver goods within a reasonable time, although he thereby makes himself liable for the damages incurred by reasons of the delay, the consignee cannot refuse to accept the goods from him and recover their value, but is compelled to receive them. The most usual element of damages for a carriers negligent delay in delivering the goods of the consignee is the difference between the market value of the goods at the time when they should have been delivered, and the time when they were delivered, to which may be added reasonable expenses caused by the delay; but if there has been a conversion of the goods by the carrier, and the consignee has not thereafter accepted them, he is

Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

12

6. Present case involves conversion A delay of more than two years in making delivery was conclusively unreasonable. A delay in pressing a defense predicated on tender, of more than two years counted from the date when the complaint was filed, was likewise unreasonable. The mancupation of the property by the defendant was sufficiently complete since it was unable to turn the goods over to the plaintiff at any time before the complaint was presented, and in fact, could not do so until a long time thereafter. Add these facts together, and the reasons why Mariano Uy Chaco Sons & CO. can be permitted to recover on its action are self-evident. Herein, Admiral Line was in effect guilty of conversion and must accordingly respond for the value of the property at the time of conversion.

It contended that based on the allegations of the complaint, the loss sustained in the case was P35,506.75 which is only 18% of P17,420,000.00, the total value of the cargo. In its order dated 23 November 1989, the Regional Trial Court sustained NMCs contention. American Home Assurance then filed a motion for reconsideration of the order of dismissal but same was denied by the court in its order dated 26 January 1990. Instead of filing an appeal from the order of the court a quo dismissing the complaint for recovery of a sum of money, American Home Assurance filed a petition for certiorari with the Court of Appeals to set aside the two orders of the judge in said court. But the Court of Appeals in its decision dated 30 May 1990, dismissed the petition as constituting plain errors of law and not grave abuse of discretion correctible by certiorari (a Special Civil Action). If at all, the appellate court ruled that there are errors of judgment subject to correction by certiorari as a mode of appeal but the appeal is to the Supreme Court under Section 17 of the Judiciary Act of 1948 as amended by RA 5440. Otherwise stated, the appellate Court opined that the proper remedy is a petition for review on certiorari with the Supreme Court on pure questions of law. Hence, the petition for review on certiorari. In a resolution dated 10 December 1990, the Supreme Court gave due course to the petition and required both parties to file their respective memoranda. The Supreme Court reversed the decisions of both the Court of Appeals and the Regional Trial Court of Manila, Branch 41, appealed from; and (2) ordered NMC to reimburse the subrogee, American Home Assurance, the amount of P31,506.75. 1. Certiorari not the proper remedy in the case before the Court of Appeals The Court of Appeals ruled that appeal is the proper remedy, for aside from the fact that the two orders dismissing the complaint for lack of cause of action are final orders within the meaning of Rule 41, Section 2 of the Rules of Court, subject petition raised questions which if at all, constitute plain errors of law or of judgment not constituting grave abuse of discretion correctible by certiorari. Evidently, the Court of Appeals did not err in dismissing the petition for certiorari for as ruled by the Supreme Court, an order of dismissal whether right or wrong is a final order, hence, a proper subject of appeal, not certiorari (Marahay v. Melicor, 181 SCRA 811 [1990]). 2. Rule may be relaxed for the broader interests of justice However, where the fact remains that the Court of Appeals obviously in the broader interests of justice, nevertheless proceeded to decide the petition for certiorari and ruled on specific points raised therein in a manner akin to what would have been done on assignments of error in a regular appeal, the petition therein was therefore disposed of on the merits and not on a dismissal due to erroneous choice of remedies or technicalities. Hence, a review of the decision of the
Bahiya Amanoddin Ibrahim

American Home Assurance vs. CA (GR 94149, 5 May 1992) Second Division, Paras (J): 4 concur Facts: American Home Assurance Co. and the National Marine Corporation (NMC) are foreign corporations licensed to do business in the Philippines, the former through its branch, The American Home Assurance Company (Philippines), Inc. and the latter through its branch, The National Marine Corporation (Manila). On or about 19 June 1988, Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp from Haulien, Taiwan on board SS Kaunlaran, which is owned and operated by NMC with Registration PID-224. The said shipment was consigned to Mayleen Paper, Inc. of Manila, which insured the shipment with American Home Assurance Co. as evidenced by Bill of Lading HLMN-01. On 22 June 1988, the shipment arrived in Manila and was discharged into the custody of the Marina Port Services, Inc., for eventual delivery to the consignee-assured. However, upon delivery of the shipment to Mayleen Paper, Inc., it was found that 122 bales had either been damaged or lost. The loss was calculated to be 4,360 kilograms with an estimated value of P61,263.41. Mayleen Paper, Inc. then duly demanded indemnification from NMC for the damages/losses in the shipment but, for apparently no justifiable reason, said demand was not heeded. As the shipment was insured with American Home Assurance Co. in the amount of US $837,500.00, Mayleen Paper, Inc. sought recovery from the former. Upon demand and submission of proper documentation, American Home Assurance paid Mayleen Paper, Inc. the adjusted amount of P31.506.75 for the damages/losses suffered by the shipment, hence, the former was subrogated to the rights and interests of Mayleen Paper, Inc. On 6 June 1989, American Home Assurance, as subrogee, then brought suit against NMC for the recovery of the amount of P31.506.75 and 25% of the total amount due as attorneys fees, by filing a complaint for recovery of sum of money. NMC filed a motion to dismiss dated 7 August 1989 stating that American Home Assurance Company had no cause of action based on Article 848 of the Code of Commerce.

Beta Sigma Lambda

Transportation Law Cases

13

Court of Appeals on the merits against American Home Assurance in this case is in order. 3. Article 848, Code of Commerce Article 848 of the Code of Commerce provides that claims for averages shall not be admitted if they do not exceed 5% of the interest which the claimant may have in the vessel or in the cargo if it be gross average and 1% of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary. 4. Particular average defined Particular average is a loss happening to the ship, freight, or cargo which is not shared by contributing among all those interested, but must be borne by the owner of the subject to which it occurs. 5. General average defined General average is a contribution by the several interests engaged in the maritime venture to make good the loss of one of them for the voluntary sacrifice of a part of the ship or cargo to save the residue of the property and the lives of those on board, or for extraordinary expenses necessarily incurred for the common benefit and safety of all. 6. Law of country of destination As resolved in National Development Co. v. C.A. (164 SCRA 593 [1988]; citing Eastern Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470 [1987], 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. (Article 1753, Civil Code). Herein, thus, for cargoes transported to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws (Article 1766, Civil Code). 7. Degree of diligence required of common carriers; Presumption of negligence Under Article 1733 of 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 and for the safety of passengers transported by them according to all circumstances of each case. Thus, under Article 1735 of the same Code, in all cases other than those mentioned in Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law. 8. Common carrier cannot limit liability for injury caused by its own negligence Common carriers cannot limit their liability for injury or loss of goods where such injury or loss was caused by its own negligence. Otherwise stated, the law on averages under the Code of Commerce cannot be applied in determining liability where there is negligence.

9. Issue of negligence addressed before extent of liability applied Under the foregoing principle and in line with the Civil Codes mandatory requirement of extraordinary diligence on common carriers in the care of goods placed in their stead, it is but reasonable to conclude that the issue of negligence must first be addressed before the proper provisions of the Code of Commerce on the extent of liability may be applied. 10. Filing of motion to dismiss due to lack of cause of action carries admission of material facts The filing of a motion to dismiss on the ground of lack of cause of action carries with it the admission of the material facts pleaded in the complaint (Sunbeam Convenience Foods, Inc. v. C.A., 181 SCRA 443 [1990]). Herein, upon delivery of the shipment in question at Mayleens warehouse in Manila, 122 bales were found to be damaged/lost with straps cut or loose, calculated by the so-called percentage method at 4,360 kilograms and amounting to P61,263.41. Instead of presenting proof of the exercise of extraordinary diligence as required by law, NMC filed its Motion to Dismiss dated 7 August 1989, hypothetically admitting the truth of the facts alleged in the complaint to the effect that the loss or damage to the 122 bales was due to the negligence or fault of NMC. Such being the case, it is evident that the Code of Commerce provisions on averages cannot apply. 11. Common carriers are responsible for loss, etc. of goods; Exceptions Article 1734 of the Civil Code provides that common carriers are responsible for loss, destruction or deterioration of the goods, unless due to any of the causes enumerated therein. Herein, it is obvious that the present case does not fall under any of the exceptions. Thus, American Home Assurance Company is entitled to reimbursement of what it paid to Mayleen Paper, Inc. as insurer.

National Development Co. vs. CA (GR L-49407, 19 August 1988) Maritime Co. of the Philippines vs. CA (GR L-49469) Second Division, Paras (J): 3 concur Facts: In accordance with a memorandum agreement entered into between National Development Corporation (NDC) and Maritime Corporation of the Philippines Inc. (MCP) on 13 September 1962, NDC as the first preferred mortgagee of three ocean going vessels including one with the name Doa Nati appointed MCP as its agent to manage and operate said vessel for and in its behalf and account. Thus, on 28 February 1964 the E. Philipp Corporation of New York loaded on board the vessel Doa Nati at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

14

Corporation, Manila and the Peoples Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil. En route to Manila the vessel Doa Nati figured in a collision at 6:04 a.m. on 15 April 1964 at Ise Bay, Japan with a Japanese vessel SS Yasushima Maru as a result of which 550 bales of aforesaid cargo of American raw cotton were lost and/or destroyed, of which 535 bales as damaged were landed and sold on the authority of the General Average Surveyor for Y6,045,500 and 15 bales were not landed and deemed lost. The damaged and lost cargoes was worth P344,977.86 which amount, the Development Insurance and Surety Corporation (DISC) as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila. The total loss was P19,938.00 which DISC as insurer paid to Guilcon as holder of the duly endorsed bill of lading. Thus, DISC had paid as insurer the total amount of P364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged cargoes. On 22 April 1965, DISC filed before the then Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorneys fees of P10,000.00 against NDC and MCP. On 12 November 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering MCP and NDC to pay jointly and solidarily to DISC the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on 22 April 1965, until fully paid and attorneys fees of P10,000.00. Likewise, in said decision, the trial court granted MCPs cross-claim against NDC. MCP interposed its appeal on 20 December 1969, while NDC filed its appeal on 17 February 1970 after its motion to set aside the decision was denied by the trial court in its order dated 13 February 1970. On 17 November 1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court. Hence, the appeals by certiorari. On 25 July 1979, the Supreme Court ordered the consolidation of the above cases. The Supreme Court denied the subject petitions for lack of merit, and affirmed the assailed decision of the Appellate Court. 1. Law of country of destination governs liability of common carrier As held in Eastern Shipping Lines Inc. v. IAC (150 SCRA 469-470 [1987]) where it was held under similar circumstances that 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 (Article 1753, Civil Code). Thus, the rule

was specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provisions of the Civil Code. 2. Actual collision occurring in foreign waters immaterial Herein, it has been established that the goods in question are transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or damaged due to a collision which was found to have been caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. 3. Extraordinary diligence required of common carriers; Negligence presumed Under Article 1733 of 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 and for the safety of the passengers transported by them according to all circumstances of each case. Accordingly, under Article 1735 of the same Code, in all cases other than those mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law. 4. Collision does not fall under matters regulated by Civil Code; Application of Article 826 to 839 of the Code of Commerce proper The collision, however, falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in the lower courts application to the present case of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels. 5. Articles 826 and 827 of the Code of Commerce; Liability of owner either when imputable to the personnel of the vessel or imputable to both vessels Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes. 6. Primary liability of shipowner on occasion of collision due to fault of captain
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

