TRANSPORTATION DIGEST – TRANSPORTATION OF GOODS A.M.+D.G. TRANSPORTATION – Atty.

Abaño

DELSAN TRANSPORT vs. CA American Home was not legally liable to Caltex due to the latter’s
breach of implied warranty under the marine insurance policy that the
FACTS vessel was seaworthy.
2. Delsan avers that although chief officer had merely a 2 nd officer’s
Caltex engaged into a contract of affreightment with the petitioner, Delsan license, he was qualified to act as the vessel’s chief officer. In fact, all
Transport Lines, Inc.(Delsan), for a period of one year whereby the said common the crew and officers of MTT Maysun were exonerated in the
carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan administrative investigation.
Refinery to different parts of the country. Under the contract, petitioner took on
board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be ISSUES
delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured
with private respondent, American Home Assurance Corporation (American Home) 1. W/N the payment made by American Home to Caltex for the insured value
of the lost cargo amounted to an admission that the vessel was seaworthy,
The vessel sank in the early morning of August 15, 1986 near Panay Gulf in the thus precluding any action for recovery against the petitioner. NO
Visayas taking with it the entire cargo of fuel oil. 2. W/N the non-presentation of the marine insurance policy bars the
complaint for recovery of sum of money for lack of cause of action. NO
Subsequently, American Home paid Caltex the sum of Php 5,096,635.57
representing the insured value of the cargo. Exercising its right to subrogation under RULING
Article 2207 of the New Civil Code, the American Home demanded the Delsan the
same amount it paid to Caltex. First Issue:

Due to its failure to collect from Delsan despite prior demand, American Home filed The payment made by American Home for the insured value of the lost cargo
a complaint with the RTC of Makati for collection of a sum of money. operates as waiver of its right to enforce the term of the implied warranty against
Caltex under the marine insurance policy. However, the same cannot be validly
The trial court dismissed the complaint against Delsan. It ruled that the vessel, MT interpreted as an automatic admission of the vessel’s seaworthiness by American
Maysun, was seaworthy and that the incident was caused by unexpected inclement Home as to foreclose recourse against Delsan for any liability under its contractual
weather condition or force majeure, thus exempting the common carrier from obligation as a common carrier. The fact of payment grants American Home
liability for the loss of its cargo. subrogatory right which enables it to exercise legal remedies that would otherwise
be available to Caltex as owner of the lost cargo against Delsan, the common carrier.
The CA reversed. It gave credence to the weather report issued by PAGASA which
stated that the waves were only .7 to 2 meters in height in the vicinity of the Panay From the nature of their business and for reasons of public policy, common carriers
Gulf at the day the ship sank, in contrast to the claim of the crew of the ship that the are bound to observe extraordinary diligence in the vigilance over the goods and for
waves were 20 feet high. the safety of passengers transported by them, according to all the circumstances of
each case. In the event of loss, destruction or deterioration of the insured goods,
Delsan contends the following common carriers shall be responsible unless the same is brought about, among
1. Delsan theorized that when the American Home paid Caltex the value others, by flood, storm, earthquake, lightning or other natural disaster or calamity.
of its lost cargo, the act of American Home is equivalent to a tacit In all other cases, if the goods are lost, destroyed or deteriorated, common carriers
recognition that the ill-fated vessel was seaworthy; otherwise,

