Transpo Digest Transportation of Goods Pascasio

8/12/2019 Transpo Digest Transportation of Goods Pascasio

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1. Extraordinary diligence

Eastern Shipping vs CA

GR No. 97412, 12 July 1994234 SCRA 78

FACTSTwo fiber drums were shipped owned by Eastern

Shipping from Japan. The shipment as insured with amarine policy. Upon arrival in Manila unto the custody ofmetro Port Service, which excepted to one drum, said tobe in bad order and which damage was unknown theMercantile Insurance Company. Allied BrokerageCorporation received the shipment from Metro, one drumopened and without seal. Allied delivered the shipment tothe consignees warehouse. The latter excepted to onedrum which contained spillages while the rest of thecontents was adulterated/fake. As consequence of theloss, the insurance company paid the consignee, so thatit became subrogated to all the rights of action ofconsignee against the defendants Eastern Shipping,Metro Port and Allied Brokerage. The insurance companyfiled before the trial court. The trial court ruled in favor ofplaintiff an ordered defendants to pay the former withpresent legal interest of 12% per annum from the date ofthe filing of the complaint. On appeal by defendants, theappellate court denied the same and affirmed in toto thedecision of the trial court.

ISSUE(1) Whether the applicable rate of legal interest is 12% or

6%.

(2) Whether the payment of legal interest on the award forloss or damage is to be computed from the time thecomplaint is filed from the date the decision appealedfrom is rendered.

HELD(1) The Court held that the legal interest is

6% computed from the decision of the court a quo. Whenan obligation, not constituting a loan or forbearance of

money, is breached, an interest on the amount ofdamages awarded may be imposed at the discretion ofthe court at the rate of 6% per annum. No interest shallbe adjudged on unliquidated claims or damages exceptwhen or until the demand can be established withreasonable certainty.

When the judgment of the court awarding asum of money becomes final and executor, the rate oflegal interest shall be 12% per annum from such finalityuntil satisfaction, this interim period being deemed to beby then an equivalent to a forbearance of money.

The interest due shall be 12% PA to becomputed fro default, J or EJD.

(2) From the date the judgment is made.Where the demand is established with reasonablecertainty, the interest shall begin to run from the time the


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claim is made judicially or EJ but when such certaintycannot be so reasonably established at the time thedemand is made, the interest shll begin to run only fromthe date of judgment of the court is made.

(3) The Court held that it should be computed from thedecision rendered by the court a quo.

DELSAN TRANSPORT vs. CA

FACTSCaltex engaged into a contract of affreightment

with the petitioner, Delsan Transport Lines, Inc.(Delsan),for a period of one year whereby the said common carrieragreed to transport Caltexs industrial fuel oil from theBatangas-Bataan Refinery to different parts of thecountry. Under the contract, petitioner took on board itsvessel, MT Maysun, 2,277.314 kiloliters of industrial fueloil of Caltex to be delivered to the Caltex Oil Terminal inZamboanga City. The shipment was insured with privaterespondent, American Home Assurance Corporation(American Home)

The vessel sank in the early morning of August 15, 1986near Panay Gulf in the Visayas taking with it the entirecargo of fuel oil.

Subsequently, American Home paid Caltex the sum ofPhp 5,096,635.57 representing the insured value of thecargo. Exercising its right to subrogation under Article

2207 of the New Civil Code, the American Homedemanded the Delsan the same amount it paid to Caltex.

Due to its failure to collect from Delsan despite prior

demand, American Home filed a complaint with the RTCof Makati for collection of a sum of money.

The trial court dismissed the complaint against Delsan. Itruled that the vessel, MT Maysun, was seaworthy andthat the incident was caused by unexpected inclementweather condition or force majeure, thus exempting thecommon carrier from liability for the loss of its cargo.

The CA reversed. It gave credence to the weather report

issued by PAGASA which stated that the waves wereonly .7 to 2 meters in height in the vicinity of the PanayGulf at the day the ship sank, in contrast to the claim ofthe crew of the ship that the waves were 20 feet high.

Delsan contends the following1. Delsan theorized that when the American

Home paid Caltex the value of its lost cargo,the act of American Home is equivalent to atacit recognition that the ill-fated vessel wasseaworthy; otherwise, American Home was notlegally liable to Caltex due to the latters breachof implied warranty under the marine insurancepolicy that the vessel was seaworthy.

2. Delsan avers that although chief officer hadmerely a 2ndofficers license, he was qualifiedto act as the vessels chief officer. In fact, allthe crew and officers of MTT Maysun wereexonerated in the administrative investigation.


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ISSUES

1. W/N the payment made by American Home toCaltex for the insured value of the lost cargoamounted to an admission that the vessel wasseaworthy, thus precluding any action for recoveryagainst the petitioner. NO

2. W/N the non-presentation of the marine insurancepolicy bars the complaint for recovery of sum ofmoney for lack of cause of action. NO

RULING

First Issue:

The payment made by American Home for the insuredvalue of the lost cargo operates as waiver of its right toenforce the term of the implied warranty against Caltexunder the marine insurance policy. However, the samecannot be validly interpreted as an automatic admissionof the vessels seaworthiness by American Home as toforeclose recourse against Delsan for any liability underits contractual obligation as a common carrier. The fact ofpayment grants American Home subrogatory right whichenables it to exercise legal remedies that wouldotherwise be available to Caltex as owner of the lostcargo against Delsan, the common carrier.

From the nature of their business and for reasons ofpublic policy, common carriers are bound to observeextraordinary diligence in the vigilance over the goods

and for the safety of passengers transported by them,according to all the circumstances of each case. In theevent of loss, destruction or deterioration of the insuredgoods, common carriers shall be responsible unless the

same is brought about, among others, by flood, storm,earthquake, lightning or other natural disaster orcalamity. In all other cases, if the goods are lost,destroyed or deteriorated, common carriers arepresumed to have been at fault or to have actednegligently, unless they prove they observedextraordinary diligence.

In order to escape liability for the loss of its cargo ofindustrial fuel oil belonging to Caltex, Delsan attributes

the sinking of MT Maysun to fortuitous event or forcemajeure. Although the testimony of the captain and chiefmate that there were strong winds and waves 20 feethigh was effectively rebutted and belied by the weatherreport of PAGASA. Thus, as the CA correctly ruled,Delsans vessel, MT Maysun, sank with its entire cargofor the reason that it was not seaworthy. There was nosquall or bad weather or extremely poor sea condition inthe vicinity where the said vessel sank.

Additionally, the exoneration of MT Maysuns officers andcrew merely concern their respective administrativeliabilities. It does not in any way operate to absolveDelsan the common carrier from its civil liability arisingfrom its failure to observe extraordinary diligence in thevigilance over the goods it was transporting and for thenegligent acts or omissions of its employees, thedetermination of which properly belongs to the courts. Inthe case at bar, Delsan is liable for the insured value of


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the lost cargo of industrial fuel oil belonging to Caltex forits failure to rebut the presumption of fault or negligenceas common carrier occasioned by the unexplainedsinking of its vessel, MT Maysun, while in transit.

Second Issue:

It is the view of the SC that the presentation in evidenceof the marine insurance policy is not indispensable in thiscase before the insurer may recover from the commoncarrier the insured value of the lost cargo in the exerciseof its subrogatory right. The subrogation receipt, by itself,is sufficient to establish not only the relationship of

American Home as insurer and Caltex, as the assured

shipper of the lost cargo of industrial fuel oil, but also theamount paid to settle the insurance claim. The right ofsubrogation accrues simply upon payment by theinsurance company of the insurance claim.

Philippine Charter Insurance Corp. vs.Unknown OwnerPHILIPPINE CHARTER INSURANCECORPORATION vs. UNKNOWN OWNER OFTHE VESSEL M/V NATIONAL HONOR,NATIONAL SHIPPING CORPORATION OFTHE PHILIPPINES and INTERNATIONALCONTAINER SERVICES, INC.[G.R. No. 161833. July 8, 2005]

FACTS:

Petitioner Philippine Charter Insurance Corporation

(PCIC) is the insurer of a shipment on board the vesselM/V National Honor, represented in the Philippines byits agent, National Shipping Corporation of thePhilippines (NSCP).

The M/V National Honor arrived at the ManilaInternational Container Terminal (MICT). TheInternational Container Terminal Services, Incorporated(ICTSI) was furnished with a copy of the crate cargo listand bill of lading, and it knew the contents of the crate.The following day, the vessel started discharging itscargoes using its winch crane. The crane was operatedby Olegario Balsa, a winch man from the ICTSI,exclusive arrastre operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP,along with the crew and the surveyor of the ICTSI,conducted an inspection of the cargo. They inspected thehatches, checked the cargo and found it in apparentgood condition. Claudio Cansino, the stevedore of theICTSI, placed two sling cables on each end of Crate No.1. No sling cable was fastened on the mid-portion of thecrate. In Dauzs experience, this was a normalprocedure. As the crate was being hoisted from thevessels hatch, the mid-portion of the wooden flooringsuddenly snapped in the air, about five feet high from thevessels twin deck, sending all its contents crashing downhard, resulting in extensive damage to the shipment.

