Transpo+Digest+2 (1)

7/28/2019 Transpo+Digest+2 (1)

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

DELSAN TRANSPORT vs. CA

FACTS

Caltex engaged into a contract of affreightment with the petitioner,Delsan Transport Lines, Inc.(Delsan), for a period of one yearwhereby the said common carrier agreed to transport Caltexsindustrial fuel oil from the Batangas-Bataan Refinery to differentparts of the country. Under the contract, petitioner took on boardits vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil ofCaltex to be delivered to the Caltex Oil Terminal in ZamboangaCity. The shipment was insured with private respondent, AmericanHome Assurance Corporation (American Home)

The vessel sank in the early morning of August 15, 1986 nearPanay Gulf in the Visayas taking with it the entire cargo of fuel oil.

Subsequently, American Home paid Caltex the sum of Php5,096,635.57 representing the insured value of the cargo.Exercising its right to subrogation under Article 2207 of the NewCivil Code, the American Home demanded the Delsan the sameamount it paid to Caltex.

Due to its failure to collect from Delsan despite prior demand,American Home filed a complaint with the RTC of Makati forcollection of a sum of money.

The trial court dismissed the complaint against Delsan. It ruled thatthe vessel, MT Maysun, was seaworthy and that the incident wascaused by unexpected inclement weather condition or forcemajeure, thus exempting the common carrier from liability for theloss of its cargo.

The CA reversed. It gave credence to the weather report issued byPAGASA which stated that the waves were only .7 to 2 meters inheight in the vicinity of the Panay Gulf at the day the ship sank, in

contrast to the claim of the crew of the ship that the waves were 20feet high.

Delsan contends the following

1. Delsan theorized that when the American Home paidCaltex the value of its lost cargo, the act of AmericanHome is equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, American Homewas not legally liable to Caltex due to the latters breachof implied warranty under the marine insurance policythat the vessel was seaworthy.

2. Delsan avers that although chief officer had merely a 2nd

officers license, he was qualified to act as the vesselschief officer. In fact, all the crew and officers of MTTMaysun were exonerated in the administrativeinvestigation.

ISSUES

1. W/N the payment made by American Home to Caltex for theinsured value of the lost cargo amounted to an admissionthat the vessel was seaworthy, thus precluding any actionfor recovery against the petitioner. NO

2. W/N the non-presentation of the marine insurance policybars the complaint for recovery of sum of money for lack ofcause of action. NO

RULING

First Issue:

The payment made by American Home for the insured value of thelost cargo operates as waiver of its right to enforce the term of theimplied warranty against Caltex under the marine insurance policy.However, the same cannot be validly interpreted as an automaticadmission of the vessels seaworthiness by American Home as toforeclose recourse against Delsan for any liability under its

1B in 3B DIGEST GROUP (Gratias ago Vos ut a amicus)

Ad Deum Per Excellentia


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contractual obligation as a common carrier. The fact of paymentgrants American Home subrogatory right which enables it toexercise legal remedies that would otherwise be available to Caltexas owner of the lost cargo against Delsan, the common carrier.

From the nature of their business and for reasons of public policy,common carriers are bound to observe extraordinary diligence inthe vigilance over the goods and for the safety of passengerstransported by them, according to all the circumstances of eachcase. In the event of loss, destruction or deterioration of theinsured goods, common carriers shall be responsible unless thesame is brought about, among others, by flood, storm, earthquake,lightning or other natural disaster or calamity. In all other cases, ifthe goods are lost, destroyed or deteriorated, common carriers arepresumed to have been at fault or to have acted negligently, unlessthey prove they observed extraordinary diligence.

In order to escape liability for the loss of its cargo of industrial fueloil belonging to Caltex, Delsan attributes the sinking of MT Maysunto fortuitous event or force majeure. Although the testimony of thecaptain and chief mate that there were strong winds and waves 20feet high was effectively rebutted and belied by the weather reportof PAGASA. Thus, as the CA correctly ruled, Delsans vessel, MTMaysun, sank with its entire cargo for the reason that it was notseaworthy. There was no squall or bad weather or extremely poorsea condition in the vicinity where the said vessel sank.