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are presumed to have been at fault or to have acted negligently, unless they prove LORENZO SHIPPING vs. BJ MATHEL
they observed extraordinary diligence.
FACTS
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to
Caltex, Delsan attributes the sinking of MT Maysun to fortuitous event or force Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in
majeure. Although the testimony of the captain and chief mate that there were coastwise shipping. Respondent BJ Marthel International, Inc. is an importer and
strong winds and waves 20 feet high was effectively rebutted and belied by the distributor of different brands of engines and spare parts.
weather report of PAGASA. Thus, as the CA correctly ruled, Delsan’s vessel, MT
Maysun, sank with its entire cargo for the reason that it was not seaworthy. There Respondent supplied petitioner with spare parts for the latter's marine engines.
was no squall or bad weather or extremely poor sea condition in the vicinity where According to the quotation it sent, deliveries of such items are “within 2 months
the said vessel sank. after receipt of firm order.” Petitioner thereafter issued to respondent Purchase
Order No. 13839 for the procurement of one set of cylinder liner, valued at
Additionally, the exoneration of MT Maysun’s officers and crew merely concern their P477,000, to be used for M/V Dadiangas Express. The purchase order was co-signed
respective administrative liabilities. It does not in any way operate to absolve Delsan by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo, respondent’s sales
the common carrier from its civil liability arising from its failure to observe manager.
extraordinary diligence in the vigilance over the goods it was transporting and for
the negligent acts or omissions of its employees, the determination of which Instead of paying the 25% down payment (indicated in the purchase order) for the
properly belongs to the courts. In the case at bar, Delsan is liable for the insured first cylinder liner, petitioner issued in favor of respondent ten postdated checks.
value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut The checks were supposed to represent the full payment of the aforementioned
the presumption of fault or negligence as common carrier occasioned by the cylinder liner.
unexplained sinking of its vessel, MT Maysun, while in transit.
Subsequently, petitioner issued Purchase Order No. 14011, for another unit of
Second Issue: cylinder liner. This purchase order stated the term of payment to be "25% upon
delivery, balance payable in 5 bi-monthly equal installments." Like the first purchase
It is the view of the SC that the presentation in evidence of the marine insurance order, the second purchase order did not state the date of the cylinder liner's
policy is not indispensable in this case before the insurer may recover from the delivery.
common carrier the insured value of the lost cargo in the exercise of its subrogatory
right. The subrogation receipt, by itself, is sufficient to establish not only the On 26 January 1990, respondent deposited petitioner's check that was postdated 18
relationship of American Home as insurer and Caltex, as the assured shipper of the January 1990, however, the same was dishonored by the drawee bank due to
lost cargo of industrial fuel oil, but also the amount paid to settle the insurance insufficiency of funds. The remaining nine postdated checks were eventually
claim. The right of subrogation accrues simply upon payment by the insurance returned by respondent to petitioner.
company of the insurance claim.
Petitioner claimed that it replaced said check with a good one, the proceeds of
which were applied to its other obligation to respondent. For its part, respondent
insisted that it returned said postdated check to petitioner.

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On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's The RTC dismissed the complaint which ordered the plaintiff to pay P50,000.00 to
warehouse in Manila. The sales invoices evidencing the delivery of the cylinder the defendant. It held respondent bound to the quotation it submitted to petitioner
liners both contain the notation "subject to verification" under which the signature particularly with respect to the terms of payment and delivery of the cylinder liners.
of petitioner's warehouseman, appeared. It also declared that respondent had agreed to the cancellation of the contract of
sale when it returned the postdated checks issued by petitioner.
Respondent sent a Statement of Account and respondent's vice-president sent a The CA reversed the decision of the RTC.
demand letter dated to petitioner requiring the latter to pay. Petitioner sent the
former a letter offering to pay only P150,000 for the cylinder liners. In said letter, ISSUES
petitioner claimed that as the cylinder liners were delivered late and due to the 1. Whether or not respondent incurred delay in performing its obligation
scrapping of the M/V Dadiangas Express, it (petitioner) would have to sell the under the contract of sale - NO
cylinder liners in Singapore and pay the balance from the proceeds of said sale. 2. Whether or not said contract was validly rescinded by petitioner. -NO

Respondent filed an action for sum of money and damages before the RTC. Prior to RULING
the filing of a responsive pleading, respondent filed an amended complaint with
preliminary attachment. The amendments also pertained to the issuance by Petitioner maintains that its obligation to pay fully the purchase price was
petitioner of the postdated checks and the amounts of damages claimed. extinguished because the adverted contract was validly terminated due to
respondent's failure to deliver within the two-month period. The threshold
The RTC granted respondent's prayer for the issuance of a preliminary attachment. question, then, is: Was there late delivery of the subjects of the contract of sale to
Petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment justify petitioner to disregard the terms of the contract considering that time was of
attaching thereto a counter-bond which the RTC allowed. the essence thereof?