PCIC paid the damage, and as subrogee, filed a caseagainst M/V National Honor, NSCP and ICTSI. Both RTCand CA dismissed the complaint.


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ISSUE:Whether or not the presumption of negligence isapplicable in the instant case.

HELD:

No. We agree with the contention of the petitioner thatcommon carriers, from the nature of their business andfor reasons of public policy, are mandated to observeextraordinary diligence in the vigilance over the goodsand for the safety of the passengers transported by them,according to all the circumstances of each case. he Courthas defined extraordinary diligence in the vigilance overthe goods as follows:

The extraordinary diligence in the vigilance over thegoods tendered for shipment requires the commoncarrier to know and to follow the required precaution foravoiding damage to, or destruction of the goodsentrusted to it for sale, carriage and delivery. It requirescommon carriers to render service with the greatest skilland foresight and to use all reasonable means toascertain the nature and characteristic of goods tenderedfor shipment, and to exercise due care in the handlingand stowage, including such methods as their naturerequires.

The common carriers duty to observe the requisitediligence in the shipment of goods lasts from the time thearticles are surrendered to or unconditionally placed inthe possession of, and received by, the carrier fortransportation until delivered to, or until the lapse of areasonable time for their acceptance, by the person

entitled to receive them. When the goods shipped areeither lost or arrive in damaged condition, a presumptionarises against the carrier of its failure to observe thatdiligence, and there need not be an express finding of

negligence to hold it liable. To overcome the presumptionof negligence in the case of loss, destruction ordeterioration of the goods, the common carrier mustprove that it exercised extraordinary diligence.

However, under Article 1734 of the New Civil Code, thepresumption of negligence does not apply to any of thefollowing causes:

1. Flood, storm, earthquake, lightning or other natural

disaster or calamity;2. Act of the public enemy in war, whether international orcivil;3. Act or omission of the shipper or owner of the goods;4. The character of the goods or defects in the packing orin the containers;5. Order or act of competent public authority.

It bears stressing that the enumeration in Article 1734 ofthe New Civil Code which exempts the common carrierfor the loss or damage to the cargo is a closed list. Toexculpate itself from liability for the loss/damage to thecargo under any of the causes, the common carrier isburdened to prove any of the a fore cited causes claimedby it by a preponderance of evidence. If the carriersucceeds, the burden of evidence is shifted to theshipper to prove that the carrier is negligent.

Defect is the want or absence of something necessary


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for completeness or perfection; a lack or absence ofsomething essential to completeness; a deficiency insomething essential to the proper use for the purpose forwhich a thing is to be used. On the other hand, inferior

means of poor quality, mediocre, or second rate. A thingmay be of inferior quality but not necessarily defective. Inother words, defectiveness is not synonymous withinferiority.

x x x

In the present case, the trial court declared that based onthe record, the loss of the shipment was caused by thenegligence of the petitioner as the shipper:

The same may be said with respect to defendant ICTSI.The breakage and collapse of Crate No. 1 and the totaldestruction of its contents were not imputable to any faultor negligence on the part of said defendant in handlingthe unloading of the cargoes from the carrying vessel, butwas due solely to the inherent defect and weakness ofthe materials used in the fabrication of said crate.

The crate should have three solid and strong woodenbatten placed side by side underneath or on the flooringof the crate to support the weight of its contents. x x x

Saludo Jr. v. CA

Facts:

Crispina Galdo Saludo, mother of the petitioners, died inChicago, Illinois. Pomierski and Son Funeral Home of

Chicago, made the necessary preparations and

arrangements for the shipment of the remains from

Chicago to the Philippines. Pomierski brought the

remains to Continental Mortuary Air Services (CMAS) at

the Chicago Airport which made the necessary

arrangements such as flights, transfers, etc. CMAS

booked the shipment with PAL thru the carriers agent Air

Care International. PAL Airway Bill Ordinary was issuedwherein the requested routing was from Chicago to San

Francisco on board Trans World Airline (TWA) and from

San Francisco to Manila on board PAL.

Salvacion (one of the petitioners), upon arrival at San

Francisco, went to the TWA to inquire about her mothers

remains. But 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. Pomierskiimmediately called CMAS which informed that the

remains were on a plane to Mexico City, that there were

two bodies at the terminal, and somehow they were

switched. CMAS called and told Pomierski that they were

sending the remains back to California via Texas.


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Petitioners filed a complaint against TWA and PAL fir the

misshipment and delay in the delay of the cargo

containing the remains of the late Crispina Saludo.

Petitioners alleged that private respondents received the

casketed remains of Crispina on October 26, 1976, asevidenced by the issuance of PAL Airway Bill by Air Care

and from said date, private respondents were charged

with the responsibility to exercise extraordinary diligence

so much so that the alleged switching of the caskets on

October 27, 1976, or one day after the private

respondents received the cargo, the latter must

necessarily be liable.

Issues:

Whether or not there was delivery of the cargo upon

mere issuance of the airway bill

Whether or not the delay in the delivery of the casketed

remains of petitioners mother was due to the fault of

respondent airline companies

Held:

NO to both, but TWA was held to pay petitioners nominal

damages of P40,000 for its violation of the degree of

diligence required by law to be exercised by every

common 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 modifiedby 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.

In other words, on October 26, 1976 the cargo containingthe casketed remains of Crispina Saludo was booked for

PAL Flight Number PR-107 leaving San Francisco for

Manila on October 27, 1976, PAL Airway Bill No. 079-

01180454 was issued, not as evidence of receipt of

delivery of the cargo on October 26, 1976, but merely as

a confirmation of the booking thus made for the San

Francisco-Manila flight scheduled on October 27, 1976.

Actually, it was not until October 28, 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 1945H, or 7:45 P.M. on

said date.

Explicit is the rule under Article 1736 of the Civil Code

that the extraordinary responsibility of the common


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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 thelapse 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.

Hence, while we agree with petitioners that 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 custodyof the carrier, absent the excepting causes under Article

1734, attach and the presumption of fault of the carrier

under Article 1735 be invoked.

As already demonstrated, the facts in the case at bar

belie the averment that there was delivery of the cargo to

the carrier on October 26, 1976. Rather, as earlier

explained, the body intended to be shipped as agreed

upon was really placed in the possession and control of

PAL on October 28, 1976 and it was from that date that

private respondents became responsible for the agreed

cargo under their undertakings in PAL Airway Bill No.079-01180454. Consequently, for the switching of

caskets prior thereto which was not caused by them, and

subsequent events caused thereby, private respondents

cannot be held liable.

The oft-repeated rule regarding a carrier's liability for

delay is that in the absence of a special contract, a

carrier is not an insurer against delay in transportation of

goods. When a common carrier undertakes to conveygoods, 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 disabledfrom 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 haveprovided against it by


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contract. Whether or not there has been such an

undertaking on the part of the carrier to be determined

from the circumstances surrounding the case and by

application of the ordinary rules for the interpretation of

contracts.

Echoing the findings of the trial court, the respondent

court correctly declared that

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 theroute of the shipment without any liability therefor", our

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).

There is no showing by plaintiffs that such a special or

specific contract had been entered into between them

and the defendant airline companies.

And this special contract for prompt delivery should call

the attention of the carrier to the circumstances

surrounding the case and the approximate amount of

damages to be suffered in case of delay (See Mendoza

vs. PAL, supra). There was no such contract entered into

in the instant case.

A common carrier undertaking to transport property has

the implicit duty to carry and deliver it within reasonabletime, 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. As found by the trial court, 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 private respondents,

a conclusion concurred in by respondent court and whichwe are not inclined to disturb.

LORENZO SHIPPING vs. BJ MATHEL

FACTS

Petitioner Lorenzo Shipping Corporation is a domestic

corporation engaged in coastwise shipping. RespondentBJ Marthel International, Inc. is an importer anddistributor of different brands of engines and spare parts.

Respondent supplied petitioner with spare parts for thelatter's marine engines. According to the quotation it sent,deliveries of such items are within 2 months after receiptof firm order. Petitioner thereafter issued to respondentPurchase Order No. 13839 for the procurement of one


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set of cylinder liner, valued at P477,000, to be used forM/V Dadiangas Express. The purchase order was co-signed by Jose Go, Jr., petitioner's vice-president, andHenry Pajarillo, respondents sales manager.

Instead of paying the 25% down payment (indicated inthe purchase order) for the first cylinder liner, petitionerissued in favor of respondent ten postdated checks. Thechecks were supposed to represent the full payment ofthe aforementioned cylinder liner.