Additionally, the exoneration of MT Maysuns officers and crewmerely concern their respective administrative liabilities. It doesnot in any way operate to absolve Delsan the common carrier fromits civil liability arising from its failure to observe extraordinarydiligence in the vigilance over the goods it was transporting and forthe negligent acts or omissions of its employees, the determinationof which properly belongs to the courts. In the case at bar, Delsanis liable for the insured value of the lost cargo of industrial fuel oilbelonging to Caltex for its failure to rebut the presumption of fault

or negligence as 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 evidence of themarine insurance policy is not indispensable in this case before theinsurer may recover from the common carrier the insured value ofthe lost cargo in the exercise of its subrogatory right. Thesubrogation receipt, by itself, is sufficient to establish not only therelationship of American Home as insurer and Caltex, as theassured shipper of the lost cargo of industrial fuel oil, but also theamount paid to settle the insurance claim. The right of subrogationaccrues simply upon payment by the insurance company of theinsurance claim.

LORENZO SHIPPING vs. BJ MATHEL

FACTS

Petitioner Lorenzo Shipping Corporation is a domestic corporationengaged in coastwise shipping. Respondent BJ MarthelInternational, Inc. is an importer and distributor of different brandsof engines and spare parts.

Respondent supplied petitioner with spare parts for the latter'smarine engines. According to the quotation it sent, deliveries ofsuch items are within 2 months after receipt of firm order.Petitioner thereafter issued to respondent Purchase Order No.13839 for the procurement of one set of cylinder liner, valued atP477,000, to be used for M/V Dadiangas Express. The purchaseorder was co-signed by Jose Go, Jr., petitioner's vice-president, andHenry Pajarillo, respondents sales manager.




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Instead of paying the 25% down payment (indicated in thepurchase order) for the first cylinder liner, petitioner issued in favorof respondent ten postdated checks. The checks were supposed to

represent the full payment of the aforementioned cylinder liner.

Subsequently, petitioner issued Purchase Order No. 14011, foranother unit of cylinder liner. This purchase order stated the termof payment to be "25% upon delivery, balance payable in 5 bi-monthly equal installments." Like the first purchase order, thesecond purchase order did not state the date of the cylinder liner'sdelivery.

On 26 January 1990, respondent deposited petitioner's check thatwas postdated 18 January 1990, however, the same wasdishonored by the drawee bank due to insufficiency of funds. Theremaining nine postdated checks were eventually returned byrespondent to petitioner.

Petitioner claimed that it replaced said check with a good one, theproceeds of which were applied to its other obligation torespondent. For its part, respondent insisted that it returned saidpostdated check to petitioner.

On 20 April 1990, Pajarillo delivered the two cylinder liners atpetitioner's warehouse in Manila. The sales invoices evidencing thedelivery of the cylinder liners both contain the notation "subject toverification" under which the signature of petitioner'swarehouseman, appeared.

Respondent sent a Statement of Account and respondent's vice-president sent a demand letter dated to petitioner requiring thelatter to pay. Petitioner sent the former a letter offering to pay onlyP150,000 for the cylinder liners. In said letter, petitioner claimedthat as the cylinder 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 and pay the balance from theproceeds of said sale.

Respondent filed an action for sum of money and damages before

the RTC. Prior to the filing of a responsive pleading, respondentfiled an amended complaint with preliminary attachment. Theamendments also pertained to the issuance by petitioner of thepostdated checks and the amounts of damages claimed.

The RTC granted respondent's prayer for the issuance of apreliminary attachment. Petitioner filed an Urgent Ex-Parte Motionto Discharge Writ of Attachment attaching thereto a counter-bondwhich the RTC allowed.

Petitioner afterwards filed its Answer alleging therein that time wasof the essence in the delivery of the cylinder liners and that thedelivery on 20 April 1990 of said items was late as respondentcommitted to deliver said items "within two (2) months afterreceipt of firm order."

Respondent filed a Second Amended Complaint with PreliminaryAttachment which dealt solely with the number of postdatedchecks issued by petitioner as full payment for the first cylinderliner it ordered from respondent. (In the first amended complaint,only nine postdated checks were involved, in its second amendedcomplaint, there were ten postdated checks).