Petitioner afterwards filed its Answer alleging therein that time was of the essence In determining whether time is of the essence in a contract, the ultimate criterion is
in the delivery of the cylinder liners and that the delivery on 20 April 1990 of said the actual or apparent intention of the parties and before time may be so regarded
items was late as respondent committed to deliver said items "within two (2) by a court, there must be a sufficient manifestation, either in the contract itself or
months after receipt of firm order." the surrounding circumstances of that intention. Petitioner insists that although its
purchase orders did not specify the dates when the cylinder liners were supposed to
Respondent filed a Second Amended Complaint with Preliminary Attachment which be delivered, nevertheless, respondent should abide by the term of delivery
dealt solely with the number of postdated checks issued by petitioner as full appearing on the quotation it submitted to petitioner. Petitioner theorizes that the
payment for the first cylinder liner it ordered from respondent. (In the first quotation embodied the offer from respondent while the purchase order
amended complaint, only nine postdated checks were involved, in its second represented its (petitioner's) acceptance of the proposed terms of the contract of
amended complaint, there were ten postdated checks). sale. Thus, petitioner is of the view that these two documents "cannot be taken
separately as if there were two distinct contracts." We do not agree.
Petitioner filed a Motion alleging therein that the cylinder liners run the risk of
obsolescence and deterioration to the prejudice of the parties to this case. Thus, While this Court recognizes the principle that contracts are respected as the law
petitioner prayed that it be allowed to sell the cylinder liners at the best possible between the contracting parties, this principle is tempered by the rule that the
price and to place the proceeds of said sale in escrow. This motion was granted. intention of the parties is primordial and "once the intention of the parties has been

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ascertained, that element is deemed as an integral part of the contract as though it notify respondent of said date is fatal to its claim that time was of the essence in the
has been originally expressed in unequivocal terms." subject contracts of sale.

In the present case, we cannot subscribe to the position of petitioner that the Finally, the ten postdated checks issued in November 1989 by petitioner and
documents, by themselves, embody the terms of the sale of the cylinder liners. One received by the respondent as full payment of the purchase price of the first
can easily glean the significant differences in the terms as stated in the formal cylinder liner supposed to be delivered on 02 January 1990 fail to impress. It is not
quotation and Purchase Order No. 13839 with regard to the due date of the down an indication of failure to honor a commitment on the part of the respondent. The
payment for the first cylinder liner and the date of its delivery as well as Purchase earliest maturity date of the checks was 18 January 1990. As delivery of said checks
Order No. 14011 with respect to the date of delivery of the second cylinder liner. could produce the effect of payment only when they have been cashed,
While the quotation provided by respondent evidently stated that the cylinder liners respondent's obligation to deliver the first cylinder liner could not have arisen as
were supposed to be delivered within two months from receipt of the firm order of early as 02 January 1990 as claimed by petitioner since by that time, petitioner had
petitioner and that the 25% down payment was due upon the cylinder liners' yet to fulfill its undertaking to fully pay for the value of the first cylinder liner. As
delivery, the purchase orders prepared by petitioner clearly omitted these explained by respondent, it proceeded with the placement of the order for the
significant items. The petitioner's Purchase Order No. 13839 made no mention at all cylinder liners with its principal in Japan solely on the basis of its previously
of the due dates of delivery of the first cylinder liner and of the payment of 25% harmonious business relationship with petitioner.
down payment. Its Purchase Order No. 14011 likewise did not indicate the due date
of delivery of the second cylinder liner. As an aside, let it be underscored that "[e]ven where time is of the essence, a
breach of the contract in that respect by one of the parties may be waived by the
In the instant case, the formal quotation provided by respondent represented the other party's subsequently treating the contract as still in force." Petitioner's receipt
negotiation phase of the subject contract of sale between the parties. As of that of the cylinder liners when they were delivered to its warehouse on 20 April 1990
time, the parties had not yet reached an agreement as regards the terms and clearly indicates that it considered the contract of sale to be still subsisting up to
conditions of the contract of sale of the cylinder liners. Petitioner could very well that time. Indeed, had the contract of sale been cancelled already as claimed by
have ignored the offer or tendered a counter-offer to respondent while the latter petitioner, it no longer had any business receiving the cylinder liners even if said
could have, withdrawn or modified the same. The parties were at liberty to discuss receipt was "subject to verification." By accepting the cylinder liners when these
the provisions of the contract of sale prior to its perfection. In this connection, we were delivered to its warehouse, petitioner indisputably waived the claimed delay in
turn to the testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer were, the delivery of said items.
indeed, renegotiated prior to the issuance of Purchase Order No. 13839.
We, therefore, hold that in the subject contracts, time was not of the essence. The
The law implies, however, that if no time is fixed, delivery shall be made within a delivery of the cylinder liners on 20 April 1990 was made within a reasonable period
reasonable time, in the absence of anything to show that an immediate delivery of time considering that respondent had to place the order for the cylinder liners
intended. with its principal in Japan and that the latter was, at that time, beset by heavy
volume of work.
We also find significant the fact that while petitioner alleges that the cylinder liners
were to be used for dry dock repair and maintenance of its M/V Dadiangas Express There having been no failure on the part of the respondent to perform its
between the later part of December 1989 to early January 1990, the record is bereft obligation, the power to rescind the contract is unavailing to the petitioner.
of any indication that respondent was aware of such fact. The failure of petitioner to