Subsequently, petitioner issued Purchase Order No.14011, for another unit of cylinder liner. This purchaseorder stated the term of payment to be "25% upondelivery, balance payable in 5 bi-monthly equalinstallments." Like the first purchase order, the secondpurchase order did not state the date of the cylinderliner's delivery.

On 26 January 1990, respondent deposited petitioner'scheck that was postdated 18 January 1990, however, thesame was dishonored by the drawee bank due toinsufficiency of funds. The remaining nine postdatedchecks were eventually returned by respondent topetitioner.

Petitioner claimed that it replaced said check with a goodone, the proceeds of which were applied to its otherobligation to respondent. For its part, respondent insistedthat it returned said postdated check to petitioner.

On 20 April 1990, Pajarillo delivered the two cylinderliners at petitioner's warehouse in Manila. The sales

invoices evidencing the delivery of the cylinder liners bothcontain the notation "subject to verification" under whichthe signature of petitioner's warehouseman, appeared.

Respondent sent a Statement of Account andrespondent's vice-president sent a demand letter dated topetitioner requiring the latter to pay. Petitioner sent theformer a letter offering to pay only P150,000 for thecylinder liners. In said letter, petitioner claimed that as thecylinder liners were delivered late and due to thescrapping of the M/V Dadiangas Express, it (petitioner)would have to sell the cylinder liners in Singapore andpay the balance from the proceeds of said sale.

Respondent filed an action for sum of money anddamages before the RTC. Prior to the filing of aresponsive pleading, respondent filed an amendedcomplaint with preliminary attachment. The amendmentsalso pertained to the issuance by petitioner of thepostdated checks and the amounts of damages claimed.

The RTC granted respondent's prayer for the issuance ofa preliminary attachment. Petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment attachingthereto a counter-bond which the RTC allowed.

Petitioner afterwards filed its Answer alleging therein thattime was of the essence in the delivery of the cylinderliners and that the delivery on 20 April 1990 of said itemswas late as respondent committed to deliver said items"within two (2) months after receipt of firm order."


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Respondent filed a Second Amended Complaint withPreliminary Attachment which dealt solely with thenumber of postdated checks issued by petitioner as fullpayment for the first cylinder liner it ordered from

respondent. (In the first amended complaint, only ninepostdated checks were involved, in its second amendedcomplaint, there were ten postdated checks).

Petitioner filed a Motion alleging therein that the cylinderliners run the risk of obsolescence and deterioration tothe prejudice of the parties to this case. Thus, petitionerprayed that it be allowed to sell the cylinder liners at thebest possible price and to place the proceeds of said salein escrow. This motion was granted.The RTC dismissed the complaint which ordered theplaintiff to pay P50,000.00 to the defendant. It heldrespondent bound to the quotation it submitted topetitioner particularly with respect to the terms ofpayment and delivery of the cylinder liners. It alsodeclared that respondent had agreed to the cancellationof the contract of sale when it returned the postdatedchecks issued by petitioner.The CA reversed the decision of the RTC.

ISSUES

1. Whether or not respondent incurred delay inperforming its obligation under the contract of sale-NO

2. Whether or not said contract was validly rescindedby petitioner.NO

RULING

Petitioner maintains that its obligation to pay fully thepurchase price was extinguished because the adverted

contract was validly terminated due to respondent'sfailure to deliver within the two-month period. Thethreshold question, then, is: Was there late delivery of thesubjects of the contract of sale to justify petitioner todisregard the terms of the contract considering that timewas of the essence thereof?

In determining whether time is of the essence in acontract, the ultimate criterion is the actual or apparentintention of the parties and before time may be soregarded by a court, there must be a sufficientmanifestation, either in the contract itself or thesurrounding circumstances of that intention. Petitionerinsists that although its purchase orders did not specifythe dates when the cylinder liners were supposed to bedelivered, nevertheless, respondent should abide by theterm of delivery appearing on the quotation it submittedto petitioner. Petitioner theorizes that the quotationembodied the offer from respondent while the purchaseorder represented its (petitioner's) acceptance of theproposed terms of the contract of sale. Thus, petitioner isof the view that these two documents "cannot be takenseparately as if there were two distinct contracts." We donot agree.

While this Court recognizes the principle that contractsare respected as the law between the contracting parties,this principle is tempered by the rule that the intention ofthe parties is primordial and "once the intention of the


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parties has been ascertained, that element is deemed asan integral part of the contract as though it has beenoriginally expressed in unequivocal terms."

In the present case, we cannot subscribe to the positionof petitioner that the documents, by themselves, embodythe terms of the sale of the cylinder liners. One can easilyglean the significant differences in the terms as stated inthe formal quotation and Purchase Order No. 13839 withregard to the due date of the down payment for the firstcylinder liner and the date of its delivery as well asPurchase Order No. 14011 with respect to the date ofdelivery of the second cylinder liner. While the quotationprovided by respondent evidently stated that the cylinderliners were supposed to be delivered within two monthsfrom receipt of the firm order of petitioner and that the25% down payment was due upon the cylinder liners'delivery, the purchase orders prepared by petitionerclearly omitted these significant items. The petitioner'sPurchase Order No. 13839 made no mention at all of thedue dates of delivery of the first cylinder liner and of thepayment of 25% down payment. Its Purchase Order No.14011 likewise did not indicate the due date of delivery ofthe second cylinder liner.

In the instant case, the formal quotation provided byrespondent represented the negotiation phase of thesubject contract of sale between the parties. As of thattime, the parties had not yet reached an agreement asregards the terms and conditions of the contract of saleof the cylinder liners. Petitioner could very well haveignored the offer or tendered a counter-offer torespondent while the latter could have, withdrawn or

modified the same. The parties were at liberty to discussthe provisions of the contract of sale prior to itsperfection. In this connection, we turn to the testimoniesof Pajarillo and Kanaan, Jr., that the terms of the offerwere, indeed, renegotiated prior to the issuance ofPurchase Order No. 13839.

The law implies, however, that if no time is fixed, deliveryshall be made within a reasonable time, in the absence ofanything to show that an immediate delivery intended.

We also find significant the fact that while petitioneralleges that the cylinder liners were to be used for drydock repair and maintenance of its M/V DadiangasExpress between the later part of December 1989 toearly January 1990, the record is bereft of any indicationthat respondent was aware of such fact. The failure ofpetitioner to notify respondent of said date is fatal to itsclaim that time was of the essence in the subjectcontracts of sale.

Finally, the ten postdated checks issued in November1989 by petitioner and received by the respondent as fullpayment of the purchase price of the first cylinder linersupposed to be delivered on 02 January 1990 fail toimpress. It is not an indication of failure to honor acommitment on the part of the respondent. The earliestmaturity date of the checks was 18 January 1990. Asdelivery of said checks could produce the effect ofpayment only when they have been cashed, respondent'sobligation to deliver the first cylinder liner could not havearisen as early as 02 January 1990 as claimed bypetitioner since by that time, petitioner had yet to fulfill its


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undertaking to fully pay for the value of the first cylinderliner. As explained by respondent, it proceeded with theplacement of the order for the cylinder liners with itsprincipal in Japan solely on the basis of its previouslyharmonious business relationship with petitioner.

As an aside, let it be underscored that "[e]ven where timeis of the essence, a breach of the contract in that respectby one of the parties may be waived by the other party'ssubsequently treating the contract as still in force."Petitioner's receipt of the cylinder liners when they weredelivered to its warehouse on 20 April 1990 clearlyindicates that it considered the contract of sale to be stillsubsisting up to that time. Indeed, had the contract ofsale been cancelled already as claimed by petitioner, itno longer had any business receiving the cylinder linerseven if said receipt was "subject to verification." Byaccepting the cylinder liners when these were deliveredto its warehouse, petitioner indisputably waived theclaimed delay in the delivery of said items.

We, therefore, hold that in the subject contracts, time wasnot of the essence. The delivery of the cylinder liners on20 April 1990 was made within a reasonable period oftime considering that respondent had to place the orderfor the cylinder liners with its principal in Japan and thatthe latter was, at that time, beset by heavy volume ofwork.

There having been no failure on the part of therespondent to perform its obligation, the power to rescindthe contract is unavailing to the petitioner.

Here, there is no showing that petitioner notifiedrespondent of its intention to rescind the contract of salebetween them. Quite the contrary, respondent's act ofproceeding with the opening of an irrevocable letter ofcredit on 23 February 1990 belies petitioner's claim that itnotified respondent of the cancellation of the contract ofsale. Truly, no prudent businessman would pursue suchaction knowing that the contract of sale, for which theletter of credit was opened, was already rescinded by theother party.