Petitioner filed a Motion alleging therein that the cylinder liners runthe risk of obsolescence and deterioration to the prejudice of theparties to this case. Thus, petitioner prayed that it be allowed tosell the cylinder liners at the best possible price and to place theproceeds of said sale in escrow. This motion was granted.The RTC dismissed the complaint which ordered the plaintiff to payP50,000.00 to the defendant. It held respondent bound to thequotation it submitted to petitioner particularly with respect to theterms of payment and delivery of the cylinder liners. It alsodeclared that respondent had agreed to the cancellation of the




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contract of sale when it returned the postdated checks issued bypetitioner.The CA reversed the decision of the RTC.

ISSUES1. Whether or not respondent incurred delay in performing its

obligation under the contract of sale - NO2. Whether or not said contract was validly rescinded by

petitioner. -NO

RULING

Petitioner maintains that its obligation to pay fully the purchaseprice was extinguished because the adverted contract was validlyterminated due to respondent's failure to deliver within the two-month period. The threshold question, then, is: Was there latedelivery of the subjects of the contract of sale to justify petitionerto disregard the terms of the contract considering that time was ofthe essence thereof?

In determining whether time is of the essence in a contract, theultimate criterion is the actual or apparent intention of the partiesand before time may be so regarded by a court, there must be asufficient manifestation, either in the contract itself or thesurrounding circumstances of that intention. Petitioner insists thatalthough its purchase orders did not specify the dates when thecylinder liners were supposed to be delivered, nevertheless,

respondent should abide by the term of delivery appearing on thequotation it submitted to petitioner. Petitioner theorizes that thequotation embodied the offer from respondent while the purchaseorder represented its (petitioner's) acceptance of the proposedterms of the contract of sale. Thus, petitioner is of the view thatthese two documents "cannot be taken separately as if there weretwo distinct contracts." We do not agree.

While this Court recognizes the principle that contracts arerespected as the law between the contracting parties, this principleis tempered by the rule that the intention of the parties isprimordial and "once the intention of the parties has been

ascertained, that element is deemed as an integral part of thecontract as though it has been originally expressed in unequivocalterms."

In the present case, we cannot subscribe to the position ofpetitioner that the documents, by themselves, embody the terms ofthe sale of the cylinder liners. One can easily glean the significantdifferences in the terms as stated in the formal quotation andPurchase Order No. 13839 with regard to the due date of the downpayment for the first cylinder liner and the date of its delivery aswell as Purchase Order No. 14011 with respect to the date ofdelivery of the second cylinder liner. While the quotation providedby respondent evidently stated that the cylinder liners weresupposed to be delivered within two months from receipt of thefirm order of petitioner and that the 25% down payment was dueupon the cylinder liners' delivery, the purchase orders prepared bypetitioner clearly omitted these significant items. The petitioner'sPurchase Order No. 13839 made no mention at all of the due datesof delivery of the first cylinder liner and of the payment of 25%down payment. Its Purchase Order No. 14011 likewise did notindicate the due date of delivery of the second cylinder liner.

In the instant case, the formal quotation provided by respondentrepresented the negotiation phase of the subject contract of salebetween the parties. As of that time, the parties had not yetreached an agreement as regards the terms and conditions of thecontract of sale of the cylinder liners. Petitioner could very wellhave ignored the offer or tendered a counter-offer to respondentwhile the latter could have, withdrawn or modified the same. Theparties were at liberty to discuss the provisions of the contract ofsale prior to its perfection. In this connection, we turn to thetestimonies of Pajarillo and Kanaan, Jr., that the terms of the offer




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were, indeed, renegotiated prior to the issuance of Purchase OrderNo. 13839.

The law implies, however, that if no time is fixed, delivery shall be

made within a reasonable time, in the absence of anything to showthat an immediate delivery intended.

We also find significant the fact that while petitioner alleges thatthe cylinder liners were to be used for dry dock repair andmaintenance of its M/V Dadiangas Express between the later partof December 1989 to early January 1990, the record is bereft of anyindication that respondent was aware of such fact. The failure ofpetitioner to notify respondent of said date is fatal to its claim thattime was of the essence in the subject contracts of sale.