15

Under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct of the voyage (Yeung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]). 7. Code of Commerce applies both to domestic and foreign trade; COGSA does not repeal nor limit Code of Commerces application The Code of Commerce applies not only to domestic trade but also foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Commonwealth Act 65) does not specifically provide for the subject of collision, said Act in no uncertain terms, restricts its application to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade. Under Section 1 thereof, it is explicitly provided that nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application. By such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but more importantly does not repeal nor limit its application. 8. DISC a subrogee, has a right of action against MCP Herein, Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed bills of lading covering the shipments in question and an examination of the invoices in particular, shows that the actual consignees of the said goods are the aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to this fact. Accordingly, as it is undisputed that the insurer, DISC paid the total amount of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is evident that DISC has a cause of action to recover (what it has paid) from MCP. 9. MCP an agent; Agency broad enough to include shipagent in maritime law The Memorandum Agreement of 13 September 1962 shows that NDC appointed MCP as Agent, a term broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the NDC. Consequently, under the circumstances, MCP cannot escape liability. 10. Owner and agent of offending vessel liable when both are impleaded It is well settled that both the owner and agent of the offending vessel are liable for the damage done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of

the Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code but more specially as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent (Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action had its origin in a tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it, for losses and damages occasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the freight (Behn, Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]). 11. Value of goods declared in bills of lading, liability of MCP not limited to P200 per package or per bale of raw cotton as stated in paragraph 17 of bill of lading The declared value of the goods was stated in the bills of lading and corroborated no less by invoices offered as evidence during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barretto et al., (51 Phil. 90 [1927]) cannot limit its liability for injury to a less of goods where such injury or loss was caused by its own negligence. Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce). 12. Action not prescribed; Section 3 (6) The bills of lading issued allow trans-shipment of the cargo, which simply means that the date of arrival of the ship Doa Nati on 18 April 1964 was merely tentative to give allowances for such contingencies that said vessel might not arrive on schedule at Manila and therefore, would necessitate the trans-shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was supposed to arrive in Manila on 18 April 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been saved, they could have arrived in Manila on the said dates. Accordingly, the complaint was filed on 22 April 1965, i.e. long before the lapse of 1 year from the date the lost or damaged cargo should have been delivered in the light of Section 3, sub-paragraph (6) of COGSA.

Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

16

Aboitiz Shipping vs. CA (GR 89757, 6 August 1990) First Division, Gancayco (J): 4 concur Facts: On October 28, 1980, the vessel M/V P. Aboitiz took on board in Hongkong for shipment to Manila some cargo consisting of 1 20-footer container holding 271 rolls of goods foe apparel covered by Bill of Lading 515-M and 1 40-footer container holding 447 rolls, 10 bulk and 95 cartons of goods for apparel covered by Bill of Landing 505-M. The total value, including invoice value, freightage, customs duties, taxes and similar imports amount to US$39,885 for the first shipment while that of the second shipment amounts to US$94,190.55. Both shipments were consigned to the Philippine Apparel, Inc. and insured with the General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC). The vessel is owned and operated by Aboitiz Shipping Corporation. On 31 October 1980 on its way to Manila the vessel sunk and it was declared lost with all its cargoes. GAFLAC paid the consignee the amounts US$39,885.85 or P319,086.80 and US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC was subrogated to all the rights, interests and actions of the consignee against Aboitiz, it filed an action for damages against Aboitiz in the Regional Trial Court of Manila alleging that the loss was due to the fault and negligence of Aboitiz and the master and crew of its vessel in that they did not observe the extraordinary diligence required by law as regards common carriers. After the issues were joined and the trial on the merits a decision was rendered by the trial court on 29 June 1985, ordering Aboitiz to pay GAFLAC actual damages in the sum of P1,072,611.20 plus legal interest from the date of the filing of the complaint on 28 October 1981, until full payment thereof, attorneys fees in the amount of 20% of the total claim and to pay the costs. Not satisfied therewith, Aboitiz appealed to the Court of Appeals wherein in due course a decision was rendered on 9 March 1989 affirming in toto the appealed decision, with costs against Aboitiz. A motion for reconsideration of said decision filed by Aboitiz was denied in a resolution dated 15 August 1989.. Hence, the petition for review. The Supreme Court dismissed the petition, with costs against Aboitiz. 1. Finding of administrative bodies not always binding upon the court The sinking of the vessel M/V P. Aboitiz was the subject of an administrative investigation conducted by the Board of Marine Inquiry (BMI) whereby in a decision dated 26 December 1984, it was found that the sinking of the vessel may be attributed to force majeure on account of a typhoon. The trial court did not err in not giving weight to the finding of the BMI that the vessel sank due to a fortuitous event as findings of administrative bodies are not always binding on courts. This is especially so in the present case where GAFLAC

was not a party in the BMI proceedings and which proceeding was not adversary in character. 2. General rule as to administrative findings of facts As a general rule, administrative findings of facts are not disturbed by the courts when supported by substantial evidence unless it is tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction. Even in Vasquez vs. Court of Appeals, the Court ruled that it nevertheless disagree with the conclusion of the BMI exonerating the captain from any negligence since it obviously had not taken into account the legal responsibility of a common carrier towards the security of the passengers involved. 3. Trial court not informed of parallel administrative investigation being conducted by BMI; GAFLAC cannot be bound by findings and conclusions of BMI The present case was brought to court on 28 October 1981. The trial court was never informed of a parallel administrative investigation that was being conducted by the BMI in any of the pleadings of Aboitiz. It was only on 22 March 1985 when Aboitiz revealed to the trial court the decision of the BMI dated 26 December 1984. The said decision appears to have been rendered over 3 years after the case was brought to court. Said administrative investigation was conducted unilaterally. GAFLAC was not notified or given an opportunity to participate therein. It cannot thereby be bound by said findings and conclusions of the BMI. 4. Weather condition prevailing under wind force of 10 to 15 knots usual and foreseeable The wind force when the ill-fated ship foundered was 10 to 15 knots. According to the Beau fort Scale (Exhibit I), which is admittedly an accurate reference for measuring wind velocity, the wind force of 10 to 15 knots is classified as scale No. 4 and described as moderate breeze, small waves, becoming longer, fairly frequent white horses. The weather condition prevailing under said wind force is usual and foreseeable. The vessel M/V Aboitiz and its cargo were not lost due to fortuitous event or force majeure. 5. Common carrier bound to observe extraordinary diligence (Article 1732 NCC); Presumption of negligence, burden of proof In accordance with Article 1732 of the Civil Code, the common carrier, from the nature of its business and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according to all the circumstances of each case. While the goods are in the possession of the carrier, it is but fair that it exercise extraordinary diligence in protecting them from loss or damage, and if loss occurs, the law presumes that it was due to the carriers fault or negligence; that is necessary to protect the interest of the shipper which is at the mercy of the carrier (Article 17O6, Civil Code; Anuran vs. Puno, 17 SCRA 224; Nocum vs. Laguna Tayabas Bus Co., 30 SCRA 69; Landigan vs. Pangasinan
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

17

Transportation Company, 88 SCRA 284). Herein, Aboitiz failed to prove that the loss of the subject cargo was not due to its fault or negligence. 6. Limited liability clause; Exception While it is true that in the bill of lading there is such stipulation that the liability of the carrier is US$500.00 per package/container/customary freight, there is an exception, that is, when the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. Herein, the description of the nature and the value of the goods shipped are declared and reflected in the bills of lading. Thus, it is the basis of the liability of the carrier as the actual value of the loss. 7. Section 4 (5) COGSA Section 4(5) of the Carriage of Goods by Sea Act provides that (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained. Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading. 8. Container construed; Noscitur a sociis It is absurd to interpret container, as provided in the bill of lading to be valued at US$500.00 each, to refer to the container which is the modern substitute for the hold of the vessel. The package/container contemplated by the law to limit the liability of the carrier should be sensibly related to the unit in which the shipper packed the goods and described them, not a large metal object, functionally a part of the ship, in which the carrier caused them to be contained. Such container must be given the same meaning and classification as a package and customary freight unit. By the rule of noscitur a sociis, the word container must be given the same meaning as package and customary freight unit and therefore cannot possibly refer to modern containers which are used for shipment of goods in bulk. 9. Allied Guarantee Insurance Co. Inc. vs. Aboitiz Shipping Corporation, (CA GR CV 04121, 23 March1987); Limited liability clause must be reasonable and freely agreed upon Generally speaking, a stipulation, limiting the common carriers liability to the value of the goods appearing in

the bill of lading, unless the shipper or owner declares a greater value, is valid. (Civil Code, Art. 1749). Such stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. vs. Macondray Co., 70 SCRA 122, 126127 (1976) Herein, the goods shipped on the M/V P. Aboitiz were insured for P278,530.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put it in its power to have taken the whole cargo. 10. Ysmael vs .Gabino Barreto; Limitation of liability inapplicable when loss caused by own negligence In Juan Ysmael & Co. vs. Gabino Barreto & Co., 51 Phil. 90 (1927), it was held that a stipulation limiting the carriers liability to $500.00 per package of silk when the value of such package was P2,500.00 unless the true value had been declared and the corresponding freight paid was void as against public policy. That ruling applies to the present case. By the weight of modern authority, a carrier cannot limit its liability for injury or loss of goods shipped where such injury or loss was caused by its own negligence. (Juan Ysmael & Co. v. Gabino Barreto & Co., supra) Here to limit the liability of Aboitiz Shipping to $500.00 would nullify the policy of the law imposing on common carriers the duty to observe extraordinary diligence in the carriage of goods. 11. Issuance of execution pending appeal; Filing of supersedeas bond to stay execution The purpose of Section 2, Rule 39, of the Rules of Court would not be achieved or execution pending appeal would not be achieved if insolvency would still be awaited. The remedy is available to petitioner under Section 3 Rule 39 of the Rules of Court but to place insolvency as a condition to issuance of a writ of execution pending appeal would render it illusory and ineffectual. Herein, Aboitiz is facing many law suits arising from said sinking of its vessel involving cargo loss of no less than P50 million, in some cases of which judgment had been rendered against Aboitiz, and considering that its insurer is now bankrupt, leaving Aboitiz alone to face and answer the suits, which may render any judgment for GAFLAC ineffectual, that the appeal is interposed manifestly for delay and the willingness of GAFLAC to put up a bond certainly are cogent bases for the issuance of an order of execution pending appeal. The statutory undertaking of posting a supersedeas bond will achieve a three-pronged direction of justice, (1) it will cast no doubt on the solvency of the defendant; (2) it will not defeat or render phyrric a just resolution of the case whichever party prevails in the end or in the main case on appeal, since both of their claims are secured by their corresponding bonds; and (3) it will put to equitable operation Sec. 3 Rule 39 of the Revised Rules of Court. 12. Aboitiz vs. CA (GR 88159; 13 November1989); Doctrine of primary administrative jurisdiction not applicable In a similar case for damages arising from the same incident entitled Aboitiz Shipping Corporation vs.
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