Sealoader shipping vs grand cement

Doctrine:

Contr ibutory Negl igence is cond uct on the part of the

injured party, contr ibut ing as a legal cause to the

harm he has suffered, which fal ls below the standard

to which he is requi red to conform for his own

protect ion

Facts:

Sealoader executed a Time Charter Party Aggrement

with Joyce Launch for the chartering of MT Viper in orderto tow its unpropelled barges for a minimum of 15 days.

Sealoder entered into a contract with Grand Cement forthe loading of cement clinkers and the delivery thereof toManila. On March 31, 1994, Sealoders barge arrived atthe wharf of Grand Cement tugged by MT Viper. It wasnot immediately loaded as the employees of Grand


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Cement were loaded another vessel.

On April 4, typhoon Bising struck Cebu area. The bargewas still docked at the wharf of Grand Cement. As it

became stronger, MT Viper tried to tow the barge awaybut it was unsuccessful because the towing lineconnecting the vessels snapped since the mooring lineswere not cast off, which is the ultimate cause. Hence, thebarge rammed the wharf causing significant damage.

Grand Cement filed a complaint for damages (P2.4M)since Sealoader ignored its demands. They allege thatSealoader was negligent when it ignored its employeesadvice to move the vessels after it had received weatherupdates. Sealoader filed a motion to dismiss on theground that Joyce Launch is the one liable since it wasthe owner of MT Viper, whos employees were manningthe vessel. Sealoader filed a cross-claim against JoyceLaunch. Joyce maintains that the damages were due toforce majeure and faulted Grand Cements employees forabandoning the wharf leaving them helpless and for notwarning them early on.

Upon testimonies, the RTC rendered judgment in favor ofGrand Cement holding the two companies liable sincethere was complete disregard of the storm signal, thecaptain of the vessel was not present and the vessel wasnot equipped with a radio or any navigational facility,which is mandatory. Joyce launch did not appeal.

On appeal, the CA affirmed the decision but on MR, itpartly reversed its decision finding Grand Cement to beguilty of contributory negligence since it was found that itwas still loading the other vessel at the last minute justbefore the storm hit, hence Sealodersvessel did notmove. Damages were reduced to 50%. Hence, petitionfor review to SC.

Issue:

Who should be liable for damage sustained by the wharfof Grand Cement?

Ruling:

Sealoader is liable for its negligence. First because it wasnot equipped with a radio or a navigational facility and itfailed to monitor the prevailing weather conditions.Second, it cannot pass the responsibility of casting off themooring lines because the people at the wharf could not

just cast off the mooring lines without any instructionsfrom the crew of the vessel. It should have taken theinitiative to cast off the mooring lines early on.

With regard to Grand Cements contributory negligence,the court found that it was not guilty thereof. It had timelyinformed the barge of the impending typhoon anddirected the vessels to move to a safer place. Sealoaderhad the responsibility to inform itself of the prevailingweather conditions in the areas where its vessel was tosail. It cannot merely rely on other vessels for weatherupdates and warnings on approaching storms. For to doso would be to gamble with the safety of its own vessel,


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putting the lives of its crew under the mercy of the sea,as well as running the rick of causing damage to propertyof third parties for which it would necessarily be liable.

2.Presumption of negligence

DELSAN TRANSPORT LINES, INC. vs. AMERICAN

HOME ASSURANCE CORPORATIONG.R. No. 149019

August 15, 2006GARCIA, J

Facts:

Delsan is a domestic corporation which owns andoperates the vessel MT Larusan. On the other hand,respondent American Home Assurance Corporation(AHAC for brevity) is a foreign insurance company dulylicensed to do business in the Philippines through itsagent, the American-International Underwriters, Inc.(Phils.). It is engaged, among others, in insuring cargoesfor transportation within the Philippines. Delsan receivedon board MT Larusan a shipment consisting of 1,986.627k/l Automotive Diesel Oil (diesel oil) at the BataanRefinery Corporation for transportation and delivery tothe bulk depot in Bacolod City of Caltex Phils., Inc.(Caltex), pursuant to a Contract of afreightment. Theshipment was insured by respondent AHAC against allrisks under Inland Floater Policy No. AH-IF64-1011549Pand Marine Risk Note No. 34-5093-6. The shipment

arrived in Bacolod City and immediately thereafter,unloading operations commenced. However, thedischarging had to be stopped on account ofthe discovery that the port bow mooring of the vessel wasintentionally cut or stolen by unknown persons, whichcaused the diesel oil to spill into the sea.As a result ofspillage and backflow of diesel oil, Caltex soughtrecovery of the loss from Delsan, but the latter refused topay. Asinsurer, AHAC paid Caltex the sum of P

479,262.57 for spillage, pursuant to Marine RiskNote, and P1,939,575.37 for backflow of the diesel oilpursuant to Inland Floater Policy. AHAC, as Caltexssubrogee, instituted Civil Case No. 85-29357against Delsan for loss caused by the spillage.

Issue: May Delsan be held liable for loss caused by thespillage of the diesel oil?

Held: Yes. The court declared that Delsan, beinga common carrier, should have exercised extraordinarydiligence in the performance of its duties. Commoncarriers are bound to observe extraordinary diligence inthe vigilance over the goods transported by them. Theyare presumed to have been at fault or to have actednegligently if the goods are lost, destroyed ordeteriorated. To overcome the presumption of negligencein case of loss, destruction or deterioration of the goods,the common carrier must prove that it exercisedextraordinary diligence subject to exceptions under Art.1734.The extraordinary responsibility of common carrierlasts from the time the goods are unconditionally placedin the possession of, and received by, the carrier for


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transportation until the same are delivered, actually orconstructively, by the carrier to the consignee, or to aperson who has the right to receive them. Thedischarging of oil products to Caltex Bulk Depot hasnot yet been finished, Delsan still has the duty to guardand to preserve the cargo. The carrier still has in it theresponsibility to guard and preserve the goods, a dutyincident to its having the goods transported

MAERSK LINES vs. CA

FACTS

Petitioner Maersk Line is engaged in the transportation ofgoods by sea, doing business in the Philippines throughits general agent Compania de Tabacos de Filipinas,while private respondent Efren Castillo is the proprietor ofEthegal Laboratories, a firm engaged in the manufactureof pharmaceutical products.

On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. ofPuerto Rico 600,000 empty gelatin capsules for the

manufacture of his pharmaceutical products. Thecapsules were placed in 6 drums of 100,000 capsuleseach valued at US$1,668.71. Shipper Eli Liily,Inc.advised Castillo through a Memorandum of Shipmentthat the products were already shipped on board MVAnders Maesrkline and date of arrival to be April 3,1977.

However, for unknown reasons, said cargoes of capsuleswere diverted to Richmond, VA and then transportedback to Oakland, CA and with the goods finally arriving inthe PI on June 10, 1977. Consignee Castillo refused totake delivery of the goods on account of its failure toarrive on time, and filed an action for rescission ofcontract with damages against Maersk and Eli Lillyalleging gross negligence and undue delay.

Maersk contends that it is liable only in case of loss,destruction or deterioration of goods under Art 1734 NCCwhile Eli Lilly in its cross claim argued that the delay wasdue solely to the negligence of Maersk Line. Trial Courtdismissed the complaint against Eli Lilly and the latterwithdrew cross claim but TC still held Maersk liable andCA affirmed with modifications.

ISSUES

1. W/N a cause of action exists against Maersk Linegiven that there was a dismissal of the complaintagainst Eli Lilly? Yes, but not under the crossclaim rather because Maersk was an originalparty.

2. W/N Castillo is entitled to damages resulting fromdelay in the delivery of the shipment in theabsence in the bill of lading of a stipulation on thedelivery of goods? Yes.

RULING


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At about ten to eleven oclock in the evening of 01October 1979, the crew of D/B Lucio abandoned thevessel because the barges rope attached to the wharfwas cut off by the big waves. At around midnight, thebarge run aground and was broken and the cargoes ofbeer in the barge were swept away.

As a result, ANCO failed to deliver to SMCs consigneeTwenty-Nine Thousand Two Hundred Ten (29,210)cases of Pale Pilsen and Five Hundred Fifty (550) casesof Cerveza Negra. The value per case of Pale Pilsenwas Forty-Five Pesos and Twenty Centavos (P45.20).The value of a case of Cerveza Negra was Forty-SevenPesos and Ten Centavos (P47.10), hence, SMCs claimagainst ANCO amounted to One Million Three HundredForty-Six Thousand One Hundred Ninety-Seven Pesos(P1,346,197.00).

As a consequence of the incident, SMC filed a complaintfor Breach of Contract of Carriage and Damages against

ANCO for the amount of One Million Three HundredForty-Six Thousand One Hundred Ninety-Seven Pesos(P1,346,197.00) plus interest, litigation expenses andTwenty-Five Percent (25%) of the total claim asattorneys fees.