Finally, the ten postdated checks issued in November 1989 by

petitioner and received by the respondent as full payment of thepurchase price of the first cylinder liner supposed to be deliveredon 02 January 1990 fail to impress. It is not an indication of failureto honor a commitment on the part of the respondent. The earliestmaturity date of the checks was 18 January 1990. As delivery ofsaid checks could produce the effect of payment only when theyhave been cashed, respondent's obligation to deliver the firstcylinder liner could not have arisen as early as 02 January 1990 asclaimed by petitioner since by that time, petitioner had yet to fulfillits undertaking to fully pay for the value of the first cylinder liner.As explained by respondent, it proceeded with the placement of theorder for the cylinder liners with its principal in Japan solely on thebasis of its previously harmonious business relationship withpetitioner.

As an aside, let it be underscored that "[e]ven where time is of theessence, a breach of the contract in that respect by one of theparties may be waived by the other party's subsequently treatingthe contract as still in force." Petitioner's receipt of the cylinderliners when they were delivered to its warehouse on 20 April 1990clearly indicates that it considered the contract of sale to be still

subsisting up to that time. Indeed, had the contract of sale beencancelled already as claimed by petitioner, it no longer had anybusiness receiving the cylinder liners even if said receipt was"subject to verification." By accepting the cylinder liners when

these were delivered to its warehouse, petitioner indisputablywaived the claimed delay in the delivery of said items.

We, therefore, hold that in the subject contracts, time was not ofthe essence. The delivery of the cylinder liners on 20 April 1990was made within a reasonable period of time considering thatrespondent had to place the order for the cylinder liners with itsprincipal in Japan and that the latter was, at that time, beset byheavy volume of work.

There having been no failure on the part of the respondent toperform its obligation, the power to rescind the contract is

unavailing to the petitioner.

Here, there is no showing that petitioner notified respondent of itsintention to rescind the contract of sale between them. Quite thecontrary, respondent's act of proceeding with the opening of anirrevocable letter of credit on 23 February 1990 belies petitioner'sclaim that it notified respondent of the cancellation of the contractof sale. Truly, no prudent businessman would pursue such actionknowing that the contract of sale, for which the letter of credit wasopened, was already rescinded by the other party.

MAERSK LINES vs. CA

FACTSPetitioner Maersk Line is engaged in the transportation of goodsby sea, doing business in the Philippines through its generalagent Compania de Tabacos de Filipinas, while privaterespondent Efren Castillo is the proprietor of EthegalLaboratories, a firm engaged in the manufacture of pharmaceutical products.




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On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of PuertoRico 600,000 empty gelatin capsules for the manufacture of hispharmaceutical products. The capsules were placed in 6 drums of100,000 capsules each valued at US$1,668.71. Shipper Eli Liily,Inc.

advised Castillo through a Memorandum of Shipment that theproducts were already shipped on board MV Anders Maesrklineand date of arrival to be April 3, 1977.

However, for unknown reasons, said cargoes of capsules werediverted to Richmond, VA and then transported back to Oakland,CA and with the goods finally arriving in the PI on June 10, 1977.Consignee Castillo refused to take delivery of the goods on accountof its failure to arrive on time, and filed an action for rescission ofcontract with damages against Maersk and Eli Lilly alleging grossnegligence and undue delay.

Maersk contends that it is liable only in case of loss, destruction ordeterioration of goods under Art 1734 NCC while Eli Lilly in its crossclaim argued that the delay was due solely to the negligence ofMaersk Line. Trial Court dismissed the complaint against Eli Lillyand the latter withdrew cross claim but TC still held Maersk liableand CA affirmed with modifications.

ISSUES

1. W/N a cause of action exists against Maersk Line given thatthere was a dismissal of the complaint against Eli Lilly?Yes,but not under the cross claim rather because Maerskwas an original party.

2. W/N Castillo is entitled to damages resulting from delay inthe delivery of the shipment in the absence in the bill oflading of a stipulation on the delivery of goods?Yes.

RULING

The complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and petitioner as carrier. Petitioner Maersk Line being anoriginal party defendant upon whom the delayed shipment isimputed cannot claim that the dismissal of the complaint against Eli

Liily inured to its benefit.