18

Honorable Court of Appeals and Allied Guaranteed Insurance Company, Inc., G.R. No. 88159, the Court in a resolution dated 13 November 1989 dismissed the petition for lack of merit. Therein this Court held in part that the cause of sinking of the vessel was due to its unseaworthiness and the failure of its crew and the master to exercise extraordinary diligence. Therein, the decision and resolution of the appellate court shows that the same took into consideration not only the findings of the lower court but also the findings of the BMI. Thus, the appellate court stated that the decision of the Board was based simply on its finding that the Philippine Coast Guard had certified the vessel to be seaworthy and that it sank because it was exposed later to an oncoming typhoon plotted within the radius where the vessel was positioned. This generalization certainly cannot prevail over the detailed explanation of the trial court in the case as basis for its contrary conclusion. The Court found therein no cogent reason to deviate from the factual findings of the appellate court and rule that the doctrine of primary administrative jurisdiction is not applicable in said case. 13. Aboitiz vs. CA (GR 88159; 13 November1989); Limitation of liability would render inefficacious the extraordinary diligence required by law of common carriers Generally speaking any stipulation, limiting the common carriers liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value is valid. (Civil Code, Art. 1749) Such stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. v. Macondray & Co., 70 SCRA 122, 126127 [1976]. Therein, the goods shipped on the M/V P. Aboitiz were insured for P278,536.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put in its power to have taken the whole cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90 [1927], it was held that a stipulation limiting the carriers liability to P300.00 per package of silk, when the value of such package was P2,500.00, unless the true value had been declared and the corresponding freight paid; was void as against public policy. That ruling applies to said case. 14. Aboitiz vs. CA (GR 88159; 13 November1989) final and executory The motion for reconsideration for the Courts Resolution in GR 88159 filed by Aboitiz was denied with finality in a resolution dated January 8, 1990. Said resolution of the case had become final and executory, entry of judgment having been made and the records remanded for execution on 22 March 1990. Said case is the law of the case applicable to the present petition. Ganzon vs. CA (GR L-48757, 30 May 1988) Second Division, Sarmiento (J): 3 concur Facts: On 28 November 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT Batman. Pursuant to

this agreement, Mauro B. Ganzon sent his lighter Batman to Mariveles where it docked in 3 feet of water. On 1 December 1956, Gelacio Tumambing delivered the scrap iron to Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captains supervision. When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing. The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment. After sometime, the loading of the scrap iron was resumed. But on 4 December 1956, Acting Mayor Basilio Rub, accompanied by 3 policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron where the lighter was docked. The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron. Tumambing instituted in the CFI of Manila an action against Ganzon for damages based on culpa contractual. The trial court rendered a decision absolving Ganzon from liability. On appeal, however, the appellate court reversed and set aside the decision appealed from, and entered a new one ordering Ganzon to pay Tumambing the sum of P5,895.00 as actual damages, the sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorneys fees; with costs against Ganzon. Hence, the petition for review on certiorari. The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals; with costs against Ganzon; the decision being immediately executory. 1. By delivery, the scraps are placed in the possession of the common carrier; Contract of carriage perfected; Duties of the carrier By the act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the carriers extraordinary responsibility for the loss, destruction, or determination of the goods commenced. Pursuant to Article 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. 2. Loss not due to any cause enumerated in Article 1734 of the Civil Code Herein, Ganzon has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil Code, namely:
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

19

(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. 3. Negligence presumed; Burden of proof to prove otherwise Herein, Ganzon is presumed to have been at fault or to have acted negligently. By reason of this presumption, the court is not even required to make an express finding of fault or negligence before it could hold Ganzon answerable for the breach of the contract of carriage. Still, Ganzon 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. As it was, there was hardly any attempt on the part of Ganzon to prove that he exercised such extraordinary diligence. 4. Order by competent authority must be valid, to allow carriers absolution from liability as per caso fortuito Before Ganzon could be absolved from responsibility on the ground that he was ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was accumulated by the appellant through separate purchases here and there from private individuals. The fact remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to shakedown Tumambing for P5,000.00. The order of the acting mayor did not constitute valid authority for Ganzon and his representatives to carry out. 5. The intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of its obligation The intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of its obligation. Herein, Ganzon 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 petitioners employees. The mere difficulty in the fulfillment of the obligation is not considered force majeure. The scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage.

6. No incompatibility between Civil Code provisions on common carriers and Articles 361 and 362 of the Code of Commerce; Article 1733 NCC modified Article 352 as to degree of diligence required of carrier There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 and 362 of the Code of Commerce which were the basis for the Courts ruling in Government of the Philippine Islands vs. Ynchausti & Co. and which Ganzon invokes in the petition. For Article 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising from the causes enumerated in Article 1734; and in these instances, the burden of proving that damages were caused by the fault or negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Article 362 appears to require of the carrier only ordinary diligence, the same is deemed to have been modified by Article 1733 of the Civil Code. 7. Findings on actual and exemplary damages not disturbed Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by the Supreme Court. Besides, these were not sufficiently controverted by Ganzon.

Heirs of de los Santos vs. CA (GR 51165, 21 June 1990) First Division, Medialdea (J): 4 concur Facts: On 2 November 1967, Mauricio de los Santos accompanied his common-law wife, Amparo delos Santos, and children, namely: Romeo, Josie, Hernani (10 years old), Abella (7 years old), Maria Lemia (5 years old) and Melany (5 months old), to pier 8, North Harbor, Manila, to board the M/V Mindoro, owned by Compania Maritima, bound for Aklan. Amparo delos Santos and the aforesaid children brought all their belongings, including household utensils valued at P1,000.00, with the intention of living in Aklan permanently. On the other hand, as to spouses Diego Salim and Teresa Pamatian, Diego brought with him P200 in cash and some belongings, while Teresa brought some cash and personal belongings worth P250. Diego boarded the vessel even if he did not have yet a ticket. As to Ruben Reyes, he brought with him personal belongings and cash in the amount of P2,900. M/V Mindoro sailed from pier 8 North Harbor, Manila, at about 6:00 p.m. (should have sailed at 2:00 p.m.) of said day bound for New Washington, Aklan, with many passengers aboard (about 200). Amparo was not included in the manifest as she boarded the boat without ticket, but appeared to have purchased one in the vessel. It appears that said vessel met typhoon Welming on the Sibuyan Sea, Aklan, at about 5:00
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

20

a.m. of 4 November 1967 causing the death of many of its passengers, including Amparo delos Santos and her children. Other drowned victims include spouses Teresa Pamatian and Diego Salim, and also Felix Reyes Jakusalam. 136 survived the accident, including Ruben Reyes and Eliadora Crisostomo de Justo. Eliandora was able to board a balsa, while Ruben was able to swim to an island and with others, rescued later on and brought to the hospital. A complaint was originally filed on 21 October 1968 and amended on 24 October 1968 by the heirs of Delos Santos and others as pauper litigants against the Compania Maritima, for damages due to the death of several passengers as a result of the sinking of the M/V Mindoro. The trial court, on 27 March 1974, adjudged the case in favor of Compania Maritima, dismissing the case due to lack of sufficient evidence. Forthwith, Reyes, and the heirs of the Delos Santos(es), Diego Salim, and Teresa Pamatian brought an appeal to the Court of Appeals. The appellate court affirmed the decision on appeal. The Supreme Court reversed the appealed decision, and rendered judgment sentencing Compania Maritima to pay the following: (1) P30,000.00 as indemnity for death to the heirs of each of the victims; (2) P10,000.00 as moral damages to the heirs of each of the victims; (3) P6,805.00 as actual damages divided among the petitioners as follows: heirs of Amparo Delos Santos and her deceased children, P2,000.00; heirs of Teresa Pamatian, P450.00; heirs of Diego Salem, P400.00; and Ruben Reyes, P2,955.00; (4) P10,000.00 as attorneys fees; and (5) the costs. 1. Article 587 of the Code of Commerce Article 587 of the Code of Commerce provides that The ship agent shall also be civilly liable for indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel, but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight it may have earned during the voyage. 2. Liability of shipowner or agent confined to which he is entitled as to right to abandon Under Article 587 of the Code of Commerce, a shipowner or agent has the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right to abandon the vessel with all her equipments and the freight it may have earned during the voyage (Yangco v. Laserna, et al., 73 Phil. 330, 332). 3. Article 587 of the Code of Commerce still a good law; Reason Notwithstanding the passage of the New Civil Code, Article 587 of the Code of Commerce is still good law. The reason lies in the peculiar nature of maritime law is which is exclusively real and hypothecary that operates to limit such liability to the value of the vessel, or to the insurance thereon, if any (Yangco v.

Laserna, ibid). This rule is found necessary to offset against the innumerable hazards and perils of a sea voyage and to encourage shipbuilding and marine commerce. 4. Application of the limited liability doctrine The limited liability doctrine applies not only to the goods but also in all cases like death or injury to passengers wherein the shipowner or agent may properly be held liable for the negligent or illicit acts of the captain (Yangco v. Laserna, ibid). Article 587 speaks only of situations where the fault or negligence is committed solely by the captain. In cases where the shipowner is likewise to be blamed, Article 587 does not apply (see Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38). Such a situation will be covered by the provisions of the New Civil Code on Common Carriers. 5. Extraordinary diligence in vigilance over goods and safety of passengers required of common carriers; Utmost diligence of very cautious persons in carrying passengers; Presumption of fault Owing to the nature of their business and for reasons of public policy, common carriers are tasked to observe extraordinary diligence in the vigilance over the goods and for the safety of its passengers (Article 1733, New Civil Code). Further, they are bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances (Article 1755, New Civil Code). Whenever death or injury to a passenger occurs, common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as prescribed by Articles 1733 and 1755 (Article 1756, New Civil Code). 6. Modern technology belie contention that Maritima did not have information as to typhoon Welming Modern technology belie Maritimas contention that it did not have any information about typhoon Welming until after the boat was already at sea. The Weather Bureau is now equipped with modern apparatus which enables it to detect any incoming atmospheric disturbances. During the periods of November 1-5, 1967, the Bureau issued a total of 17 warnings or advisories of typhoon Welming to shipping companies. Considering the the late departure of the ship at 6:00 p.m. (instead of the scheduled 2:00 p.m. departure) on 2 November 1967, it is highly improbable that the Weather Bureau had not yet issued any typhoon bulletin at any time during the day to the shipping companies. Maritima submitted no convincing evidence to show this omission. 7. Ships captain aware of typhoon, Maritima duly informed; Maritima displayed lack of foresight and minimum concern for safety of passengers Herein, It cannot be true that he was apprised of the typhoon only at about 11:00 a.m. on 3 November 1967 when the Weather report was transmitted to him from
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