ISSUE

ANCO raised the defense that the breach was caused bya fortuitous event, thus it is exempted from liability. Is thiscontention correct?

RULING

No. In order for fortuitous event to be a valid defense fora common carrier, the event must be:

1. Unforeseeable , or if foreseeable it must beinevitable.

2. It must be the proximate and the only cause of theloss.

3. The common carrier must exercise due diligenceto prevent or minimize the loss (before, duringafter the occurrence of the event).

Caso fortuito or force majeure (which in law are identicalinsofar as they exempt an obligor from liability)[19] bydefinition, are extraordinary events not foreseeable oravoidable, events that could not be foreseen, or whichthough foreseen, were inevitable. It is therefore notenough that the event should not have been foreseen oranticipated, as is commonly believed but it must be oneimpossible to foresee or to avoid.

In this case, the calamity which caused the loss of thecargoes was not unforeseen nor was it unavoidable. Infact, the other vessels in the port of San Jose, Antique,managed to transfer to another place, a circumstancewhich prompted SMCs District Sales Supervisor to

request that the D/B Lucio be likewise transferred, but tono avail. The D/B Lucio had no engine and could notmaneuver by itself. Even if ANCOs representativeswanted to transfer it, they no longer had any means to doso as the tugboat M/T ANCO had already departed,leaving the barge to its own devices. The captain of thetugboat should have had the foresight not to leave thebarge alone considering the pending storm.


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While the loss of the cargoes was admittedly caused bythe typhoon Sisang, a natural disaster, ANCO could notescape liability to respondent SMC. The records clearlyshow the failure of petitioners representatives to exercisethe extraordinary degree of diligence mandated by law.To be exempted from responsibility, the natural disastershould have been the proximate and only cause of theloss. There must have been no contributory negligenceon the part of the common carrier. As held in the case ofLimpangco Sons v. Yangco Steamship Co.:

. . . To be exempt from liability because of an actof God, the tug must be free from any previousnegligence or misconduct by which that loss or damagemay have been occasioned. For, although the immediateor proximate cause of the loss in any given instance mayhave been what is termed an act of God, yet, if the tugunnecessarily exposed the two to such accident by anyculpable act or omission of its own, it is not excused.

Therefore, as correctly pointed out by the appellate court,

there was blatant negligence on the part of M/T ANCOs

crewmembers, first in leaving the engine-less barge D/B

Lucio at the mercy of the storm without the assistance ofthe tugboat, and again in failing to heed the request of

SMCs representatives to have the barge transferred to a

safer place, as was done by the other vessels in the port;

thus, making said blatant negligence the proximate cause

of the loss of the cargoes.

DSR-SENATOR vs. FEDERAL

FACTS

Berde Plants delivered 632 units of artificial treesto C.F. Sharp, the General Ship Agent of DSR-SenatorLines, a foreign shipping corporation, for transportationand delivery to the consignee, Al-Mohr InternationalGroup, in Riyadh, Saudi Arabia.

C.F. Sharp issued International Bill of Lading for thecargo the port of discharge for the cargo was at theKhor Fakkan port and the port of delivery was Riyadh,Saudi Arabia, viaPort Dammam. The cargo was loaded

in M/S Arabian Senator.

Federal Phoenix Assurance insured the cargo against allrisks.

On June 7, 1993, M/S Arabian Senator left the ManilaSouth Harbor for Saudi Arabia with the cargo onboard. When the vessel arrived in Khor Fakkan Port, thecargo was reloaded on board DSR-Senator Lines feedervessel, M/V Kapitan Sakharov, bound for Port

Dammam, Saudi Arabia.

However, while in transit, the vessel and all its cargocaught fire.

On July 5, 1993, DSR-Senator Lines informed BerdePlants that M/V Kapitan Sakharov with its cargo wasgutted by fire and sank on or about July 4, 1993. On


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December 16, 1993, C.F. Sharp issued a certification tothat effect

Consequently, Federal Phoenix Assurance paid BerdePlants P941,429.61 corresponding to the amount ofinsurance for the cargo. In turn Berde Plants executed inits favor a Subrogation Receipt dated January 17, 1994.

On February 8, 1994, Federal Phoenix Assurance sent aletter to C.F. Sharp demanding payment of P941,429.61on the basis of the Subrogation Receipt. C.F. Sharpdenied any liability on the ground that such liability wasextinguished when the vessel carrying the cargo wasgutted by fire.On March 11, 1994, Federal Phoenix Assurance filedwith the RTC, Branch 16, Manila a complaint fordamages against DSR-Senator Lines and C.F. Sharp,praying that the latter be ordered to pay actual damagesof P941,429.61, compensatory damages of P100,000.00and costs.ISSUE

W/N DSR-Senator is liableYES

RULING

Under Article 1734, Fire is not one of those enumeratedunder the above provision which exempts a carrier fromliability for loss or destruction of the cargo. Since theperil of fire is not comprehended within the exceptions in

Article 1734, then the common carrier shall be presumedto have been at fault or to have acted negligently, unless

it proves that it has observed the extraordinary diligencerequired by law.

The natural disaster must have been the proximate andonly cause of the loss, and that the carrier has exerciseddue diligence to prevent or minimize the loss before,during or after the occurrence of the disaster.

When the goods shipped either are lost or arrive indamaged condition, a presumption arises against thecarrier of its failure to observe that diligence, and thereneed not be an express finding of negligence to hold itliable.

Common carriers are obliged to observe extraordinarydiligence in the vigilance over the goods transported bythem. Accordingly, they are presumed to have been atfault or to have acted negligently if the goods are lost,destroyed or deteriorated.

Respondent Federal Phoenix Assurance raised thepresumption of negligence against petitioners. However,they failed to overcome it by sufficient proof ofextraordinary diligence.

PHILAMGEN vs. SWEET LINES

FACTSA total 7,000 bags of low density polyethylene

(600 bags of polyethylene 641 and 6,400 bags ofpolyethylene 647) were shipped from Baton Rouge, LA toManila on board SS Vishva Yash, a vessel belonging to


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the Shipping Corporation of India (SCI). From Manila, thecargoes were shipped to Davao on board MV SweetLove, a vessel owned by Sweet Lines. The consigneewas Far East Bank with arrival notice to Tagum Plastics,Inc., Tagum, Davao City. The cargoes were insured byFar East Bank with the Philippine American GeneralInsurance Co (Philamgen) and were covered by bills oflading which contained the following stipulation inparagraph 5:

Claims for shortage, damage, must bemade at the time of delivery to consignee oragent, if container shows exterior signs ofdamage or shortage. Claims for non-delivery, misdelivery, loss or damage mustbe filed within 30 days from accrual. Suitsarising from shortage, damage or loss, non-delivery or misdelivery shall be institutedwithin 60 days from date of accrual of rightof action. Failure to file claims or institute

judicial proceedings as herein providedconstitutes waiver of claim or right of action.In no case shall carrier be liable for anydelay, non-delivery, misdelivery, loss ofdamage to cargo while cargo is not in

actual custody of carrier.

On May 15, 1977, the shipment(s) were discharged fromthe interisland carrier into the custody of the consignee. Asurvey conducted on July 8, 1977 showed that of theshipment totalling 7,000 bags, originally contained in 175pallets, only a total of 5,820 bags were delivered to theconsignee in good order condition, leaving a balance of

1,080 bags. Some of the 1,080 bags were eitherMISSING OR DAMAGED beyond the point of beinguseful for the intended purpose.

FEBTC and Tagum Plastics sued the internationalcarrier, SCI, the inter-island carriers, Sweet Lines, thearrastre company, Davao Arrastre and FE Zuellig (whichI assume is the shipper). Before trial, a compromiseagreement was entered into between the complainantsand SCI and F.E. Zuellig, thus, only Sweet Lines andDavao Arrastre remained as defendants.The trial court ruled in favour of Philamgen and TagumPlastics. The CA reversed on the ground of prescriptionand denied the motion for reconsideration.

ISSUES(1) Was there a prescriptive period?(2) If yes, was the prescriptive period valid and legal?(3) If it was valid and legal, did Philamgen act within

the prescriptive period?

RULING(1) Yes. There was a prescriptive period. When thecomplaint was filed, prescription as an affirmativedefense was seasonably raised by Sweet Lines in its

answer. Though the bills of lading were not presented inevidence, the SC said that: As petitioners are suingupon SLI's contractual obligation under the contract ofcarriage as contained in the bills of lading, such bills oflading can be categorized as actionable documentswhich under the Rules must be properly pleaded eitheras causes of action or defenses, and the genuinenessand due execution of which are deemed admitted unless


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specifically denied under oath by the adverse party. Therules on actionable documents cover and apply to both acause of action or defense based on said documents. Intheir answer, Sweet Lines included the prescriptiveperiod under paragraph 5 of the bills of lading. Philamgendid not deny the existence of the bill of lading under oath.Instead, in its reply to the answer, Philamgen assertedthat the bills of lading were contracts of adhesion andthat such provisions were contrary to law and publicpolicy and thus, Sweet Lines cannot avail of suchprescriptive period as a valid defense. The SC said thatPhilamgens failure to deny under oath the existence ofthe bills of lading was tantamount to an admission of itsexistence, together with paragraph 5 containing theprescriptive period. Thus, the existence of theprescriptive period was duly proved even if the bills oflading were not presented in court.