Petitioner contends as well that it cannot be held liable becausethere was no special contract under which the carrier undertook todeliver the shipment on or before a specific date and that the Bill ofLading provides that The Carrier does not undertake that theGoods shall arrive at port of discharge or the place of delivery atany particular time. However, although the SC stated that a billof lading being a contract of adhesion will not be voided on thatbasis alone, it did declare that the questioned provision to be voidbecause it has the effect of practically leaving the date of arrival ofthe subject shipment on the sole determination and will of the

carrier. It is established that without any stipulated date, thedelivery of shipment or cargo should be made within a reasonabletime. In the case at hand, the SC declared that a delay in thedelivery of the goods spanning a period of 2 months and 7 daysfalls way beyond the realm of reasonableness.

FGU INSURANCE vs. CA

FACTS

Anco Enterprises Company (ANCO), a partnership between Ang Guiand Co To, was engaged in the shipping business. It owned the M/T




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ANCO tugboat and the D/B Lucio barge which were operated ascommon carriers. Since the D/B Lucio had no engine of its own, itcould not maneuver by itself and had to be towed by a tugboat forit to move from one place to another.

The D/B Lucio was towed by the M/T ANCO all the way fromMandaue City to San Jose, Antique. The vessels arrived at San Jose,Antique, at about one oclock in the afternoon of 30 September1979. The tugboat M/T ANCO left the barge immediately afterreaching San Jose, Antique.

When the barge and tugboat arrived at San Jose, Antique, in theafternoon of 30 September 1979, the clouds over the area weredark and the waves were already big. The arrastre workersunloading the cargoes of SMC on board the D/B Lucio began tocomplain about their difficulty in unloading the cargoes. SMCs

District Sales Supervisor, Fernando Macabuag, requested ANCOsrepresentative to transfer the barge to a safer place because thevessel might not be able to withstand the big waves.

ANCOs representative did not heed the request because he wasconfident that the barge could withstand the waves. This,notwithstanding the fact that at that time, only the M/T ANCO wasleft at the wharf of San Jose, Antique, as all other vessels alreadyleft the wharf to seek shelter. With the waves growing bigger andbigger, only Ten Thousand Seven Hundred Ninety (10,790) cases ofbeer were discharged into the custody of the arrastre operator.

At about ten to eleven oclock in the evening of 01 October 1979,the crew of D/B Lucio abandoned the vessel because the bargesrope attached to the wharf was cut off by the big waves. At aroundmidnight, the barge run aground and was broken and the cargoesof beer in the barge were swept away.

As a result, ANCO failed to deliver to SMCs consignee Twenty-NineThousand Two Hundred Ten (29,210) cases of Pale Pilsen and FiveHundred Fifty (550) cases of 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 andTen Centavos (P47.10), hence, SMCs claim against ANCOamounted to One Million Three Hundred Forty-Six Thousand One

Hundred Ninety-Seven Pesos (P1,346,197.00).As a consequence of the incident, SMC filed a complaint for Breachof Contract of Carriage and Damages against ANCO for the amountof One Million Three Hundred Forty-Six Thousand One HundredNinety-Seven Pesos (P1,346,197.00) plus interest, litigationexpenses and Twenty-Five Percent (25%) of the total claim asattorneys fees.

ISSUE

ANCO raised the defense that the breach was caused by afortuitous event, thus it is exempted from liability. Is this contention

correct?

RULING

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

1. Unforeseeable , or if foreseeable it must be inevitable.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 the loss (before, during after the occurrence ofthe event).

Caso fortuito or force majeure (which in law are identical insofar asthey exempt an obligor from liability)[19] by definition, areextraordinary events not foreseeable or avoidable, events thatcould not be foreseen, or which though foreseen, were inevitable.It is therefore not enough that the event should not have beenforeseen or anticipated, as is commonly believed but it must beone impossible to foresee or to avoid.




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In this case, the calamity which caused the loss of the cargoes wasnot unforeseen nor was it unavoidable. In fact, the other vessels inthe port of San Jose, Antique, managed to transfer to another place,a circumstance which prompted SMCs District Sales Supervisor to

request that the D/B Lucio be likewise transferred, but to no avail.The D/B Lucio had no engine and could not maneuver by itself.Even if ANCOs representatives wanted to transfer it, they nolonger had any means to do so as the tugboat M/T ANCO hadalready departed, leaving the barge to its own devices. Thecaptain of the tugboat should have had the foresight not to leavethe barge alone considering the pending storm.