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Here, there is no showing that petitioner notified respondent of its intention to ISSUES
rescind the contract of sale between them. Quite the contrary, respondent's act of
proceeding with the opening of an irrevocable letter of credit on 23 February 1990 1. W/N a cause of action exists against Maersk Line given that there was a
belies petitioner's claim that it notified respondent of the cancellation of the dismissal of the complaint against Eli Lilly? Yes, but not under the cross
contract of sale. Truly, no prudent businessman would pursue such action knowing claim rather because Maersk was an original party.
that the contract of sale, for which the letter of credit was opened, was already 2. W/N Castillo is entitled to damages resulting from delay in the delivery of
rescinded by the other party. the shipment in the absence in the bill of lading of a stipulation on the
delivery of goods? Yes.
MAERSK LINES vs. CA
RULING
FACTS
Petitioner Maersk Line is engaged in the transportation of goods by sea, doing The complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and
business in the Philippines through its general agent Compania de Tabacos de petitioner as carrier. Petitioner Maersk Line being an original party defendant upon
Filipinas, while private respondent Efren Castillo is the proprietor of Ethegal whom the delayed shipment is imputed cannot claim that the dismissal of the
Laboratories, a firm engaged in the manufacture of pharmaceutical products. complaint against Eli Liily inured to its benefit.

On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of Puerto Rico 600,000 empty Petitioner contends as well that it cannot be held liable because there was no
gelatin capsules for the manufacture of his pharmaceutical products. The capsules special contract under which the carrier undertook to deliver the shipment on or
were placed in 6 drums of 100,000 capsules each valued at US$1,668.71. Shipper Eli before a specific date and that the Bill of Lading provides that “The Carrier does not
Liily,Inc. advised Castillo through a Memorandum of Shipment that the products undertake that the Goods shall arrive at port of discharge or the place of delivery at
were already shipped on board MV “Anders Maesrkline” and date of arrival to be any particular time…”. However, although the SC stated that a bill of lading being a
April 3, 1977. contract of adhesion will not be voided on that basis alone, it did declare that the
questioned provision to be void because it has the effect of practically leaving the
However, for unknown reasons, said cargoes of capsules were diverted to date of arrival of the subject shipment on the sole determination and will of the
Richmond, VA and then transported back to Oakland, CA and with the goods finally carrier. It is established that without any stipulated date, the delivery of shipment or
arriving in the PI on June 10, 1977. Consignee Castillo refused to take delivery of the cargo should be made within a reasonable time. In the case at hand, the SC declared
goods on account of its failure to arrive on time, and filed an action for rescission of that a delay in the delivery of the goods spanning a period of 2 months and 7 days
contract with damages against Maersk and Eli Lilly alleging gross negligence and falls way beyond the realm of reasonableness.
undue delay.