21

the Weather Bureau at which time he plotted its position. For in his radiogram sent to Maritimas office in Manila as early as 8:07 a.m. of 3 November 1967, he stated in the concluding portion still observing weather condition. thereby implicitly suggesting that he had known even before departure of the unusual weather condition. If the captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally in the dark of Welming. In allowing the ship to depart late from Manila despite the typhoon advisories, Maritima displayed lack of foresight and minimum concern for the safety of its passengers taking into account the surrounding circumstances of the case. 8. Maritima shares equally in ship captains negligence While the captain was negligent for overloading the ship, Maritima shares equally in his negligence. While M/V Mindoro was already cleared by the Bureau of Customs and the Coast Guard for departure at 2:00 p.m. the ships departure was, however, delayed for 4 hours. Maritima could not account for the delay because it neither checked from the captain the reasons behind the delay nor sent its representative to inquire into the cause of such delay. It was due to this interim that iindeed there is a great probability that unmanifested cargo (such as dump truck, 3 Toyota cars, steel bars, and 6,000 beer cases) and passengers (about 241 more than the authorized 193 passengers) were loaded during the 4 hour interval. Perchance, a closer supervision could have prevented the overloading of the ship. Maritima could have directed the ships captain to immediately depart in view of the fact that as of 11:07 a.m. of 2 November 1967, the typhoon had already attained surface winds of about 240 kilometers per hour. Verily, if it were not for this delay, the vessel could have reached its destination and thereby have avoided the effects of the storm. This conclusion was buttressed by evidence that another ship, M/V Mangaren, an inter island vessel, sailed for New Washington, Aklan on 2 November 1967, ahead of M/V Mindoro and took the same route as the latter but it arrived safely. 9. Seaworthiness; Necessity of installation of a radar Maritima presents evidence of the seaworthy condition of the ship prior to its departure to prove that it exercised extraordinary diligence in this case. M/V Mindoro was dry-docked for about a month. Necessary repairs were made on the ship. Life saving equipment and navigational instruments were installed. Maritima, however, could not present evidence that it specifically installed a radar which could have allowed the vessel to navigate safely for shelter during a storm. Consequently, the vessel was left at the mercy of Welming in the open sea because although it was already in the vicinity of the Aklan river, it was unable to enter the mouth of Aklan River to get into New Washington, Aklan due to darkness and the Floripon Lighthouse at the entrance of the Aklan River was not functioning or could not be seen at all. With the impending threat of Welming, an important device such as the radar could have enabled the ship to pass through the river and to safety.

10. Storms and typhoons not strange occurrences Storms and typhoons are not strange occurrences. In 1967 alone before Welming, there were about 17 typhoons that hit the country, the latest of which was typhoon Uring which occurred on October 20-25, which cost so much damage to lives and properties. 11. Maritimas negligence proximate cause of sinking of M/V Mindoro Maritimas lack of extraordinary diligence coupled with the negligence of the captain were the proximate causes of the sinking of M/V Mindoro. Hence, Maritima is liable for the deaths and injury of the victims. 12. Trial court generally fix amount of damages; Exceptions Ordinarily, the Supreme Court would remand the case to the trial court for the reception of evidence. Considering however, that the case has been pending for almost 23 years and that since all the evidence had already been presented by both parties and received by the trial court, the Supreme Court resolved to decide the corresponding damages due to petitioners (see Samal v. Court of Appeals, 99 Phil. 230; Del Castillo v. Jaymalin, L-28256, March 17, 1982, 112 SCRA 629). 13. Amount of damages for the death of passenger caused by breach of contract of carriage Under Article 1764 in relation to Article 2206 of the New Civil Code, the amount of damages for the death of a passenger caused by the breach of contract by a common carrier is at least P3,000.00. The prevailing jurisprudence has increased the amount of P3,000.00 to P30,000.00 (De Lima v. Laguna Tayabas Co., L35697-99, April 15, 1988, 160 SCRA 70). Consequently, Maritima should pay the civil indemnity of P30,000.00 to the heirs of each of the victims. For mental anguish suffered due to the deaths of their relatives, Maritima should also pay to the heirs the sum of P10,000.00 each as moral damages. 14. Actual damages In addition, at the time of death, (1) Amparo delos Santos had with her cash in the sum of P1,000.00 and personal belongings valued at P500.00; (2) Teresa Pamatian, cash in the sum of P250.00 and personal belongings worth P200.00; and (3) Diego Salem, cash in the sum of P200.00 and personal belongings valued at P100.00. Likewise, the heirs of Amparo delos Santos and her deceased children incurred transportation and incidental expenses in connection with the trial in the amount of P500.00 while Dominador Salem, son of victim Diego Salem and nephew of victim Teresa Pamatian spent about P100.00 for expenses at the trial. With respect to Reyes, the evidence shows that at the time of the disaster, he had in his possession cash in the sum of P2,900.00 and personal belongings worth P100.00. Further, due to the disaster, Reyes was unable to work for 3 months due to shock and he was earning P9.50 a day or in a total sum of P855.00. He also spent about P100.00 for court expenses. For such losses and incidental expenses at the trial of the case,
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

22

Maritima should pay the amounts to the petitioners as actual damages. 15. Moral damages not due; Exception to rule that moral damages not recoverable in action based on breach of contract Reyes claim for moral damages cannot be granted inasmuch as the same is not recoverable in damage action based on the breach of contract of transportation under Articles 2219 and 2220 of the New Civil Code except (1) where the mishap resulted in the death of a passenger and (2) where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result (Rex Taxicab Co., Inc. v. Bautista, 109 Phil. 712). The exceptions do not apply in the present case since Reyes survived the incident and no evidence was presented to show that Maritima was guilty of bad faith. Mere carelessness of the carrier does not per se constitute or justify an inference of malice or bad faith on its part (Rex Taxicab Co., Inc. v. Bautista, supra). 16. Exemplary damages not due Anent the claim for exemplary damages, the Court is not inclined to grant the same in the absence of gross or reckless negligence in this case. 17. Attorneys fees As regards the claim for attorneys fees, the records reveal that the petitioners engaged the services of a lawyer and agreed to pay the sum of P3,000.00 each on a contingent basis. In view thereof, The Court finds the sum of P10,000.00 as a reasonable compensation for the legal services rendered.

Wallem directly to GPC, not to Pakistan Bank, and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay Pakistan Bank such that the latter, still in possession of the original bills of lading, refused to pay Macam through SolidBank. Since SolidBank already pre-paid Macam the value of the shipment, it demanded payment from respondent Wallem through 5 letters but was refused. Macam was thus allegedly constrained to return the amount involved to SolidBank, then demanded payment from Wallem in writing but to no avail. On 25 September 1991, Macam sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from China Ocean Shipping and/or Wallem before the RTC of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee. On 14 May 1993, the trial court ordered China Ocean Shipping and Wallem to pay, jointly and severally, (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as attorneys fees; and, (3) the costs. The counterclaims were dismissed for lack of merit. The Court of Appeals appreciated the evidence in a different manner. Thus, on 13 March 1996, the appellate court set aside the decision of the trial court and dismissed the complaint together with the counterclaims. On 5 July 1996 reconsideration was denied. Hence, the petition for review. The Supreme Court denied the petition; and affirmed the decision of respondent Court of Appeals of 13 March 1996, as well as its resolution of 5 July 1996 denying reconsideration. 1. Content of telex of 5 April 1989 The telex dated 5 April 1989 conveying Macams request read AS PER SHPRS REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L 2 and bank guarantee since for prepaid ship ofrt charges already fully paid our end. 2. Explanation for the delivery without presentation of bills of lading and bank guarantee The shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per request of Macam himself because the shipment consisted of perishable goods. It is a standard maritime practice, when immediate delivery is of the essence, for the shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of the bill of lading as that usually takes time. 3. Allegation of complaint does not deal with misdelivery of cargoes The submission of Macam that the fact that the shipment was not delivered to the consignee as stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof is a deviation from his cause of action before the trial
Bahiya Amanoddin Ibrahim

Macam vs. CA (GR 125524, 25 August 1999) Second Division, Bellosillo (J): 3 concur Facts: On 4 April 1989, Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and operated by China Ocean Shipping Co., through local agent Wallem Philippines Shipping, Inc. 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading HKG 99012 and exported through Letter of Credit HK 1031/30 issued by National Bank of Pakistan, Hongkong and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading HKG 99013 and exported through Letter of Credit HK 1032/30 also issued by Pakistan Bank. The Bills of Lading contained the following pertinent provision: One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order. The shipment was bound for Hongkong with Pakistan Bank as consignee and Great Prospect Company (GPC) of Kowloon, Hongkong as notify party. On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to Macams depository bank, Consolidated Banking Corporation (SolidBank), which paid Macam in advance the total value of the shipment of US$20,223.46. Upon arrival in Hongkong, the shipment was delivered by

Beta Sigma Lambda

Transportation Law Cases

23

court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank guarantee, i.e. (6) The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release of the shipment issued by the consignee of the goods. 4. Misdelivery never an issue when Macam wrote Wallem for the payment of the value of the cargoes Herein, when Macam wrote Wallem demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture. The letter, in part, states We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and 99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank guarantee. We were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong, did not release or endorse the original bills of lading. As a result thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods. 5. Article 1736 NCC Article 1736 of the Civil Code provides that The extraordinary responsibility of the common carriers 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. 6. When contract of carriage ends; Delivery to party other than actual consignee The extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. Herein, Pakistan Bank was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. The delivery of the cargoes to GPC as buyer/importer which, conformably with Article 1736 had, other than the consignee, the right to receive them was proper. 7. Effect of telegraphic transfers as to bank guarantee The telex of 5 April 1989 instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and bank guarantee per the respective shippers request since for prepaid shipt ofrt charges already fully paid. Macam was named therein as shipper and GPC as consignee with respect to Bill of Lading HKG 99012 and HKG 99013. In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using

telegraphic transfers, Macam dispenses with the bank guarantee because the goods are already fully paid. 8. Prior conduct between Macam and GPC as to perishable good; Bill of Lading not presented Macam has been transacting with GPC as buyer/importer for around 2 or 3 years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of Wallem is twice or thrice a week. The goods are released to GPC. It has been the practice of Macam to request the shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his people. In his several years of business relationship with GPC and Wallem, there was not a single instance when the bill of lading was first presented before the release of the cargoes. 9. On account of perishable goods as cargoes and prepayment by bank, Macam requested release of goods Against Macams claim of not remembering having made a request for delivery of subject cargoes to GPC without presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his testimony. He declared that it was his practice to ask the shipping lines to immediately release shipment of perishable goods through telephone calls by himself or his people. He no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into account that subject shipment consisted of perishable goods and SolidBank pre-paid the full amount of the value thereof, it is not hard to believe the claim of Wallem that Macam indeed requested the release of the goods to GPC without presentation of the bills of lading and bank guarantee. 10. GPC, not Pakistan Bank, is the consignee referred in telex The instruction in the telex of 5 April 1989 was to deliver the shipment to respective consignees. The originals of the 2 subject Bills of Lading are still in the possession of the Pakistani Bank. Conformably, to implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate delivery thereof to the buyer/importer is essentially a factor to reckon with. Besides, GPC is listed as one among the several consignees in the telex and the instruction in the telex was to arrange delivery of A/M shipment (not any party) to respective consignees without presentation of OB/L and bank guarantee. 11. Return of money to bank mere accommodation of SolidBank by Macam
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

