Common Carrier of Goods Fulltext Part 1

Choco Notes
Transportation Law cases Common Carrier of Goods part 1

Contents
Common Carrier of Goods
Vigilance Over Goods Art. 1734 - 35.......................................1

Liability for Loss; Presumption of Negligence....................1
Ynchausti v. Dexter..........................................................1
Mirasol v. Dollar...............................................................2
Standard Vacuum v. Luzon Stevedoring...........................4
Firemans Fund v. Metro Port...........................................6
Aboitiz v. CA....................................................................9
Bankers and Manufacturers v. CA..................................13
Summa Insurance Corp. v. CA.......................................14
Sarkies Tours v. CA........................................................16
Belgian Overseas v. Phil. First Insurance.......................18
Aboitiz. v. ICNA.............................................................21
Exemption From Liability..................................................26
Natural Disaster or Calamity art. 1734 (1); 1739; 1740.26
Martini v. Macondray.....................................................31
Eastern v. IAC................................................................35
Eastern Shipping v. CA..................................................39
Arada v. CA....................................................................41
Philamgen v. CA.............................................................45
Delsan Transporp. v. CA................................................48
Philamgen v. MCG Marine
Mar 8, 2002 (case not found)
Edgar Cokaliong v. UCPB General................................50
Asia Lighterage and Shipping v. CA..............................54
DSR-Senator Lines v. Federal Phoenix..........................57
Central Shipping v. Ins. Co. of North Amer...................58
FGU Insurance Corp. v. CA...........................................61
Schmitz Transport v. Transport Venture.........................66
Lea Mer Industries v. Malayan.......................................70
Act of Shipper 1734[3];1741..............................................72
Compania Maritima v. CA.............................................72
Tabacalera v. North Front...............................................75
Character of Goods.............................................................77
Government v. Ynchausti,..............................................77
Southern Lines v. CA.....................................................78
Calvo v. UCPB...............................................................79
Belgian Overseas v. PFIC...............................................82
Iron Bulk Shipping v. Remington...................................86
AF Sanchez Brokerage v. CA.........................................89
Order of Competent Authority;1734[5]; 1743....................92
Ganzon v. CA.................................................................92
50
THE YNCHAUSTI STEAMSHIP COMPANY, petitioner,

vs.
I. B. DEXTER, as Auditor of the Philippine Islands, and C. E.
UNSON, as Acting Purchasing Agent of the Philippine Islands,
respondents.
Vigilance Over Goods Art. 1734

- 35
Cohn & Fisher for petitioner.

Attorney-General Paredes and Assistant Attorney-General A. Santos
for respondents.
Liability for Loss; Presumption

of Negligence
STREET, J.:
This a petition for a writ of mandamus filed in this court of the
Ynchausti Steamship Company to compel the Purchasing Agent of
the Philippine Islands and the Insular Auditor to sign, countersign,
and deliver to the petitioner a warrant upon the Treasurer of the
Ynchausti v. Dexter
G.R. No. L-15652 December 14, 1920
Choco Notes
Philippine Islands for the sum of P82.79 in satisfaction of a claim for
that amount, which is alleged to be due the petitioner as a common
carrier for freight earned in transporting for the Government two
distinct consignments of mineral oil from Manila to two other ports
in the Philippine Islands. After the defendants had duly answered,
denying all the allegations of the petition except such as relate to the
character and places of residence of the parties to the petition (which
are admitted) the controversy was submitted for determination by this
court upon an agreed statement of facts as follows:
full sum of P82.79, and has tendered to it a warrant for the sum of
P60.26, which the petitioner has refused to accept.lawphi1.net
The sum of P22.53 authorized to be deducted by the Insular Auditor,
as appears herein, has not at any time been liquidated by consent,
agreement, or by the judgment of any court of competent jurisdiction.
Upon a perusal of the foregoing agreed statement it will be seen that
the present litigation had its origin in a situation practically identical
with that considered by this court in Compaia General de Tabacos
vs. French and Unson (39 Phil., 34). It will be noted, however, that
the case mentioned was decided upon demurrer, while the one now
before us is to be heard and determined upon the petition, answer,
and the admitted facts.
On July 23, 1918, the Government of the Philippine Islands, acting

by and through the respondent Insular Purchasing Agent, employed
the services of the petitioner, Ynchausti Steamship Co., a common
carrier, for the transportation, on board the steamship Venus, from the
port of Manila to the port of Aparri, Cagayan, of a consignment of
merchandise, consisting of thirty (30) cases of "White Rose" mineral
oil of two five-gallon cans to the case; and on September 18, 1918,
the said Government likewise employed the services of petitioner for
the transportation on board the steamship Venus, from Manila to
Aparri, Cagayan, of ninety-six cases of "Cock" Brand mineral oil, ten
gallons to the case. The goods were delivered by the shipper to the
carrier, which accordingly received them, and to evidence the
contract of transportation, the parties duly executed and delivered
what is popularly called the Government bill of lading (General Form
9-A), hereto attached, marked Exhibit A and made a part hereof,
wherein and whereby it was stipulated that the carrier, the petitioner
Ynchausti & Co., received the above-mentioned supplies in apparent
good condition, obligating itself to carry said supplies to the place
agreed upon, in accordance with the authorized and prescribed rates
and classifications, and subject to the law of common carriers in force
on the date of the shipment, and to the conditions prescribed by the
Insular Collector of Customs in Philippine Marine Regulations at
page 16 under the heading of "Bill of Lading Conditions," hereto
attached, marked Exhibit B and made a part hereof.
We note that in this case, as in the case of Compaia General de