Maersk contends that it is liable only in case of loss, destruction or deterioration of

goods under Art 1734 NCC while Eli Lilly in its cross claim argued that the delay was
due solely to the negligence of Maersk Line. Trial Court dismissed the complaint
against Eli Lilly and the latter withdrew cross claim but TC still held Maersk liable
and CA affirmed with modifications.

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FGU INSURANCE vs. CA Cerveza Negra. The value per case of Pale Pilsen was Forty-Five Pesos and Twenty
Centavos (P45.20). The value of a case of Cerveza Negra was Forty-Seven Pesos and
FACTS Ten Centavos (P47.10), hence, SMC’s claim against ANCO amounted to One Million
Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos
Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was (P1,346,197.00).
engaged in the shipping business. It owned the M/T ANCO tugboat and the D/B As a consequence of the incident, SMC filed a complaint for Breach of Contract of
Lucio barge which were operated as common carriers. Since the D/B Lucio had no Carriage and Damages against ANCO for the amount of One Million Three Hundred
engine of its own, it could not maneuver by itself and had to be towed by a tugboat Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) plus interest,
for it to move from one place to another. litigation expenses and Twenty-Five Percent (25%) of the total claim as attorney’s
fees.
The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San
Jose, Antique. The vessels arrived at San Jose, Antique, at about one o’clock in the ISSUE
afternoon of 30 September 1979. The tugboat M/T ANCO left the barge
immediately after reaching San Jose, Antique. ANCO raised the defense that the breach was caused by a fortuitous event, thus it is
exempted from liability. Is this contention correct?
When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30
September 1979, the clouds over the area were dark and the waves were already RULING
big. The arrastre workers unloading the cargoes of SMC on board the D/B Lucio
began to complain about their difficulty in unloading the cargoes. SMC’s District No. In order for fortuitous event to be a valid defense for a common carrier, the
Sales Supervisor, Fernando Macabuag, requested ANCO’s representative to transfer event must be:
the barge to a safer place because the vessel might not be able to withstand the big 1. Unforeseeable , or if foreseeable it must be inevitable.
waves. 2. It must be the proximate and the only cause of the loss.
3. The common carrier must exercise due diligence to prevent or minimize
ANCO’s representative did not heed the request because he was confident that the the loss (before, during after the occurrence of the event).
barge could withstand the waves. This, notwithstanding the fact that at that time,
only the M/T ANCO was left at the wharf of San Jose, Antique, as all other vessels Caso fortuito or force majeure (which in law are identical insofar as they exempt an
already left the wharf to seek shelter. With the waves growing bigger and bigger, obligor from liability)[19] by definition, are extraordinary events not foreseeable or
only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged avoidable, events that could not be foreseen, or which though foreseen, were
into the custody of the arrastre operator. inevitable. It is therefore not enough that the event should not have been foreseen
or anticipated, as is commonly believed but it must be one impossible to foresee or
At about ten to eleven o’clock in the evening of 01 October 1979, the crew of D/B to avoid.
Lucio abandoned the vessel because the barge’s rope attached to the wharf was cut
off by the big waves. At around midnight, the barge run aground and was broken In this case, the calamity which caused the loss of the cargoes was not unforeseen
and the cargoes of beer in the barge were swept away. nor was it unavoidable. In fact, the other vessels in the port of San Jose, Antique,
managed to transfer to another place, a circumstance which prompted SMC’s
As a result, ANCO failed to deliver to SMC’s consignee Twenty-Nine Thousand Two District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to
Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of no avail. The D/B Lucio had no engine and could not maneuver by itself. Even if