While the loss of the cargoes was admittedly caused by thetyphoon Sisang, a natural disaster, ANCO could not escape liabilityto respondent SMC. The records clearly show the failure ofpetitioners representatives to exercise the extraordinary degree of

diligence mandated by law. To be exempted from responsibility,the natural disaster should have been the proximate and onlycause of the loss. There must have been no contributorynegligence on the part of the common carrier. As held in the caseof Limpangco Sons v. Yangco Steamship Co.:

. . . To be exempt from liability because of an act of God,the tug must be free from any previous negligence or misconductby which that loss or damage may have been occasioned. For,although the immediate or proximate cause of the loss in any giveninstance may have been what is termed an act of God, yet, if thetug unnecessarily 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, therewas blatant negligence on the part of M/T ANCOs crewmembers,first in leaving the engine-less barge D/B Lucio at the mercy of thestorm without the assistance of the tugboat, and again in failing toheed the request of SMCs representatives to have the bargetransferred to a safer place, as was done by the other vessels in the

port; thus, making said blatant negligence the proximate cause ofthe loss of the cargoes.

DSR-SENATOR vs. FEDERAL

FACTS

Berde Plants delivered 632 units of artificial trees to C.F. Sharp, theGeneral Ship Agent of DSR-Senator Lines, a foreign shippingcorporation, for transportation and delivery to the consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia.

C.F. Sharp issued International Bill of Lading for the cargo theport of discharge for the cargo was at the Khor Fakkan port and theport of delivery was Riyadh, Saudi Arabia, via Port Dammam. Thecargo was loaded in M/S Arabian Senator.

Federal Phoenix Assurance insured the cargo against all risks.

On June 7, 1993, M/S Arabian Senator left the Manila SouthHarbor for Saudi Arabia with the cargo on board. When the vesselarrived in Khor Fakkan Port, the cargo was reloaded on board DSR-Senator Lines feeder vessel, M/V Kapitan Sakharov, bound forPort Dammam, Saudi Arabia.

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




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On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/VKapitan Sakharov with its cargo was gutted by fire and sank on orabout July 4, 1993. On December 16, 1993, C.F. Sharp issued acertification to that effect

Consequently, Federal Phoenix Assurance paid Berde PlantsP941,429.61 corresponding to the amount of insurance for thecargo. In turn Berde Plants executed in its favor a SubrogationReceipt dated January 17, 1994.

On February 8, 1994, Federal Phoenix Assurance sent a letter toC.F. Sharp demanding payment of P941,429.61 on the basis of theSubrogation Receipt. C.F. Sharp denied any liability on the groundthat such liability was extinguished when the vessel carrying thecargo was gutted by fire.On March 11, 1994, Federal Phoenix Assurance filed with the RTC,

Branch 16, Manila a complaint for damages against DSR-SenatorLines and C.F. Sharp, praying that the latter be ordered to payactual damages of P941,429.61, compensatory damages ofP100,000.00 and costs.ISSUE

W/N DSR-Senator is liable YES

RULING

Under Article 1734, Fire is not one of those enumerated under theabove provision which exempts a carrier from liability for loss or

destruction of the cargo. Since the peril of fire is notcomprehended within the exceptions in Article 1734, then thecommon carrier shall be presumed to have been at fault or to haveacted negligently, unless it proves that it has observed theextraordinary diligence required by law.

The natural disaster must have been the proximate and only causeof the loss, and that the carrier has exercised due diligence to

prevent or minimize the loss before, during or after theoccurrence of the disaster.

When the goods shipped either are lost or arrive in damaged

condition, a presumption arises against the carrier of its failure toobserve that diligence, and there need not be an express finding ofnegligence to hold it liable.

Common carriers are obliged to observe extraordinary diligence inthe vigilance over the goods transported by them. Accordingly,they are presumed to have been at fault or to have actednegligently if the goods are lost, destroyed or deteriorated.

Respondent Federal Phoenix Assurance raised the presumption ofnegligence against petitioners. However, they failed to overcome itby sufficient proof of extraordinary diligence.

CENTRAL SHIPPIN vs. INS

TO FOLLOW. SORRY OF THE INCONVENIENCE.

EVERETT STEAMSHIP vs. CA

FACTSHernandez trading company imported three crates of bus spareparts marked as Marco 12, Marco 13, Marco 14 from its supplierMaruman trading company.