(2) Yes. The prescriptive periods were valid and legal.Philamgen insists that the bills of lading were contracts ofadhesion and that the prescriptive periods stated thereinwere void for being contrary to law and public policy. TheSC, citing Ong Yu vs CA, said that contracts of adhesionare not entirely prohibited. The one who adheres to thecontract is in reality free to reject it entirely; if he adheres

he gives his consent. Philamgen, thus, gave its consentto the contractsthe bills of ladingincluding consent tothe prescriptive periods therein. The SC also agreed withthe CA that parties can stipulate a shorter prescriptiveperiod for the filing of suits. The SC quoted the CA, Itmust be noted, at this juncture, that the aforestated timelimitation (paragraph 5) in the presentation of claim forloss or damage, is but a restatement of the rule

prescribed under Art. 366 of the Code of Commerce... The SC said that, ... the validity of a contractuallimitation of time for filing the suit itself against a carriershorter than the statutory period therefor has generallybeen upheld as such stipulation merely affects theshipper's remedy and does not affect the liability of thecarrier. In the absence of any statutory limitation andsubject only to the requirement on the reasonableness ofthe stipulated limitation period, the parties to a contract ofcarriage may fix by agreement a shorter time for thebringing of suit on a claim for the loss of or damage to theshipment than that provided by the statute of limitations.Such limitation is not contrary to public policy for it doesnot in any way defeat the complete vestiture of the rightto recover, but merely requires the assertion of that rightby action at an earlier period than would be necessary todefeat it through the operation of the ordinary statute oflimitations. The SC also said that, ..., the shortenedperiod for filing suit is not unreasonable and has in factbeen generally recognized to be a valid business practicein the shipping industry. This is in recognition of theinherent dangers of carriage by sea.

(3) No. Philamgen did not act within the prescriptiveperiod. The shipment was discharged into the custody of

the consignee on May 15, 1977, and it was from this datethat petitioners' cause of action accrued, with thirty (30)days therefrom within which to file a claim with the carrierfor any loss or damage which may have been suffered bythe cargo and thereby perfect their right of action. Claimwas filed only on April 28, 1978, way beyond the periodprovided in the bills of lading and violative of thecontractual provision, the inevitable consequence of


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which is the loss of petitioners' remedy or right to sue.The SC said, Even the filing of the complaint on May 12,1978 is of no remedial or practical consequence, sincethe time limits for the filing thereof, whether viewed as acondition precedent or as a prescriptive period, would inthis case be productive of the same result, that is, thatpetitioners had no right of action to begin with or, at anyrate, their claim was time-barred.

Other things discussed by the SC:1. ...where the contract of shipment contains areasonable requirement of giving notice of loss of orinjury to the goods, the giving of such notice is a

condition precedent to the action for loss or injury or theright to enforce the carrier's liability. Such requirement isnot an empty formalism. The fundamental reason orpurpose of such a stipulation is not to relieve the carrierfrom just liability, but reasonably to inform it that theshipment has been damaged and that it is charged withliability therefor, and to give it an opportunity to examinethe nature and extent of the injury. This protects thecarrier by affording it an opportunity to make aninvestigation of a claim while the matter is fresh and

easily investigated so as to safeguard itself from falseand fraudulent claims.

2. Philamgen also asserted that since the purpose of thenotice of claim or loss was to charge Sweet Lines withactual knowledge of the loss and damage involved, thenthe issuance of Sweet Lines of a Report on Losses andDamage dated May 15, 1977, would obviate the need

for or render superfluous the filing of a claim within thestipulated period. The SC said, The report on lossesand damages is not the claim referred to and required bythe bills of lading for it does not fix responsibility for theloss or damage, but merely states the condition of thegoods shipped. The claim contemplated herein, inwhatever form, must be something more than a noticethat the goods have been lost or damaged; it mustcontain a claim for compensation or indicate an intent toclaim. Furthermore, the report bears an annotation at itslower part that says this Copy should be submittedtogether with your claim invoice or receipt within 30 daysfrom date of issue otherwise your claim will not behonored."

4. The claim against the carrier, Sweet Lines, has

prescribed but what about the claim against Davao

Arrastre. The SC said that there was not enough

proof to pinpoint the party responsible for the lost

and damaged bags. (What I found surprising was

that the SC also said, Unlike a common carrier,

an arrastre operator does not labor under a

presumption of negligence in case of loss,

destruction or deterioration of goods discharged

into its custody. In other words, to hold an arrastre

operator liable for loss of and/or damage to goods

entrusted to it there must be preponderant

evidence that it did not exercise due diligence in

the handling and care of the goods.


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BELGIAN OVERSEAS CHARTERING ANDSHIPPING N.V. and JARDINE DAVIESTRANSPORT SERVICES, INC., petit ion ers, vs.PHILIPPINE FIRST INSURANCE CO., INC.,

respondent.

PANGANIBAN, J.:

Facts:CMC Trading A.G. shipped on board the MN AnangelSky at Hamburg, Germany 242 coils of various PrimeCold Rolled Steel sheets for transportation to Manilaconsigned to the Philippine Steel Trading Corporation.On July 28, 1990, MN Anangel Sky arrived at the port of

Manila and, within the subsequent days, discharged thesubject cargo. Four (4) coils were found to be in badorder B.O. Tally sheet No. 154974. Finding the four (4)coils in their damaged state to be unfit for the intendedpurpose, the consignee Philippine Steel TradingCorporation declared the same as total loss.Despite receipt of a formal demand, Phil. First insurancerefused to submit to the consignees claim.Consequently, Belgian Overseas paid the consigneeP506,086.50, and was subrogated to the latters rights

and causes of action against defendants-appellees.Subsequently, plaintiff-appellant instituted this complaintfor recovery of the amount paid by them, to theconsignee as insured.Impugning the propriety of the suit against them,defendants-appellees imputed that the damage and/orloss was due to pre-shipment damage, to the inherentnature, vice or defect of the goods, or to perils, danger

and accidents of the sea, or to insufficiency of packingthereof, or to the act or omission of the shipper of thegoods or their representatives. In addition thereto,defendants-appellees argued that their liability, if there beany, should not exceed the limitations of liability providedfor in the bill of lading and other pertinent laws. Finally,defendants-appellees averred that, in any event, theyexercised due diligence and foresight required by law toprevent any damage/loss to said shipment.

Issue: Whether or not petitioners have overcome thepresumption of negligence of a common carrier

Held:No.Petitioners contend that the presumption of faultimposed on common carriers should not be applied on

the basis of the lone testimony offered by privaterespondent. The contention is untenable.Well-settled is the rule that common carriers, from thenature of their business and for reasons of public policy,are bound to observe extraordinary diligence andvigilance with respect to the safety of the goods and thepassengers they transport. Thus, common carriers arerequired to render service with the greatest skill andforesight and to use all reasonable means to ascertainthe nature and characteristics of the goods tendered for

shipment, and to exercise due care in the handling andstowage, including such methods as their naturerequires. The extraordinary responsibility lasts from thetime the goods are unconditionally placed in thepossession of and received for transportation by thecarrier until they are delivered, actually or constructively,to the consignee or to the person who has a right toreceive them.