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ANCO’s representatives wanted to transfer it, they no longer had any means to do FACTS
so as the tugboat M/T ANCO had already departed, leaving the barge to its own
devices. The captain of the tugboat should have had the foresight not to leave the Berde Plants delivered 632 units of artificial trees to C.F. Sharp, the General Ship
barge alone considering the pending storm. Agent of DSR-Senator Lines, a foreign shipping corporation, for transportation and
delivery to the consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a
natural disaster, ANCO could not escape liability to respondent SMC. The records C.F. Sharp issued International Bill of Lading for the cargo – the port of discharge for
clearly show the failure of petitioners’ representatives to exercise the extraordinary the cargo was at the Khor Fakkan port and the port of delivery was Riyadh, Saudi
degree of diligence mandated by law. To be exempted from responsibility, the Arabia, via Port Dammam. The cargo was loaded in M/S “Arabian Senator.”
natural disaster should have been the proximate and only cause of the loss. There
must have been no contributory negligence on the part of the common carrier. As Federal Phoenix Assurance insured the cargo against all risks.
held in the case of Limpangco Sons v. Yangco Steamship Co.:
On June 7, 1993, M/S “Arabian Senator” left the Manila South Harbor for Saudi
. . . To be exempt from liability because of an act of God, the tug must be free Arabia with the cargo on board. When the vessel arrived in Khor Fakkan Port, the
from any previous negligence or misconduct by which that loss or damage may have cargo was reloaded on board DSR-Senator Lines’ feeder vessel, M/V “Kapitan
been occasioned. For, although the immediate or proximate cause of the loss in any Sakharov,” bound for Port Dammam, Saudi Arabia.
given instance may have been what is termed an act of God, yet, if the tug
unnecessarily exposed the two to such accident by any culpable act or omission of However, while in transit, the vessel and all its cargo caught fire.
its own, it is not excused.
On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V “Kapitan
Therefore, as correctly pointed out by the appellate court, there was blatant Sakharov” with its cargo was gutted by fire and sank on or about July 4, 1993. On
negligence on the part of M/T ANCO’s crewmembers, first in leaving the engine-less December 16, 1993, C.F. Sharp issued a certification to that effect
barge D/B Lucio at the mercy of the storm without the assistance of the tugboat,
and again in failing to heed the request of SMC’s representatives to have the barge Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61
transferred to a safer place, as was done by the other vessels in the port; thus, corresponding to the amount of insurance for the cargo. In turn Berde Plants
making said blatant negligence the proximate cause of the loss of the cargoes. executed in its favor a “Subrogation Receipt” dated January 17, 1994.

On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp

demanding payment of P941,429.61 on the basis of the Subrogation Receipt. C.F.
Sharp denied any liability on the ground that such liability was extinguished when
the vessel carrying the cargo was gutted by fire.
On March 11, 1994, Federal Phoenix Assurance filed with the RTC, Branch 16,
Manila a complaint for damages against DSR-Senator Lines and C.F. Sharp, praying
that the latter be ordered to pay actual damages of P941,429.61, compensatory
damages of P100,000.00 and costs.
DSR-SENATOR vs. FEDERAL ISSUE

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W/N DSR-Senator is liable – YES

EVERETT STEAMSHIP vs. CA
RULING
FACTS
Under Article 1734, Fire is not one of those enumerated under the above provision Hernandez trading company imported three crates of bus spare parts marked as
which exempts a carrier from liability for loss or destruction of the cargo. Since the Marco 12, Marco 13, Marco 14 from its supplier Maruman trading company.
peril of fire is not comprehended within the exceptions in Article 1734, then the
common carrier shall be presumed to have been at fault or to have acted Said crates were shipped from Japan to Manila on noard the vessel owned by
negligently, unless it proves that it has observed the extraordinary diligence Everette Orient Lines. Upon arrival in Manila, it was discovered that Marco 14 was
required by law. missing.

The natural disaster must have been the proximate and only cause of the loss, and Hernandez makes a formal claim to Everette in an amount of 1 mill ++ Yen, which is
that the carrier has exercised due diligence to prevent or minimize the loss before, the amount of the cargo lost.
during or after the occurrence of the disaster. However, Everett offers an amount of 100k because it is the amount that was
stipulated in its Bill of Lading.
When the goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and Hernandez files a case at the RTC of Caloocan, RTC rules 1 in favor of Hernandez
there need not be an express finding of negligence to hold it liable. holding Everett liable for the amount of !mill ++ Yen.
THE CA affirmed the RTC’s ruling and made an additional observation that since
Common carriers are obliged to observe extraordinary diligence in the vigilance over Hernandez is not a privy to the contract in the bill of lading ( the contract was
the goods transported by them. Accordingly, they are presumed to have been at entered by Everett and Maruman trading [shipper]), and so the 100k limit stipulated
fault or to have acted negligently if the goods are lost, destroyed or deteriorated. will not bind Hernandez making Everett liable for the full amount of 1mill ++ Yen.