24

Herein, Macam failed to substantiate his claim that he returned to SolidBank the full amount of the value of the cargoes. It is not far-fetched to entertain the notion that he merely accommodated SolidBank in order to recover the cost of the shipped cargoes from Wallem. SolidBank initially demanded payment from respondents through 5 letters. SolidBank must have realized the absence of privity of contract between itself and Wallem. That is why Macam conveniently took the cudgels for the bank.

liable to pay the Mecenas, the sum of P400,000.00 for the death of their parents, Perfecto A. Mecenas and Sofia P. Mecenas; to pay the Mecenas the sum of P15,000.00 as and for attorneys fees; plus costs of the suit; (b) each of Negros Navigation PNOC/PNOC Shipping to pay Ciocon the sum of P100,000.00 for the death of Manuel Ciocon, to pay Ciocon jointly and severally, the sum of P15,000.00 as and for attorneys fees, plus costs of the suit. Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial courts decision to the Court of Appeals. Later, PNOC and PNOC Shipping withdrew their appeal citing a compromise agreement reached by them with Negros Navigation; the Court of Appeals granted the motion by a resolution dated 5 September 1988, subject to the reservation made by Lilia Ciocon that she could not be bound by the compromise agreement and would enforce the award granted her by the trial court. In time, the Court of Appeals rendered a decision dated 26 January 1989, affirming the decision of the lower court with modification with respect to Civil Case 31525, wherein Negros Navigation and Capt. Santisteban are held jointly and severally liable to pay the Mecenas the amount of P100,000.00 as actual and compensatory damages and P15,000.00 as attorneys fees and the cost of the suit. The Mecenas filed a petition for review in light of the reduction of the amount of damages awarded. The Supreme Court granted the Petition for Review on Certiorari, reversed and set aside the Decision of the Court of Appeals insofar as it reduced the amount of damages awarded to the Mecenas to P100,000.00; restored the award granted by the trial court and augmented as follows: (a) P126,000.00 for actual damages; (b) P60,000.00 as compensatory damages for wrongful death; (c) P307,000.00 as moral damages; (d) P307,000.00 as exemplary damages making a total of P800,000.00; and (e) P15,000.00 as attorneys fees. The Court also ordered the Mecenas to pay the additional filing fees properly due and payable in view of the award made, which fees shall be computed by the Clerk of Court of the trial court, and shall constitute a lien upon the judgment awarded; with costs against Negros Navigation and Capt. Santisteban. 1. Mecenas suit based on breach of contract of carriage, not quasi-delict Both the trial court and the Court of Appeals considered the action (Civil Case Q-31525) brought by the sons and daughters of the deceased Mecenas spouses against Negros Navigation as based on quasidelict. The action, however, is more appropriately regarded as grounded on contract, the contract of carriage between the Mecenas spouses as regular passengers who paid for their boat tickets and Negros Navigation; the surviving children while not themselves passengers are in effect suing the carrier in representation of their deceased parents. 2. Ciocon suit based on both contract (Negros Navigation) and quasi-delict (PNOC and PNOC Shipping)
Bahiya Amanoddin Ibrahim

Mecenas vs. CA (GR 88052, 14 December 1989) Third Division, Feliciano (J): 4 concur Facts: At 6:20 a.m. of 22 April 1980, the M/T Tacloban City, a barge-type oil tanker of Philippine registry, with a gross tonnage of 1,241.68 tons, owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and headed towards Bataan. At about 1:00 p.m. of that same day, the M/V Don Juan, an interisland vessel, also of Philippine registry, of 2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc. (Negros Navigation) left Manila bound for Bacolod with 750 passengers listed in its manifest, and a complete set of officers and crew members. At about 10:30 p.m., the Tacloban City and the Don Juan collided at the Talbas Strait near Maestra de Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred, the sea was calm, the weather fair and visibility good. As a result of this collision, the M/V Don Juan sank and hundreds of its passengers perished. Among the ill-fated passengers were the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by their children, Jose, Romeo, Lilia, Orlando, Violeta (Acervo), Luzviminda, and Ofelia (Javier). On 29 December 1980, the Mecenas filed a complaint in the then Court of First Instance of Quezon City (Civil Case Q-31525), against Negros Navigation and Capt. Roger Santisteban, the captain of the Don Juan without, however, impleading either PNOC or PNOC Shipping. The children prayed for actual damages of not less than P100,000.00 as well as moral and exemplary damages in such amount as the Court may deem reasonable to award to them. Another complaint (Civil Case Q-33932), was filed in the same court by Lilia Ciocon claiming damages against Negros Navigation, PNOC and PNOC Shipping for the death of her husband Manuel Ciocon, another of the luckless passengers of the Don Juan. Manuel Ciocons body, too, was never found. The 2 cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, Branch 82. On 17 July 1986, after trial, the trial court rendered a decision, ordering (a) Negros Navigation and Capt. Santisteban jointly and severally

Beta Sigma Lambda

Transportation Law Cases

25

The suit (Civil Case Q-33932) filed by the widow Lilia Ciocon was correctly treated by the trial and appellate courts as based on contract (vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC and PNOC Shipping). 3. Liability of common carrier in action based upon breach of contract of carriage In an action based upon a breach of the contract of carriage, the carrier under our civil law is liable for the death of passengers arising from the negligence or wilful act of the carriers employees although such employees may have acted beyond the scope of their authority or even in violation of the instructions of the carrier, which liability may include liability for moral damages. 4. Article 2232 NCC Article 2332 of the Civil Code provides that In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 5. Both vessels at fault The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 March 1981, held that the Tacloban City was primarily and solely [sic] at fault and responsible for the collision. Initially, the Minister of National Defense upheld the decision of Commodore Ochoco. On Motion for Reconsideration, however, the Minister of National Defense reversed himself and held that both vessels had been at fault. The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion that the Minister of National Defense had reached that both the Tacloban City and the Don Juan were at fault in the collision. The trial court found that M/V Don Juan and Tacloban City became aware of each others presence in the area by visual contact at a distance of something like 6 miles from each other. They were fully aware that if they continued on their course, they will meet head on. Don Juan steered to the right; Tacloban City continued its course to the left. There can be no excuse for them not to realize that, with such maneuvers, they will collide. They executed maneuvers inadequate, and too late, to avoid collision. They are thus equally negligent and are liable for damages. The Court of Appeals, for its part, reached the same conclusion. There is, therefore, no question that the Don Juan was at least as negligent as the M/T Tacloban City in the events leading up to the collision and the sinking of the Don Juan. 6. Fact pointing to negligence reaching level of recklessness or gross negligence; Captain and crew playing mahjong The report of the Philippine Coast Guard Commandant set out that there had been fault or negligence on the part of Capt. Santisteban and his officers and crew before the collision and immediately after contact of the 2vessels. The decision of Commodore Ochoco said MS Don Juans Master, Capt. Rogelio Santisteban, was playing mahjong before and up to the time of collision.

Moreover, after the collision, he failed to institute appropriate measures to delay the sinking of MS Don Juan and to supervise properly the execution of his order of abandonship. As regards the officer on watch, Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform Capt. Santisteban of the imminent danger of collision and of the actual collision itself . Also, he failed to assist his master to prevent the fast sinking of the ship. The record also indicates that Auxiliary Chief Mate Antonio Labordo displayed laxity in maintaining order among the passengers after the collision. The behaviour of the captain of the Don Juan in this instance playing mahjong before and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least 750 passengers had been entrusted. 7. No such thing as off-duty hours for master of a vessel Whether or not Capt. Santisteban was off-duty or on-duty at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as offduty hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence, i.e. the duty to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. The record does not show that was the first or only time that Capt. Santisteban had entertained himself during a voyage by playing mahjong with his officers and passengers; Negros Navigation in permitting, or in failing to discover and correct such behaviour, must be deemed grossly negligent. 8. Captain failed to maintain seaworthiness of Don Juan Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, to institute appropriate measures to delay the sinking of M/V Don Juan. This appears to us to be a euphemism for failure to maintain the seaworthiness or the watertight integrity of the Don Juan. The record shows that the Don Juan sank within 10 to 15 minutes after initial contact with the Tacloban City. While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the 2 vessels. The officer-on-watch in the Don Juan admitted that he had failed to inform Capt. Santisteban not only of the imminent danger of collision but even of the actual collision itself. 9. Don Juan carrying more passengers than what it is certified to carry The Don Juan was carrying more passengers than
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

26

she had been certified as allowed to carry. The Certificate of Inspection, dated 27 August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the Don Juans home port, states Passengers allowed: 810, Total Persons Allowed: 864. The report of the Philippine Coast Guard stated that the Don Juan had been officially cleared with 878 passengers on-board when she sailed from the port of Manila on 22 April 1980 at about 1:00 p.m. This head-count of the passengers did not include the 126 crew members, children below 3 years old and 2 half-paying passengers which had been counted as one adult passenger. Thus, the total number of persons on board the Don Juan on that ill-starred night of 22 April 1980 was 1,004, or 140 persons more than the maximum number that could be safely carried by the Don Juan, per its own Certificate of Inspection. In addition, that only 750 passengers had been listed in its manifest for its final voyage; in other words, at least 128 passengers on board had not even been entered into the Don Juans manifest. The Don Juans Certificate of Inspection showed that she carried life boat and life raft accommodations for only 864 persons, the maximum number of persons she was permitted to carry; in other words, she did not carry enough boats and life rafts for all the persons actually on board that tragic night of 22 April 1980. 10. Don Juan grossly negligent The grossness of the negligence of the Don Juan is underscored by the facts: (1) The Don Juan was more than twice as fast as the Tacloban City. The Don Juans top speed was 17 knots; while that of the Tacloban City was 6.3. knots. (2) The Don Juan carried the full complement of officers and crew members specified for a passenger vessel of her class. (3) The Don Juan was equipped with radar which was functioning that night. (4) The Don Juans officer onwatch had sighted the Tacloban City on his radar screen while the latter was still 4 nautical miles away. Visual confirmation of radar contact was established by the Don Juan while the Tacloban City was still 2.7 miles away. In the total set of circumstances which existed, the Don Juan, had it taken seriously its duty of extraordinary diligence, could have easily avoided the collision with the Tacloban City. Indeed, the Don Juan might well have avoided the collision even if it had exercised ordinary diligence merely. 11. Rule 18 of the International Rules of the Road are not to be obeyed and construed without regard to all circumstances attendant It is true that the Tacloban City failed to follow Rule 18 of the International Rules of the Road which requires 2 power-driven vessels meeting end on or nearly end on each to alter her course to starboard (right) so that each vessel may pass on the port side (left) of the other. The Tacloban City, when the 2 vessels were only 0.3 of a mile apart, turned (for the second time) 15x to port side while the Don Juan veered hard to starboard. This circumstance, while it may have made the collision immediately inevitable, cannot, however, be viewed in isolation from the rest of the factual circumstances obtaining before and up to the collision. In any case, Rule 18 like all other