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Owing to this high degree of diligence required of them,common carriers, as a general rule, are presumed tohave been at fault or negligent if the goods theytransported deteriorated or got lost or destroyed. That is,unless they prove that they exercised extraordinarydiligence in transporting the goods. In order to avoidresponsibility for any loss or damage, therefore, theyhave the burden of proving that they observed suchdiligence.However, the presumption of fault or negligence will notarise if the loss is due to any of the following causes: (1)flood, storm, earthquake, lightning, or other naturaldisaster or calamity; (2) an act of the public enemy inwar, whether international or civil; (3) an act or omissionof the shipper or owner of the goods; (4) the character of

the goods or defects in the packing or the container; or(5) an order or act of competent public authority. This is aclosed list. If the cause of destruction, loss ordeterioration is other than the enumeratedcircumstances, then the carrier is liable therefor.Corollary to the foregoing, mere proof of delivery of thegoods in good order to a common carrier and of theirarrival in bad order at their destination constitutes a primafacie case of fault or negligence against the carrier. If noadequate explanation is given as to how the

deterioration, the loss or the destruction of the goodshappened, the transporter shall be held responsible.That petitioners failed to rebut the prima faciepresumption of negligence is revealed in the case at barby a review of the records and more so by the evidenceadduced by respondent

EDGAR COKALIONG SHIPPING LINES, INC. VS

UCPB

Facts:

- Nestor Angelia and Zosimo Mercado both delivered to

petitioner cargo, valued on its face 6,500 and 14,000pesos respectively

- The Bills of Lading contain the stipulation that in caseof claim for loss or for damage to the shippedmerchandise or property, the liability of the commoncarrier shall not exceed the value of the goodsappearing in the Bill of Lading

- Nestor was both the shipper and consignee of thecargo

- Feliciana Legaspi insured the cargo of the 2 bills of

lading for the amount of 50, 000 and 100,000 pesosagainst all risks

- Fire ensured in the engine room and destroyed theentire vessel and all the cargo therin

- Feliciana filed a claim for the value of the cargo, itwas approved for the amount of 49,500 and 99,000pesos for both bills of lading

- Respondent filed a complaint in the RTC for thecollection of 148,500 pesos, the total principal amount

it paid to Feliciana Legaspi- Petitioners argued that after settling his claim, Nestor

Angelia executed the Release and Quitclaimhence itwas absolved of any liability for the loss of the cargoand even if it was, its liability should not exceed thevalue of the cargo as stated in the Bills of Lading

- CA held that petitioner is not bound by the valuationof the cargo under the Bills of Lading, nor is the value


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of the cargo under said Bills of Lading conclusive onthe respondentthe goods were insured with therespondent for the total amount of 150,000 pesos,which amount may be considered as the face value ofthe goods

Issue:

Amount of liability of petitioner: WON it is that which was

stated in the Bills of Lading, or the extent of the amount

paid by the insurance company

Held: That which is stated in the Bills of Lading

Ratio:

- A stipulation that limits liability is valid as long as it isnot against public policy

- A stipulation in the Bill of Lading limiting the commoncarriers liability for loss or destruction of a cargo to a

certain sum, unless the shipper or owner declares agreater value, is sanctioned by law [1749, 1750]- The present stipulation is not against public policy, it

is just and reasonable; the shippers/consignees mayrecover the full value of the goods by the simpleexpedient of declaring the true value of the shipmentin the bill of lading

- In fact, they even committed fraud in deliberatelyundervaluing the goods

- Purpose of the limiting stipulation is to protect thecommon carrierto notify it of the amount it may beliable for and be able to take appropriate measures tocover or protect itself i.e. getting insurance

- For assuming a higher risk, the insurance companywas paid the correct higher premium while thepetitioner was paid a fee lower for transporting thegoods that had been deliberately undervalued

- Between the two of them, the insurer should bear theloss in excess of the value declared in the bill oflading, this is a just and equitable solution

Sarkies Tours Philippines, Inc. v. CA, ElinoFortades, Marisol Fortades and FatimaMinervaFortadesG.R. No. 108897 October 2, 1997

Romero, J.

FACTS:

Fatima boarded Sarkies Tours bus in Manila onher way to Legazpi City. She had her 3pieces ofluggage containing all of her optometry review books,

materials and equipment,trial lenses, trial contactlenses, passport and visa, as well as her motherMarisols U.S.immigration (green) card, among otherimportant documents and personal belongingsloaded in the bus luggage compartment. During astopover at Daet, it was discovered thatonly one bagremained in the open compartment. The others, including


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Fatimasthings, were missing and might have dropped alongthe way.

Fatima filed an action against Sarkies Tours, claimingthat the loss was due to its failure toobserveextraordinary diligence in the care of her luggageand that Sarkies Tours dealtwith them in badfaith from the start

ISSUE:WON Sarkies Tours is liable

HELD:Yes. Common carriers, from the nature of theirbusiness and for reasons of

pub licpo l icy , a re bound to observe ext raord ina ry d i l i gence in t he v ig i l ance ove r t he goods transported by them, and this liability lasts fromthe time the goods are unconditionally placed in thepossession of, and received by the carrier fortransportation until the same are delivered, actually orconstructively, by the carrier to the person who has aright to receive them, unless the loss is due to any of theexcepted causes under Art. 1734. The cause of theloss was Sarkies Tours negligence in not

ensuring that the doors of the baggagecompartment of its bus were securely fastened. Asa result of this lack of care, almost all of the luggagewas lost, to the prejudice of the paying passengers.

Valenzuela Hardwood vs. CA(GR 102316, 30 June 1997)

FACTS:Valenzuela Hardwood and Industrial Supply, Inc. (VHIS)

entered into an agreement with the Seven Brothers

whereby the latter undertook to load on board its vessel

M/V Seven Ambassador the formers lauan round logs

numbering 940 at the port of Maconacon, Isabela for

shipment to Manila. VHIS insured the logs against loss

and/or damage with South Sea Surety and Insurance Co.

The said vessel sank resulting in the loss of VHISinsured logs. VHIS demanded from South Sea Surety the

payment of the proceeds of the policy but the latter

denied liability under the policy for non-payment of

premium. VHIS likewise filed a formal claim with Seven

Brothers for the value of the lost logs but the latter denied

the claim.

The RTC ruled in favor of the petitioner.Both Seven

Brothers and South Sea Surety appealed. The Court ofAppeals affirmed the judgment except as to the liability of

Seven Brothers.South Sea Surety and VHIS filed

separate petitions for review before the Supreme Court.

In a Resolution dated 2 June 1995, the Supreme Court

denied the petition of South Sea Surety. The present

decision concerns itself to the petition for review filed by

THIS.


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ISSUE:

Is a stipulation in a charter party that the (o)wners shall

not be responsible for loss, split, short-landing,

breakages and any kind of damages to the cargo valid?

HELD: Yes, It is undisputed that private respondent had

acted as a private carrier in transporting petitioners lauan

logs. Thus, Article 1745 and other Civil Code provisions

on common carriers which were cited by petitioner may

not be applied unless expressly stipulated by the parties

in their charter party.

In a contract of private carriage, the parties may validly

stipulate that responsibility for the cargo rests solely onthe charterer, exempting the ship owner from liability for

loss of or damage to the cargo caused even by the

negligence of the ship captain. Pursuant to Article 1306

of the Civil Code, such stipulation is valid because it is

freely entered into by the parties and the same is not

contrary to law, morals, good customs, public order, or

public policy. Indeed, their contract of private carriage is

not even a contract of adhesion. We stress that in a

contract of private carriage, the parties may freely

stipulate their duties and obligations which perforce

would be binding on them. Unlike in a contract involving a

common carrier, private carriage does not involve the

general public. Hence, the stringent provisions of the Civil

Code on common carriers protecting the general public

cannot justifiably be applied to a ship transporting

commercial goods as a private carrier. Consequently, the

public policy embodied therein is not contravened by

stipulations in a charter party that lessen or remove the

protection given by law in contracts involving common

carriers.

The general public enters into a contract of transportation

with common carriers without a hand or a voice in the

preparation thereof. The riding public merely adheres to

the contract; even if the public wants to, it cannot submit

its own stipulations for the approval of the common

carrier. Thus, the law on common carriers extends its

protective mantle against one-sided stipulations inserted

in tickets, invoices or other documents over which theriding public has no understanding or, worse, no choice.

Compared to the general public, a charterer in a contract

of private carriage is not similarly situated. It can -- and in

fact it usually does -- enter into a free and voluntary

agreement. In practice, the parties in a contract of private

carriage can stipulate the carriers obligations and

liabilities over the shipment, which in turn, determine the

price or consideration of the charter. Thus, a charterer, in

exchange for convenience and economy, may opt to set

aside the protection of the law on common carriers.

When the charterer decides to exercise this option, he

takes a normal business risk


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lberta Yobido and Cresencio Yobido v. CA,Leny Tumboy, Ardee Tumboy and JasminTumboy

Romero, J.FACTS:

Spouses Tito and Leny Tumboy and their minor childrennamed Ardee and Jasmin, boardeda Yobido Linerbus bound fo r Davao C i t y . A long the t r i p , t helef t f ront t i re of the bus exploded. The bus fe l linto a ravine around 3 ft. from the road and strucka tree. The incident resulted in the death of Tito andphysical injuries to other passengers.

Factual backdrop based on testimony of Leny: thewinding road the bus traversed was not cemented andwas wet due to the rain; it was rough with crushedrocks. The bus which was full of passengers hadcargoes on top. Since it was running fast, (at aspeed of 50-60kph based on another witnesstestimony) she cautioned the driver to slow down but hemerely stared at her through the mirror.

A complaint for breach of contract of carriage was filed byLeny and her children against Alberta Yobido, the ownerof the bus, and Cresencio Yobido, its driver; Yobidosraised thea f f i rma t i ve de fense o f caso fo r tu i t o ; t hey a l so f i l ed a th i r d pa r t y comp la in t aga ins tPhilippine Phoenix Surety and Insurance, Inc.