Respondent Federal Phoenix Assurance raised the presumption of negligence ISSUE

against petitioners. However, they failed to overcome it by sufficient proof of
extraordinary diligence. 1
Art. 1750. ‘A contract fixing the sum that may be recovered by
the owner or shipper for the loss, destruction or deterioration of the
goods is valid, if it is reasonable and just under the circumstances, and
has been fairly and freely agreed upon.’
“It is required, however, that the contract must be reasonable and just under the
circumstances and has been fairly and freely agreed upon.XXX
the Court is of the view that the requirements of said article have not been met. The fact
that those conditions are printed at the back of the bill of lading in letters so small that they
are hard to read would not warrant the presumption that the plaintiff or its supplier was
aware of these conditions such that he had “fairly and freely agreed” to these conditions. It
CENTRAL SHIPPIN vs. INS
can not be said that the plaintiff had actually entered into a contract with the defendant,
embodying the conditions as printed at the back of the bill of lading that was issued by the
TO FOLLOW. SORRY OF THE INCONVENIENCE. defendant to plaintiff.”

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unless the value of the goods higher than this amount is declared in
1. Is Everett liable for the full amount or the amount that was writing by the shipper before receipt of the goods by the carrier and
stipulated in the contract?- what was stipulated in the contract inserted in the Bill of Lading and extra freight is paid as required.”
2. Is Hernandez a privy to the contract which says that Petitioner is (Emphasis supplied)
liable only for 100k? Yes
The shipper, Maruman Trading, had the option to declare a higher valuation if the
value of its cargo was higher than the limited liability of the carrier. Considering
RULING
that the shipper did not declare a higher valuation, it had itself to blame for not
complying with the stipulations.
1. Controlling provisions for this issue would be 1749 and 1750 of the Civil
Code. 2
The trial court’s ratiocination that private respondent could not have “fairly
and freely” agreed to the limited liability clause in the bill of lading because the said
In Sea Land Service, Inc. vs Intermediate Appellate Court
conditions were printed in small letters does not make the bill of lading invalid.
In Ong Yiu VS. CA the court said that
That said stipulation is just and reasonable is arguable from the fact that it echoes
Art. 1750 itself in providing a limit to liability only if a greater value is not declared
“ contracts of adhesion wherein one party imposes a ready-made form of
for the shipment in the bill of lading. To hold otherwise would amount to
contract on the other, as the plane ticket in the case at bar, are contracts
questioning the justness and fairness of the law itself, and this the private
not entirely prohibited
respondent does not pretend to do. But over and above that consideration, the just
and reasonable character of such stipulation is implicit in it giving the shipper or
A contract limiting liability upon an agreed valuation does not offend
owner the option of avoiding accrual of liability limitation by the simple and surely
against the policy of the law forbidding one from contracting against his
far from onerous expedient of declaring the nature and value of the shipment in the
own negligence
bill of lading
The shipper, Maruman Trading, we assume, has been extensively engaged in the
The clause of the contract goes:
trading business. It can not be said to be ignorant of the business transactions it
“The carrier shall not be liable for any loss of or any damage to or in
entered into involving the shipment of its goods to its customers. The shipper could
any connection with, goods in an amount exceeding One Hundred
not have known, or should know the stipulations in the bill of lading and there it
Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any
should have declared a higher valuation of the goods shipped. Moreover, Maruman
other currency per package or customary freight unit (whichever is least)
Trading has not been heard to complain that it has been deceived or rushed into
2
“ART. 1749. A stipulation that the common carrier’s liability is limited to agreeing to ship the cargo in petitioner’s vessel.
the value of the goods appearing in the bill of lading, unless the shipper or owner
declares a greater value, is binding.” 2. Even if the consignee was not a signatory to the contract of carriage
“ART. 1750. A contract fixing the sum that may be recovered by the owner between the shipper and the carrier.
or shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been freely and fairly agreed The consignee can still be bound by the contract. private respondent
upon.” (Hernandez) formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very