International Rules of the Road, are not to be obeyed and construed without regard to all the circumstances surrounding a particular encounter between 2 vessels. 12. Route observance of International Rules of Road does not per se relieve vessel from responsibility In ordinary circumstances, a vessel discharges her duty to another by a faithful and literal observance of the Rules of Navigation, and she cannot be held at fault for so doing even though a different course would have prevented the collision. This rule, however, is not to be applied where it is apparent that her captain was guilty of negligence or of a want of seamanship in not perceiving the necessity for, or in so acting as to create such necessity for, a departure from the rule and acting accordingly. In other words, route observance of the International Rules of the Road will not relieve a vessel from responsibility if the collision could have been avoided by proper care and skill on her part or even by a departure from the rules. 13. Intention of Tacloban City signaled to Don Juan Herein, the Don Juan having sighted the Tacloban City when it was still a long way off was negligent in failing to take early preventive action and in allowing the 2 vessels to come to such close quarters as to render the collision inevitable when there was no necessity for passing so near to the Tacloban City as to create that hazard or inevitability, for the Don Juan could choose its own distance. The Tacloban City, upon turning hard to port shortly before the moment of collision, signaled its intention to do so by giving 2 short blasts with its horn. The Don Juan gave no answering horn blast to signal its own intention and proceeded to turn hard to starboard. 14. Manchester Development Corp. vs. CA cannot be given retroactive effect The Manchester doctrine, which has been modified and clarified in subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. cannot be applied in the present case so as to work a striking out of that portion of the trial courts award which could be deemed notionally to constitute an award of moral and exemplary damages. Manchester was promulgated by the Court on 7 May 1987. Circular 7 of the Supreme Court, which embodied the doctrine in Manchester, is dated 24 March 1988. Upon the other hand, the complaint in the present case was filed on 29 December 1980, that is, long before either Manchester or Circular 7 of 24 March 1988 emerged. The decision of the trial court was itself promulgated on 17 July 1986, again, before Manchester and Circular 7 were promulgated. Manchester should not be applied retroactively to the present case where a decision on the merits had already been rendered by the trial court, even though such decision was then under appeal and had not yet reached finality. There is no indication at all that the Mecenas here sought simply to evade payment of the courts filing fees or to mislead the court in the assessment of the filing fees. In any event, herein, the Court applies Manchester as clarified and amplified by Sun Insurance Office Ltd.
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

27

(SIOL), by holding that the Mecenas shall pay the additional filing fee that is properly payable given the award specified below, and that such additional filing fee shall constitute a lien upon the judgment. 15. Disaggregation of original award of damages The amount of damages compensatory, moral and exemplary were properly imposable upon Negros Navigation and Capt. Santisteban. The original award of the trial court of P400,000.00 could well have been disaggregated by the trial court and the Court of Appeals in the following manner: (1) actual or compensatory damages proved in the course of trial consisting of actual expenses incurred by petitioners in their search for their parents bodies 126,000.00; (2) actual or compensatory damages in case of wrongful death (P30,000.00 x 2) P 60,000.00; (3) moral damages P107,000.00; (4) exemplary damages P107,000.00; or a total of P400,000.00. 16. Additional moral damages of P200,000 reasonable Considering that the legitimate children of the deceased spouses Mecenas, are 7 in number and that they lost both father and mother in one fell blow of fate, and considering the pain and anxiety they doubtless experienced while searching for their parents among the survivors and the corpses recovered from the sea or washed ashore, the Court believes that an additional amount of P200,000.00 for moral damages, making a total of P307,000.00 as moral damages, would be quite reasonable. 17. Judicial notice of dreadful regularity of maritime disasters The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea. 18. Purpose of exemplary damages; As to common carriers Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is in fact that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their property. The Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. Herein, considering the foregoing, an additional award

in the amount of P200,000.00 as exemplary damages, making a total award of P307,000.00 as exemplary damages, is quite modest. 19. Court may consider and resolve all issues to render substantial justice The Mecenas herein merely asked for the restoration of the P400,000.00 award of the trial court. The Court underscore once more, however, the firmly settled doctrine that the Court may consider and resolve all issues which must be decided in order to render substantial justice to the parties, including issues not explicitly raised by the party affected. In the present case, as in Kapalaran Bus Line v. Coronado, et al., both the demands of substantial justice and the imperious requirements of public policy compel the Court to the conclusion that the trial courts implicit award of moral and exemplary damages was erroneously deleted and must be restored and augmented and brought more nearly to the level required by public policy and substantial justice.

Ganzon vs. CA (GR L-48757, 30 May 1988) Second Division, Sarmiento (J): 3 concur Facts: On 28 November 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT Batman. Pursuant to this agreement, Mauro B. Ganzon sent his lighter Batman to Mariveles where it docked in 3 feet of water. On 1 December 1956, Gelacio Tumambing delivered the scrap iron to Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captains supervision. When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing. The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment. After sometime, the loading of the scrap iron was resumed. But on 4 December 1956, Acting Mayor Basilio Rub, accompanied by 3 policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron where the lighter was docked. The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron. Tumambing instituted in the CFI of Manila an action against Ganzon for damages based on culpa contractual. The trial court rendered a decision absolving Ganzon from liability. On appeal, however, the appellate court reversed and set aside the decision appealed from, and entered a new one ordering
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

28

Ganzon to pay Tumambing the sum of P5,895.00 as actual damages, the sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorneys fees; with costs against Ganzon. Hence, the petition for review on certiorari. The Supreme Court denied the petition, and affirmed the assailed decision of the Court of Appeals; with costs against Ganzon; the decision being immediately executory. 1. By delivery, the scraps are placed in the possession of the common carrier; Contract of carriage perfected; Duties of the carrier By the act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the carriers extraordinary responsibility for the loss, destruction, or determination of the goods commenced. Pursuant to Article 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. 2. Loss not due to any cause enumerated in Article 1734 of the Civil Code Herein, Ganzon has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil Code, 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; and (5) Order or act of competent public authority. 3. Negligence presumed; Burden of proof to prove otherwise Herein, Ganzon is presumed to have been at fault or to have acted negligently. By reason of this presumption, the court is not even required to make an express finding of fault or negligence before it could hold Ganzon answerable for the breach of the contract of carriage. Still, Ganzon 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. As it was, there was hardly any attempt on the part of Ganzon to prove that he exercised such extraordinary diligence. 4. Order by competent authority must be valid, to allow carriers absolution from liability as per caso fortuito Before Ganzon could be absolved from responsibility on the ground that he was ordered by competent public authority to unload the scrap iron, it must be

shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was accumulated by the appellant through separate purchases here and there from private individuals. The fact remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to shakedown Tumambing for P5,000.00. The order of the acting mayor did not constitute valid authority for Ganzon and his representatives to carry out. 5. The intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of its obligation The intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of its obligation. Herein, Ganzon 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 petitioners employees. The mere difficulty in the fulfillment of the obligation is not considered force majeure. The scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage. 6. No incompatibility between Civil Code provisions on common carriers and Articles 361 and 362 of the Code of Commerce; Article 1733 NCC modified Article 352 as to degree of diligence required of carrier There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 and 362 of the Code of Commerce which were the basis for the Courts ruling in Government of the Philippine Islands vs. Ynchausti & Co. and which Ganzon invokes in the petition. For Article 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising from the causes enumerated in Article 1734; and in these instances, the burden of proving that damages were caused by the fault or negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Article 362 appears to require of the carrier only ordinary diligence, the same is deemed to have been modified by Article 1733 of the Civil Code. 7. Findings on actual and exemplary damages not disturbed Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by the
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

29

Supreme Court. Besides, these were not sufficiently controverted by Ganzon.

The Supreme Court denied the petition, and affirmed the challenged decision of the Court of Appeals, subject to the modification as to the award for attorneys fees which is set aside; with costs against Trans-Asia. 1. Laws applicable Undoubtedly, there was, between Trans-Asia and Arroyo, a contract of common carriage. The laws of primary application then are the provisions on common carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all other matters not regulated thereby, the Code of Commerce and special laws. 2. Article 1733 NCC, Extraordinary diligence; Article 1755, Utmost diligence of very cautious persons Under Article 1733 of the Civil Code, Trans-Asia was bound to observe extraordinary diligence in ensuring the safety of Arroyo. That meant that Trans-Asia was, pursuant to Article 1755 of the said Code, bound to carry Arroyo safely as far as human care and foresight could provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. Herein, Trans-Asia failed to discharge this obligation. 3. Vessel was unseaworthy even before voyage began; Unseaworthiness defined, a clear breach of duty of carrier Before commencing the contracted voyage, Trans-Asia undertook some repairs on the cylinder head of one of the vessels engines. But even before it could finish these repairs, it allowed the vessel to leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine was not in perfect condition as sometime after it had run its course, it conked out. This caused the vessel to stop and remain adrift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of is duty prescribed in Article 1755 of the Civil Code. 4. Article 1764 NCC; Liability for damages As to its liability for damages, Article 1764 of the Civil Code expressly provides that Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by common carrier. The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary. 5. Actual and compensatory damages Actual or compensatory damages represent the adequate compensation for pecuniary loss suffered
Bahiya Amanoddin Ibrahim

Trans-Asia Shipping Lines vs. CA (GR 118126, 4 March 1996) Third Division, Davide Jr. (J): 4 concur Facts: Atty. Renato Arroyo, a public attorney, bought a ticket Trans-Asia Shipping Lines Inc., a corporation engaged in inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on 12 November 1991. At around 5:30p.m of the said day, Arroyo boarded the M/V Asia Thailand vessel. At that instance, Arroyo noticed that some repair work were being undertaken on the engine of the vessel. The vessel departed at around 11:00 p.m. with only 1 engine running. After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to Cagayan de Oro City. The captain acceded [sic] to their request and thus the vessel headed back to Cebu City. At Cebu City, Arroyo, together with the other passengers who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Arroyo, the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of Trans-Asia. On account of the failure of Trans-Asia to transport him to the place of destination on 12 November 1991, Arroyo filed before the trial court a complaint for damages against Trans-Asia. After due trial, the trial court rendered its decision and ruled that the action was only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as applicable law not Article 2180 of the same Code. The Court dismissed the complaint as it did not appear that Arroyo was left in the Port of Cebu because of the fault, negligence, malice or wanton attitude of Trans-Asias employees; and likewise dismissed Trans-Asias counterclaim is likewise dismissed it not appearing also that filing of the case by Arroyo was motivated by malice or bad faith. Unsatisfied, Arroyo appealed to the Court of Appeals (CA-GR CV 39901). In its decision of 23 November 1994, the Court of Appeals reversed the trial courts decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of the Civil Code and, accordingly, awarded (1) P20,000.00 as moral damages; (2) P10,000.00 as exemplary damages; (3) P5,000.00 as attorneys fees; and (4) Cost of suit. Trans-Asia instituted the petition for review on certiorari.