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Said crates were shipped from Japan to Manila on noard the vesselowned by Everette Orient Lines. Upon arrival in Manila, it wasdiscovered that Marco 14 was missing.

Hernandez makes a formal claim to Everette in an amount of 1 mill++ Yen, which is the amount of the cargo lost.However, Everett offers an amount of 100k because it is theamount that was stipulated in its Bill of Lading.

Hernandez files a case at the RTC of Caloocan, RTC rules1 in favorof Hernandez holding Everett liable for the amount of !mill ++ Yen.THE CA affirmed the RTCs ruling and made an additionalobservation that since Hernandez is not a privy to the contract inthe bill of lading ( the contract was entered by Everett andMaruman trading [shipper]), and so the 100k limit stipulated willnot bind Hernandez making Everett liable for the full amount of

1mill ++ Yen.

ISSUE

1Art. 1750. A contract fixing the sum that may berecovered by the owner or shipper for the loss,destruction or deterioration of the goods is valid, if it isreasonable and just under the circumstances, and hasbeen fairly and freely agreed upon.

It is required, however, that the contract must be reasonable and justunder the circumstances and has been fairly and freely agreed upon.XXXthe Court is of the view that the requirements of said article have not beenmet. The fact that those conditions are printed at the back of the bill oflading in letters so small that they are hard to read would not warrant thepresumption that the plaintiff or its supplier was aware of these conditionssuch that he had fairly and freely agreed to these conditions. It can notbe said that the plaintiff had actually entered into a contract with thedefendant, embodying the conditions as printed at the back of the bill oflading that was issued by the defendant to plaintiff.

1. Is Everett liable for the full amount or the amount thatwas stipulated in the contract?- what was stipulatedin the contract

2. Is Hernandez a privy to the contract which says thatPetitioner is liable only for 100k?Yes

RULING

1. Controlling provisions for this issue would be 1749 and 1750of the Civil Code. 2

In Sea Land Service, Inc. vs Intermediate Appellate Court

That said stipulation is just and reasonable is arguable from thefact that it echoes Art. 1750 itself in providing a limit to liability

only if a greater value is not declared for the shipment in the bill oflading. To hold otherwise would amount to questioning thejustness and fairness of the law itself, and this the privaterespondent does not pretend to do. But over and above thatconsideration, the just and reasonable character of such stipulationis implicit in it giving the shipper or owner the option of avoidingaccrual of liability limitation by the simple and surely far fromonerous expedient of declaring the nature and value of theshipment in the bill of lading

The clause of the contract goes:The carrier shall not be liable for any loss of or any

2ART. 1749. A stipulation that the common carriers liability is limited to

the value of the goods appearing in the bill of lading, unless the shipper or owner

declares a greater value, is binding.

ART. 1750. A contract fixing the sum that may be recovered by the owner

or shipper for the loss, destruction, or deterioration of the goods is valid, if it is

reasonable and just under the circumstances, and has been freely and fairly agreed

upon.




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damage to or in any connection with, goods in an amountexceeding One Hundred Thousand Yen in JapaneseCurrency (Y100,000.00) or its equivalent in any othercurrency per package or customary freight unit (whichever

is least) unless the value of the goods higher than thisamount is declared in writing by the shipper before receiptof the goods by the carrier and inserted in the Bill of Ladingand extra freight is paid as required. (Emphasis supplied)

The shipper, Maruman Trading, had the option to declare ahigher valuation if the value of its cargo was higher thanthe limited liability of the carrier. Considering that theshipper did not declare a higher valuation, it had itself toblame for not complying with the stipulations.

The trial courts ratiocination that private respondent could not

have fairly and freely agreed to the limited liability clause in thebill of lading because the said conditions were printed in smallletters does not make the bill of lading invalid.In Ong Yiu VS. CA the court said that

contracts of adhesion wherein one party imposes a ready-made form of

contract on the other, as the plane ticket in the case at bar,are contracts

not entirely prohibited

A contract limiting liability upon an agreed valuation does

not offendagainst the policy of the law forbidding one from contracting

against hisown negligence

The shipper, Maruman Trading, we assume, has been extensivelyengaged in the trading business. It can not be said to be ignorantof the business transactions it entered into involving the shipmentof its goods to its customers. The shipper could not have known, or

should know the stipulations in the bill of lading and there it shouldhave declared a higher valuation of the goods shipped. Moreover,Maruman Trading has not been heard to complain that it has beendeceived or rushed into agreeing to ship the cargo in petitioners

vessel.