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TRANSPORTATION DIGEST – TRANSPORTATION OF GOODS A.M.+D.G. TRANSPORTATION – Atty. Abaño

same bill of lading, it (private respondent) accepted the provisions of the PAL Contends: The Lower Courts were in error in not applying the limit of liability
contract and thereby made itself a party thereto, or at least has come to court under the Warsaw Convention which limits the liability of an air carrier of loss, delay
to enforce it. Thus, private respondent cannot now reject or disregard the or damage to checked-in baggage to US$20.00 based on weight; and
carrier’s limited liability stipulation in the bill of lading. In other words, private
respondent is bound by the whole stipulations in the bill of lading and must ISSUE
respect the same.
W/N the Lower Courts should apply the limit of liability under the Warsaw
PAL vs. CA Convention? – NO

FACTS RULING
Isidro Co, accompanied by his wife and son, arrived at the Manila International
Airport aboard PAL airline's Flight from San Francisco. Soon after his embarking, Co In Alitalia vs. IAC, the Warsaw Convention limiting the carrier's liability was applied
proceeded to the baggage retrieval area to claim his checks in his possession. He because of a simple loss of baggage without any improper conduct on the part of
found 8 of his luggage, but despite diligent search, he failed to locate his 9 th luggage. the officials or employees of the airline, or other special injury sustained by the
passengers. The petitioner therein did not declare a higher value for his luggage,
Co then immediately notified PAL through its employee, Willy Guevarra, who was much less did he pay an additional transportation charge.
then in charge of the PAL claim counter at the airport. Willy filled up the printed
form known as a Property Irregularity Report, acknowledging the luggage to be PAL contends that under the Warsaw Convention, its liability, if any, cannot exceed
missing, and signed it. US $20.00 based on weight as private respondent Co did not declare the contents of
his baggage nor pay traditional charges before the flight.
The incontestable evidence further shows that plaintiff lost luggage was a Samsonite
suitcase worth about US$200 and containing various personal effects purchased by We find no merit in that contention. In Samar Mining Company, Inc. vs.
plaintiff and his wife during their stay in the US and similar other items sent by their Nordeutscher Lloyd, this Court ruled:
friends abroad to be given as presents to relatives in the Philippines worth around
$1,800. The liability of the common carrier for the loss, destruction or deterioration of
goods transported from a foreign country to the Philippines is governed
Co on several occasions unrelentingly called PAL’s office in order to pursue his primarily by the New Civil Code. In all matters not regulated by said Code, the
complaint about his missing luggage but no avail was given. Thus, Co wrote a rights and obligations of common carriers shall be governed by the Code of
demand letter to PAL, through its manager of the Central Baggage Services. PAL Commerce and by Special Laws.
replied acknowledging that they have been unable to locate the baggage despite The provisions of the New Civil Code on common carriers are Articles 1733, 1735
careful search and extended their sincere apologies for the inconvenience. PAL and 1753 which provide:
never found the missing luggage or paid its corresponding value. Co then filed his
present complaint against PAL for damages. Art. 1733. Common carriers.. are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them...
The RTC found PAL liable and ordered said company to pay damages. The CA
affirmed in toto the trial court's award.

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Art. 1735. ...if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence..

Art. 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or deterioration.

Since the passenger's destination in this case was the Philippines, Philippine law
governs the liability of the carrier for the loss of the passenger's luggage.

In this case, the PAL failed to overcome, not only the presumption, but more
importantly, the Co’s evidence, proving that the carrier's negligence was the
proximate cause of the loss of his baggage. Furthermore, petitioner acted in bad
faith in faking a retrieval receipt to bail itself out of having to pay Co's claim. The CA
therefore did not err in disregarding the limits of liability under the Warsaw
Convention and applied the Civil Code instead.

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