Beta Sigma Lambda

Transportation Law Cases

30

and for profits the obligee failed to obtain. 6. Damages resulting in contracts or quasicontracts In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably attributed to the non- performance of the obligation if he is guilty of fraud, bad faith, malice, or wanton attitude. 7. Moral damages Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they are the proximate result of, as herein, TransAsias breach of the contract of carriage. Anent a breach of a contract of common carriage, moral damages may be awarded if the common carrier acted fraudulently or in bad faith. 8. Exemplary damages; not a matter of right Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. In contracts and quasi-contracts, exemplary damages may be awarded if the defendant acted in a wanton fraudulent, reckless, oppressive or malevolent manner. It cannot, however, be considered as a matter of right; the court having to decide whether or not they should be adjudicated. Before the court may consider an award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or compensatory damages; but it is not necessary that he prove the monetary value thereof. 9. Article 1169 not applicable The Court of Appeals did not grant Arroyo actual or compensatory damages, reasoning that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code. This article, however, finds no application in the case because, as there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred, it was after the commencement of such voyage, more specifically, when the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out. 10. Article 698 of the Code of Commerce applies suppletorily to Article 1766 NCC; Rights and duties of parties arising out of delay As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically provides for such a situation. It reads In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel and a passenger should agree to await the

repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay shall be for his own account. This article applies suppletorily pursuant to Article 1766 of the Civil Code. 11. Article 698 of the Code of Commerce must be read with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 NCC; Arroyo not entitled to actual or compensatory damages The cause of the delay or interruption was Trans-Asias failure to observe extraordinary diligence. Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. In so reading, it means that Trans-Asia is liable for any pecuniary loss or loss of profits which Arroyo may have suffered by reason thereof. For Arroyo, such would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but he did not. As he and some passengers resolved not to complete the voyage, the vessel had to return to its port of origin and allow them to disembark. Arroyo then took Trans-Asias other vessel the following day, using the ticket he had purchased for the previous days voyage. Any further delay then in Arroyos arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual or compensatory damages must be proved, which Arroyo failed to do. There is no convincing evidence that he did not receive his salary for 13 November 1991 nor that his absence was not excused. 12. Trans-Asia is liable for moral and exemplary damages Trans-Asia is liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and reckless manner. 13. Trans-Asias assertion shows lack of genuine concern for safety of passengers; TransAsia cannot expect passengers to act in manner it desired Trans-Asias assertions that the safety of the vessel and passengers was never at stake because the sea was calm in the vicinity where it stopped as faithfully recorded in the vessels log book demonstrates beyond cavil Trans-Asias lack of genuine concern for the safety of its passengers. It was, perhaps, only providential than the sea happened to be calm. Even so, Trans-Asia should not expect its passengers to act in the manner it desired. The passengers were not stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar zone a nighttime is not the sole prerogative of the faintBahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

31

hearted. More so in the light of the many tragedies at sea resulting in the loss of lives of hopeless passengers and damage to property simply because common carriers failed in their duty to exercise extraordinary diligence in the performance of their obligations. 14. Article 2208 NCC Article 2208 of the Civil Code provides that In the absence of stipulation, attorney s fees and expenses of litigation, other than judicial costs cannot be recovered except: (1) When exemplary damages are awarded; (2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. 15. Award of attorneys fees not justified Under Article 2208 of the Civil Code, Attorneys fees are recoverable only in the concept of actual damages, not as moral damages nor judicial costs. Hence, to merit such an award, it is settled that the amount thereof must be proven. Moreover, such must be specifically prayed for and may not be deemed incorporated within a general prayer for such other relief and remedy as the court may deem just and equitable. The statement that the plaintiff was forced to litigate in order that he can claim moral and exemplary damages for the suffering he incurred does not satisfy the benchmark of factual, legal and equitable justification needed as basis for an award of attorneys fees. In sum, for lack of factual and legal basis, the award of attorneys fees must be deleted.

Pag-asa Sales for the latters lost cargo PhilGen now claims to be subrogated to all the contractual rights and claims which the consignee may have against the carrier, which is presumed to have violated the contract of carriage. The RTC (Branch 35) awarded the amount prayed for by PhilGen, i.e. the principal amount of P700,000.00 plus interest thereon at the legal rate computed from 29 March 1989, the date the complaint was filed until fully paid and another sum of P100,000.00 as attorneys fees and costs. On Coastwise Lighterages appeal to the Court of Appeals, the award was affirmed on 17 December 1993. Hence, the petition for review. The Supreme Court denied the petition, and affirmed the appealed decision. 1. Liability of shipowner in contract of affreightment over vessels, as common carrier, remains in the absence of the stipulation When the charter party contract is one of affreightment over the whole vessels, rather than a demise, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation. Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment on account of the distinctions between a contract of affreightment and a bareboat charter. Herein, Pag-asa Sales only leased three of Coastwise Lighterages vessels, in order to carry cargo from one point to another, but the possession, command mid navigation of the vessels remained with Coastwise Lighterage. The contract thus entered into with the consignee was one of affreightment. 2. Demise or bareboat charter of the vessel; Puromines vs. CA Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party all. 3. Contract of affreightment; Puromines vs. CA A contract of affreightment is one in which the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment or the charter hire. An owner who retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo . . .
Bahiya Amanoddin Ibrahim

Coastwise Lighterage Corp. vs. CA (GR 114167, 12 July 1995) Third Division, Francisco R. (J): 4 concur Facts: Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise Lighterage Corp., using the latters dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise. Upon reaching Manila Bay, while approaching Pier 18, one of the barges, Coastwise 9, struck an unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole 2 inches wide and 22 inches long. As a consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pagasa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, Philippine General Insurance Company (PhilGen) and against the carrier, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which. paid the consignee, Pag-asa Sales the amount of P700,000.00 representing the value of the damaged cargo of molasses. In turn, PhilGen then filed an action against Coastwise Lighterage before the RTC of Manila, seeking to recover the amount of P700,000.00 which it paid to

Beta Sigma Lambda

Transportation Law Cases

32

4. Presumption of negligence The law and jurisprudence on common carriers both hold that the mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case against the carrier. It follows then that the presumption of negligence that attaches to common carriers, once the goods it is sports are lost, destroyed or deteriorated, applies to Coastwise Lighterage. This presumption, which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in the present case. As a common carrier, Coastwise Lighterage is liable for breach of the contract of carriage, having failed to overcome the presumption of negligence with the loss and destruction of goods it transported, by proof of its exercise of extraordinary diligence. 5. Article 609 of the Code of Commerce Article 609 of the Code of Commerce, which subsidiarily governs common carriers (which are primarily governed by the provisions of the Civil Code) provides that captains, masters, or patrons of vessels must be Filipinos, have legal capacity to contract in accordance with this code, and prove the skill capacity and qualifications necessary to command and direct the vessel, as established by marine and navigation laws, ordinances or regulations, and must not be disqualified according to the same for the discharge of the duties of the position. 6. Carrier remised in observance of duties; Unlicensed patron presumes lack of skill and lack of familiarity to usual and safe routes taken by seasoned and authorized ones Far from having rendered service with the greatest skill and outmost foresight, and being free from fault, the carrier was culpably remiss in the observance of its duties. For one, Jesus R. Constantino, the patron of the vessel Coastwise 9 admitted that he was not licensed. Clearly, Coastwise Lighterages embarking on a voyage with an unlicensed patron violates Article 609 of the Code of Commerce. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose navigational skills are questionable, at the helm of the vessel which eventually met the fateful accident. It may also logically, follow that a person without license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. Had the patron been licensed he could be presumed to have both the skill and the knowledge that would have prevented the vessels hitting the sunken derelict ship that lay on their way to Pier 18. 7. Article 2207 NCC Article 2207 of the Civil Code provides that If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loses arising out of the wrong or breach of contract complained of the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who violated the contract.

8. Principle of subrogation explained Article 2207 NCC containing the equitable principle of subrogation has been applied in a long line of cases including Compania Maritima v. Insurance Company of North America; Firesmans Fund Insurance Company v. Jamilla & Company, Inc., and Pan Malayan Insurance Corporation v. Court of Appeals, wherein the Court explained that Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operated as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any private of contract or upon written assignment of, claim. It accrues simply upon payment of the insurance claim by the insurer. Herein, Coastwise Lighterage was liable for breach of the contract of carriage it entered into with the Pag-asa Sales. However, for the damage sustained by the loss of the cargo which the carrier was transporting, it was not the carrier which paid the value thereof to Pag-asa Sales but the latters insurer, PhilGen. Upon payment by insurer PhilGen of the amount of P700,000.00 to Pag-asa Sales, the consignee of the cargo of molasses totally damaged while being transported by Coastwise Lighterage, the former was, subrogated into all the rights which Pag-asa Sales may have had against the carrier, Coastwise Lighterage.

Magellan Manufacturing Marketing vs. CA [GR 95529, 22 August 1991] Second Division, Regalado (J): 3 concur, 1 on leave Facts: On 20 May 1980, Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in consideration of $23,220.00. As payment thereof, a letter of credit was issued to MMMC by the buyer. Through its president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, through its solicitor, one Mr. King, to ship the anahaw fans through Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transshipment is not allowed under the letter of credit. On 30 June 1980, MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied Bank. The bank then credited the amount of US$23 ,220.00 covered by the letter of credit to appellants account. However, when MMMCs president James Cu, went back to the bank later, he was informed that the payment was refused by the buyer allegedly because there was no on-board bill of lading, and there was a transshipment of goods. As a result of the refusal of the buyer to accept, upon MMMCs request, the anahaw fans were shipped back
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

33

to Manila by OOCL and FE Zuellig, for which the latter demanded from MMMC payment of P246,043.43. MMMC abandoned the whole cargo and asked OOCL and FE Zuellig for damages. On 20 July 1981 MMMC filed the complaint in this case praying that OOCL and FE Zuellig be ordered to pay whatever MMMC was not able to earn from Choju Co., Ltd., amounting to P174,150.00 and other damages like attorneys fees since OOCL and FE Zuellig are to blame for the refusal of Choju Co., Ltd. to accept the Anahaw fans. In answer thereto the latter alleged that the bill of lading clearly shows that there will be a transshipment and that MMMC was well aware that MV (Pacific) Despatcher was only up to Hongkong where the subject cargo will be transferred to another vessel for Japan. They this filed a counterclaim praying that MMMC be ordered to pay freight charges from Japan to Manila and the demurrages in Japan and Manila amounting to P298,150.93. The lower court decided the case in favor of OOCL and FE Zuellig. On appeal to the Court of Appeals, the finding of the lower court that MMMC agreed to a transshipment of the goods was affirmed but the finding that petitioner is liable for P298,150.93 was modified. It was reduced to P52,102.45 which represents the freight charges and demurrages incurred in Japan but not for the demurrages incurred in Manila. MMMC, dissatisfied with the decision moved for reconsideration. Denied, it filed a petition for review on certiorari. The Supreme Court affirmed the judgment of the Court of Appeals with the modification that MMMC is likewise absolved of any liability, thus setting aside the award of P52,102.45 with legal interest granted by the appellate court on OOCL and FE Zuelligs counterclaim, said counterclaim being dismissed, without pronouncement as to costs. 1. Transshipment defined Transshipment, in maritime law, is defined as the act of taking cargo out of one ship and loading it in another, or the transfer of goods from the vessel stipulated in the contract of affreightment to another vessel before the place of destination named in the contract has been reached, or the transfer for further transportation from one ship or conveyance to another. Either in its ordinary or its strictly legal acceptation, there is transshipment whether or not the same person, firm or entity owns the vessels. In other words, the fact of transhipment is not dependent upon the ownership of the transporting ships or conveyances or in the change of camera, but rather on the fact of actual physical transfer of cargo from one vessel to another. 2. Transshipment exists in present case There was transhipment, as there unmistakably appears on the face of the bill of lading the entry Hong Kong in the blank space labeled Transshipment, which can only mean that transshipment actually took place. This fact is further bolstered by the certification issued by F.E. Zuellig, Inc.