2. Even if the consignee was not a signatory to the contract ofcarriage between the shipper and the carrier.

The consignee can still be bound by the contract. privaterespondent (Hernandez) formally claimed reimbursement forthe missing goods from petitioner and subsequently filed a caseagainst the latter based on the very same bill of lading, it(private respondent) accepted the provisions of the contractand thereby made itself a party thereto, or at least has come tocourt to enforce it. Thus, private respondent cannot now reject

or disregard the carriers limited liability stipulation in the bill oflading. In other words, private respondent is bound by thewhole stipulations in the bill of lading and must respect thesame.

PAL vs. CA

FACTSIsidro Co, accompanied by his wife and son, arrived at the ManilaInternational Airport aboard PAL airline's Flight from San Francisco.Soon after his embarking, Co proceeded to the baggage retrievalarea to claim his checks in his possession. He found 8 of his

luggage, but despite diligent search, he failed to locate his 9 th

luggage.

Co then immediately notified PAL through its employee, WillyGuevarra, who was then in charge of the PAL claim counter at theairport. Willy filled up the printed form known as a PropertyIrregularity Report, acknowledging the luggage to be missing, andsigned it.




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The incontestable evidence further shows that plaintiff lost luggagewas a Samsonite suitcase worth about US$200 and containingvarious personal effects purchased by plaintiff and his wife duringtheir stay in the US and similar other items sent by their friends

abroad to be given as presents to relatives in the Philippines wortharound $1,800.

Co on several occasions unrelentingly called PALs office in order topursue his complaint about his missing luggage but no avail wasgiven. Thus, Co wrote a demand letter to PAL, through its managerof the Central Baggage Services. PAL replied acknowledging thatthey have been unable to locate the baggage despite carefulsearch and extended their sincere apologies for the inconvenience.PAL never found the missing luggage or paid its correspondingvalue. Co then filed his present complaint against PAL for damages.

The RTC found PAL liable and ordered said company to paydamages. The CA affirmed in toto the trial court's award.

PAL Contends: The Lower Courts were in error in not applying thelimit of liability under the Warsaw Convention which limits theliability of an air carrier of loss, delay or damage to checked-inbaggage to US$20.00 based on weight; and

ISSUE

W/N the Lower Courts should apply the limit of liability under theWarsaw Convention? NO

RULING

In Alitalia vs. IAC, the Warsaw Convention limiting the carrier'sliability was applied because of a simple loss of baggage withoutany improper conduct on the part of the officials or employees ofthe airline, or other special injury sustained by the passengers. Thepetitioner therein did not declare a higher value for his luggage,much less did he pay an additional transportation charge.

PAL contends that under the Warsaw Convention, its liability, if any,cannot exceed US $20.00 based on weight as private respondentCo did not declare the contents of his baggage nor pay traditional

charges before the flight.

We find no merit in that contention. In Samar Mining Company, Inc.vs. Nordeutscher Lloyd, this Court ruled:

The liability of the common carrier for the loss, destruction ordeterioration of goods transported from a foreign country to thePhilippines is governed primarily by the New Civil Code. In allmatters not regulated by said Code, the rights and obligationsof common carriers shall be governed by the Code ofCommerce and by Special Laws.The provisions of the New Civil Code on common carriers are

Articles 1733, 1735 and 1753 which provide:

Art. 1733. Common carriers.. are bound to observe extraordinarydiligence in the vigilance over the goods and for the safety of thepassengers transported by them...

Art. 1735. ...if the goods are lost, destroyed or deteriorated,common carriers are presumed to have been at fault or to haveacted negligently, unless they prove that they observedextraordinary 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 theirloss, 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 thepassenger's luggage.

In this case, the PAL failed to overcome, not only the presumption,but more importantly, the Cos evidence, proving that the carrier's




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negligence was the proximate cause of the loss of his baggage.Furthermore, petitioner acted in bad faith in faking a retrievalreceipt to bail itself out of having to pay Co's claim. The CAtherefore did not err in disregarding the limits of liability under the

Warsaw Convention and applied the Civil Code instead.



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