Upon a finding that the third party defendant was notliable under the insurance contract, the lowercourt dismissed the third party complaint.

ISSUE:

WON the tire blowout was a caso fortuito as to exemptYobidos from liability

HELD:No.tire blowout- mechanical defect of the conveyance or a fault inits equipment which was easi ly discoverable if thebus had been subjected to a more thorough or

rig id check-up before it took to the road

when a passenger boards a common carrier, he takesthe risks incidental to the mode of travel he has taken.

After all, a carrier is not an insurer of the safety of itspassengers and is not bound absolutely and at all eventsto carry them safely and without injury. However, when apassenger is injured or dies while travelling, the lawpresumes that the common carrier is negligent. (see Art.1756)

Art. 1755 provides that a common carrier is boundto carry the passengers safely as farashuman care and for es ight can p rov ide, us ing the u tmos t d i l i gence o f ve ry cau t iouspersons , w i th a due rega rd fo r a l l t he c i r cumstances . In cu lpa co nt rac tua l, onc e apassenger diesor is injured, the carrier is presumed to have been at fault


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or to have acted neg ligent ly.This disputable presumption mayonly be overcome by evidence that the carrier hadobserved extraordinary diligence as prescribed by Arts.1733, 1755 and 1756 or that the death or injury of the

passenger was due to a fortuitous event.

Charac te r i st i cs o f f o r tu i t ous even t : a ) t he cause o f t he un fo reseen and unexpec tedocc u r r e n c e , o r t h e f a i l u r e o f t h e d e b t o r t o c o mp l y w i t h h i s o b l i g a t i o n s , m u s t b e independent of human will; b) it must be impossible to foresee theevent which constitutesthe caso fortuito, or if it can beforeseen, it must be impossible to avoid; c) theoccurrencemust be such as to render it impossible for the

debtor to fulfill his obligation in a normalmanner; and d)the obligor must be free from any participation in theaggravation of theinjury resulting to the creditor

Ar t 1174: no pe rson sha l l be respons ib le f o ra for tu i tou s even t whic h coul d not beforeseen,or which, though foreseen, was inevitable

the explosion of the new tire may not be considered afortuitous event; there are humanfactors involved in

the situation; the fact that the tire was new did notimply that it wasentirely free from manufacturingdefects or that it was properly mounted on the vehicle.

3. Defenses and condition

CENTRAL SHIPPING COMPANY, INC.,petitioner, vs. INSURANCE COMPANY OFNORTH AMERICA, respondent.

Doctrine of Limited Liability does not apply to

situations in which the loss or the injury is due to the

concurrent negligence of the shipowner and the

captain.

Facts:

1. On July 25, 1990 at Puerto Princesa, Palawan, thepetitioner received on board its vessel, the M/V CentralBohol, 376 pieces of Philippine Apitong Round Logs andundertook to transport said shipment to Manila fordelivery to Alaska Lumber Co., Inc.

2. During the voyage the degree of the position of theship would change due to the shifting of the logs inside.Eventually at about 15 degrees the captain ordered foreveryone to abandon the ship.

3. Respondent alleged that the total loss of theshipment was caused by the fault and negligence of thepetitioner and its captain. Petitioner while admitting the


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sinking of the vessel, interposed the defense that thevessel was fully manned, fully equipped and in allrespects seaworthy; that all the logs were properlyloaded and secured; that the vessels master exerciseddue diligence to prevent or minimize the loss before,

during and after the occurrence of the storm.

4. It raised as its main defense that the proximate andonly cause of the sinking of its vessel and the loss of itscargo was a natural disaster, a tropical storm whichneither [petitioner] nor the captain of its vessel couldhave foreseen.

5. The RTC was unconvinced that the sinking of M/VCentral Bohol had been caused by the weather or any

other caso fortuito. It noted that monsoons, which werecommon occurrences during the months of July toDecember, could have been foreseen and provided forby an ocean-going vessel. Applying the rule ofpresumptive fault or negligence against the carrier, thetrial court held petitioner liable for the loss of the cargo.

6. The CA affirmed the trial courts finding that thesouthwestern monsoon encountered by the vessel wasnot unforeseeable. Given the season of rains and

monsoons, the ship captain and his crew should haveanticipated the perils of the sea. Citing Arada v. CA,7 itsaid that findings of the BMI were limited to theadministrative liability of the owner/operator, officers andcrew of the vessel. However, the determination ofwhether the carrier observed extraordinary diligence inprotecting the cargo it was transporting was a function ofthe courts, not of the BMI.

Issue:

Whether or not the Doctrine of Limited Liability applies.

Held:

No it does not.

Common carriers are bound to observe extraordinarydiligence over the goods they transport, according to allthe circumstances of each case; In all other cases notspecified under Article 1734 of the Civil Code, commoncarriers are presumed to have been at fault or to haveacted negligently, unless they prove that they observed

extraordinary diligence. From the nature of their businessand for reasons of public policy, common carriers arebound to observe extraordinary diligence over the goodsthey transport, according to all the circumstances of eachcase. In the event of loss, destruction or deterioration ofthe insured goods, common carriers are responsible; thatis, unless they can prove that such loss, destruction ordeterioration was brought aboutamong othersbyflood, storm, earthquake, lightning or other naturaldisaster or calamity. In all other cases not specified

under Article 1734 of the Civil Code, common carriers arepresumed to have been at fault or to have actednegligently, unless they prove that they observedextraordinary diligence.The doctrine of limited liability under Article 587 of theCode of Commerce is not applicable to the present case.This rule does not apply to situations in which the loss orthe injury is due to the concurrent negligence of the ship-


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owner and the captain. It has already been establishedthat the sinking of M/V Central Bohol had been causedby the fault or negligence of the ship captain and thecrew, as shown by the improper stowage of the cargo oflogs. Closer supervision on the part of the shipowner

could have prevented this fatal miscalculation. As such,the shipowner was equally negligent. It cannot escapeliability by virtue of the limited liability rule.

Everett Steamship Corporation vs. CAG.R.No.122494, October 8, 1998

FACTS:

Private respondent imported 3 crates of bus spareparts marked as MARCO C/No. 12,MARCO C/No.13 and MARCO C/No. 14, from its supplier,Maruman Trading Company,Ltd. (Maruman Trading),a foreign corporation based in Inazawa, Aichi, Japan.The crates we re sh ip pe d fr omNagoya , Japan to Man i lain board "ADELFAEVERETTE," a vesse lowned by petitioner's principal, Everett Orient Lines.Upon arrival at the port of

M a n i l a , i t w a s d i s c o v e r e d t h a t t h e c r a t e m ar k e d M A R C O C / N o . 1 4 w a s m i s s i n g . P r i va te responden t c la im upon pe t i t i one r f o r t heva lue o f t he los t ca rgo amoun t ing to OneMi l l i on F ive Hundred F i f t y Two Thousand F ive Hundred (Y1 ,552,500 .00 ) Yen , t heamo un ts h o w n i n a n I n v o i c e N o . M T M 9 4 1 , d a t e dNo ve mb er 14 , 19 91 . Ho we ve r , petitioneroffered to pay only One Hundred Thousand

(Y100,000.00) Yen, the maximum amount stipulatedunder Clause 18 of the covering bill of lading which limitsthe liability of petitioner. Private respondentrejected the offer and thereafter instituted a suitfor collection. The trial court rendered a decision

in favor of the private respondents and this wasaffirmed by the Court of Appeals. Thus, this instantpetition.

ISSUES:1 . I s t h e p e t i t i o n e r l i a b l e f o r t h e a c t ua l v a l u e a n d n o t t h e m a x i m u m v a l u erecoverable under the bill of lading?

2. Is p rivate respondent, as consignee, whois not a signatory to the bill of lading bound by thestipulations thereof?

ARGUMENTS:

1.The Petitioner is only liable for the maximumvalue recoverable under the bill of lading. Clause 18of the covering bill of lading:18. All claims forwh ich the ca r r i e r may be l i ab le sha l l be

ad jus ted and se t t l ed on the bas is o f t hesh ippe r ' s ne t i nvo ice cos t p lus f r e igh t andinsurance premiums, if paid, and in no event shall thecarrier be liable for any loss of possible profits or anyconsequential loss. The carrie r shall not be liable f orany loss of or any damage to or in any connectionwith, goods in an amount exceeding One Hundredthousand Yen in Japan ese Cur rency


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(Y100 ,000 .00 ) o r i t s equ iva len t i n any o the rcurrency per package or customary freight unit(whichever is least) un less the value of the goodshigher than this amount is declared in writingby the shipper before receipt of the goods by the

carrier and inserted in the Bill of Lading and extrafreight is paid as

Transpo Digest Transportation of Goods Pascasio

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