dated 19 July 1980, although it carefully used the term transfer instead of transshipment. Nonetheless, no amount of semantic juggling can mask the fact that transshipment in truth occurred in this case. 3. A bill of lading operates both as a receipt and as a contract A bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a contract, it names the parties, which includes the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties. Being a contract, it is the law between the parties who are bound by its terms and conditions provided that these are not contrary to law, morals, good customs, public order and public policy. A bill of lading usually becomes effective upon its delivery to and acceptance by the shipper. It is presumed that the stipulations of the bill were, in the absence of fraud, concealment or improper conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the bill or not. 4. Claims of mistake militates against nature of bill of lading The claim that there was a mistake in documentation on the part of OOCL and FE Zuellig militates against the conclusiveness of the bill of lading insofar as it reflects the terms of the contract between the parties, as an exception to the parol evidence rule, and would therefore permit it to explain or present evidence to vary or contradict the terms of the written agreement, that is, the bill of lading involved. 5. Receipt of bill lading without objection presumed to mean acceptance of contents as correct and assent thereto A shipper who receives a bill of lading without objection after an opportunity to inspect it, and permits the carrier to act on it by proceeding with the shipment is presumed to have accepted it as correctly stating the contract and to have assented to its terms. The acceptance of the bill without dissent raises the presumption that all the terms therein were brought to the knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents and acceptance under such circumstances makes it a binding contract. 6. Parol evidence rule vis--vis contracts Under the parol evidence rule, the terms of a contract are rendered conclusive upon the parties, and evidence aliunde is not admissible to vary or contradict a complete and enforceable agreement embodied in a document, subject to well defined exceptions which do not obtain in this case. The parol evidence rule is based on the consideration that when the parties have reduced their agreement on a particular matter into writing, all their previous and contemporaneous agreements on the matter are merged therein.
Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

34

Accordingly, evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid instrument. The mistake contemplated as an exception to the parol evidence rule is one which is a mistake of fact mutual to the parties. Furthermore, the rules on evidence, as amended, require that in order that parol evidence may be admitted, said mistake must be put in issue by the pleadings, such that if not raised inceptively in the complaint or in the answer, as the case may be, a party can not later on be permitted to introduce parol evidence thereon. 7. Terms of contract in bill of lading clear and conclusive The terms of the contract as embodied in the bill of lading are clear and thus obviates the need for any interpretation. The intention of the parties which is the carriage of the cargo under the terms specified thereunder and the wordings of the bill of lading do not contradict each other. The terms of the contract being conclusive upon the parties and judging from the contemporaneous and subsequent actuations of petitioner, to wit, personally receiving and signing the bill of lading and paying the freight charges, there is no doubt that petitioner must necessarily be charged with full knowledge and unqualified acceptance of the terms of the bill of lading and that it intended to be bound thereby. 8. Transshipment of freight without legal excuse is a violation of contract; No cause to suppose shippers to be unaware of custom It is a well-known commercial usage that transshipment of freight without legal excuse, however competent and safe the vessel into which the transfer is made, is a violation of the contract and an infringement of the right of the shipper, and subjects the carrier to liability if the freight is lost even by a cause otherwise excepted. It is highly improbable to suppose that OOCL and FE Zuellig, having been engaged in the shipping business for so long, would be unaware of such a custom of the trade as to have undertaken such transshipment without petitioners consent and unnecessarily expose themselves to a possible liability. Verily, they could only have undertaken transshipment with the shippers permission, as evidenced by the signature of James Cu. 9. Knowledge of difference between bill of lading and on board bill of lading expected from those engaged in export industry for long periods The refusal of acceptance of the cargo of anahaw fans by Choju Co., Ltd. was also made on the ground that the bill of lading that was issued was not an on board bill of lading, in clear violation of the terms of the letter of credit issued in favor of MMMC. MMMC knew from the onset that its buyer, Choju Co., Ltd., particularly required that there be an on board bill of lading, obviously due to the guaranty afforded by such a bill of lading over any other kind of bill of lading. The buyer could not have insisted on such a stipulation on a pure whim or caprice, but rather because of its reliance on the safeguards to the cargo that having an on board

bill of lading ensured. Herein petitioner cannot feign ignorance of the distinction between an or board and a received for shipment bill of lading. It is only to be expected that those long engaged in the export industry should be familiar with business usages and customs. 10. On board bill of lading defined An on board bill of lading is one in which it is stated that the goods have been received on board the vessel which is to carry the goods, whereas a received for shipment bill of lading is one in which it is stated that the goods have been received for shipment with or without specifying the vessel by which the goods are to be shipped. Received for shipment bills of lading are issued whenever conditions are not normal and there is insufficiency of shipping space. An on board bill of lading is issued when the goods have been actually placed aboard the ship with every reasonable expectation that the shipment is as good as on its way. It is, therefore, understandable that a party to a maritime contract would require an on board bill of lading because of its apparent guaranty of certainty of shipping as well as the seaworthiness of the vessel which is to carry the goods. 11. FE Zuelligs certification cannot qualify bill of lading into an ob board bill of lading The certification of F.E. Zuellig, Inc. cannot qualify the bill of lading, as originally issued, into an on board bill of lading as required by the terms of the letter of credit issued in favor of MMMC. For one, the certification was issued only on 19 July 1980, way beyond the expiry date of 30 June 1980 specified in the letter of credit for the presentation of an on board bill of lading. Thus, even assuming that by a liberal treatment of the certification it could have the effect of converting the received for shipment bill of lading into an on board of bill of lading, such an effect may be achieved only as of the date of its issuance, that is, on 19 July 1980 and onwards. The fact remains, though, that on the crucial date of 30 June 1980 no on board bill of lading was presented by petitioner in compliance with the terms of the letter of credit and this default consequently negates its entitlement to the proceeds thereof. Said certification, if allowed to operate retroactively, would render illusory the guaranty afforded by an on board bill of lading, that is, reasonable certainty of shipping the loaded cargo aboard the vessel specified, not to mention that it would indubitably be stretching the concept of substantial compliance too far. 12. Claim of contract of adhesion cannot be upheld as bill of lading is clear MMMC cannot escape liability by adverting to the bill of lading as a contract of adhesion, thus warranting a more liberal consideration in its favor to the extent of interpreting ambiguities against OOCL and FE Zuellig as allegedly being the parties who gave rise thereto. The bill of lading is clear on its face. There is no occasion to speak of ambiguities or obscurities whatsoever. All of its terms and conditions are plainly worded and commonly understood by those in the business.

Bahiya Amanoddin Ibrahim

Beta Sigma Lambda

Transportation Law Cases

35

13. Certain contracts of adhesion, such as bill of lading, not prohibited It is conceded that bills of lading constitute a class of contracts of adhesion. However, as ruled in the earlier case of Ong Yiu us. Court of Appeals, et al. and reiterated in Servando, et al. vs. Philippine Steam Navigation Co., plane tickets as well as bills of lading are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. 14. Violation of letter of credit would defeat right to collect proceeds thereof Any violation of the terms and conditions of the letter of credit as would defeat its right to collect the proceeds thereof was, therefore, entirely of MMMCs making for which it must bear the consequences. Whether there was a violation of the terms and conditions of the letter of credit, or whether such violation was the cause or motive for the rejection by MMMCs Japanese buyer should not affect OOCL and FE Zuellig since they were not privies to the terms and conditions of MMMCs letter of credit and cannot therefore be held liable for any violation thereof by any of the parties thereto. 15. Demurrage defined Demurrage, in its strict sense, is the compensation provided for in the contract of affreightment for the detention of the vessel beyond the time agreed on for loading and unloading. Essentially, demurrage is the claim for damages for failure to accept delivery. In a broad sense, every improper detention of a vessel may be considered a demurrage. Liability for demurrage, using the word in its strictly technical sense, exists only when expressly stipulated in the contract. Using the term in its broader sense, damages in the nature of demurrage are recoverable for a breach of the implied obligation to load or unload the cargo with reasonable dispatch, but only by the party to whom the duty is owed and only against one who is a party to the shipping contract. Notice of arrival of vessels or conveyances, or of their placement for purposes of unloading is often a condition precedent to the right to collect demurrage charges. 16. Abandonment of goods releases MMMC from liability from demurrage charges Ordinarily, the shipper is liable for freightage due to the fact that the shipment was made for its benefit or under its direction and, correspondingly, the carrier is entitled to collect charges for its shipping services. By virtue of the exercise of its option to abandon the goods so as to allow OOCL and FE Zuellig to sell the same at a public auction and to apply the proceeds thereof as payment for the shipping and demurrage charges, MMMC was released from liability for the sum of P52,102.43 since such amount represents the shipping and demurrage charges from which it is considered to have been released due to the abandonment of goods. 17. OOCL offered MMMC option, cannot renege of offer unilaterally OOCL and FE Zuellig unequivocally offered MMMC, on

20 March 1981, the option of paying the shipping and demurrage charges in order to take delivery of the goods or of abandoning the same so that the former could sell them at public auction and thereafter apply the proceeds in payment of the shipping and other charges. Responding thereto, in a letter dated 3 April 1981, MMMC seasonably communicated its decision to abandon to the goods in favor of the former with the specific instruction that any excess of the proceeds over the legal costs and charges be turned over to MMMC. Having given such option, especially since it was accepted by MMMC, OOCL and FE Zuellig are estopped from reneging thereon. To allow either of them to unilaterally back out on the offer and on the exercise of the option would be to countenance abuse of rights as an order of the day, doing violence to the long entrenched principle of mutuality of contracts. 18. Grounds for abandonment of goods In overland transportation, an unreasonable delay in the delivery of transported goods is sufficient ground for the abandonment of goods. By analogy, this can also apply to maritime transportation. Further, MMMC can properly abandon the goods, not only because of the unreasonable delay in its delivery but because of the option which was categorically granted to and exercised by it as a means of settling its liability for the cost and expenses of reshipment. Said choice having been duly communicated, the same is binding upon the parties on legal and equitable considerations of estoppel.

Bahiya Amanoddin Ibrahim