Tabacos vs. French and Unson (supra), the petition alleges that the
leakage of the lost gasoline was due to causes unknown to the
petitioner and was not due to any fault or negligence of petitioner, its
agents, or servants. The respondents, by demurring to the petition in
the earlier case, admitted that allegation. In the case now before us
that allegation is put in issue, and we find nothing in the admitted
statement of facts to support it. It results that if that allegation is
material to the relief here sought, the petition must fail.
We are of the opinion that the allegation in question is material and
that the belief sought in this case cannot be granted.
In section 646 of the Administrative Code it is provided that when
Government property is transmitted from one place to another by
carrier, it shall be upon proper bill of lading, or receipt, from such
carrier, and it shall be the duty of the consignee, or his representative,
to make full notation of any evidence of loss, shortage, or damage,
upon the bill of lading, or receipt, before accomplishing it. It is
admitted by the petitioner in the agreed statement of facts that the
consignee, at the time the oil was delivered, noted the loss in the
present case upon the two respective bills of lading. The notation of
these losses by the consignee, in obedience to the precept of section
646 of the Administrative Code, is competent evidence to show that
the shortage in fact existed. As the petitioner admits that the oil was
received by it for carriage and inasmuch as the fact of loss is proved
in the manner just stated, it results that there is a presumption that the
petitioner was to blame for the loss; and it was incumbent upon the
petitioner in order to entitle it to relief in the case to rebut that
presumption by proving, as is alleged in the petition, that the loss was
not due to any fault or negligence of the petitioner.
Upon the delivery of the said shipment of "Cock" brand oil and
consignee claimed that one case was delivered empty, and noted such
claim upon the bill of lading; and upon the delivery of the said
shipment of "White Rose," brand oil the consignee claimed that one
case was delivered empty, and noted said claim upon the bill of
lading.
Thereafter, notwithstanding the protestations of the petitioner,
Ynchausti Steamship Co., that said shortages were due to causes
entirely unknown to it, and were not due to any fault or negligence on
its part, or on the part of its agents or servants, the Acting Insular
Purchasing Agent of the Philippine Islands notified the petitioners
herein that after due investigation the Insular Auditor found and
decided that the leakages of the two whole cases were due to its
negligence and that the deduction of the sum of P22.53, the invoice
value of the goods lost, and held by the Auditor to be the true value
thereof had been authorized by the said Insular Auditor.
The mere proof of delivery of goods in good order to a carrier, and of

their arrival at the place of destination in bad order, makes out a
prima facie case against the carrier, so that if no explanation is given
as to how the injury occurred, the carrier must be held responsible. (4
R. C. L., p. 917.) It is incumbent upon the carrier to prove that the
loss was due to accident or some other circumstance inconsistent with
its liability. (Articles
361-363, Code of Commerce.) Indeed, if the Government of the
Philippine Islands had instituted an action in a court of law against
the petitioner to recover the value of the oil lost while these
consignments were in the court of transportation, it would, upon the
facts appearing before us, have been entitled to judgment.
Petitioner thereupon protested against the threatened deduction, and

demanded that it be paid the full amount due for the transportation of
the two said shipments of merchandise, to wit, the sum of P82.79, as
shown by its transportation voucher presented in this cause, hereto
attached. marked Exhibit C and made a part hereof.
Thereafter, notwithstanding the protest and demand of the petitioner
as aforesaid, the Insular Auditor, in conformity with his ruling,
declined and still declines to issue to the petitioner a warrant for the
From this it is apparent that the mandamus prayed for cannot be

granted. It is a rule of universal application that a petition for
extraordinary relief of the character here sought must show merit.
Choco Notes
That is, the petitioner's right to relief must be clear. Such cannot be
said to be the case where, as here, a presumption of responsibility on
the part of the petitioner stands unrefuted upon the record.
bill of lading issued by the defendant to plaintiff, it was agreed in

writing that defendant should not be "held liable for any loss of, or
damage to, any of said merchandise resulting from any of the
following causes, to wit: Acts of God, perils of the sea or other
waters," and that plaintiff's damage, if any, was caused by "Acts of
God" or "perils of the sea." As a third special defense, defendant
quoted clause 13 of the bill of lading, in which it is stated that in no
case shall it be held liable "for or in respect to said merchandise or
property beyond the sum of two hundred and fifty dollars for any
piece, package or any article not enclosed in a package, unless a
higher value is stated herein and ad valorem freight paid or assessed
thereon," and that there was no other agreement. That no September
3, 1927 the plaintiff wrote the defendant a letter as follows:
We are of the opinion that, in the absence of proof showing that the
carrier was not at fault in respect to the matter under discussion, the
Insular Auditor was entitled to withhold, from the amount admittedly
due to the petitioner for the freight charges, a sum sufficient to cover
the value of the oil lost in transit.
The petition will be dismissed, with costs against the petitioner. So
ordered.
Mirasol v. Dollar
G.R. No. L-29721
Therefore, I wish to file claim of damage to the meager maximum

value that your bills of lading will indemnify me, that is $250 as per
condition 13.
March 27, 1929
AMANDO MIRASOL, plaintiff-appellant,

vs.
THE ROBERT DOLLAR CO., defendant-appellant.
As a fourth special defense, defendant alleges that the damage, if any,

was caused by "sea water," and that the bill of lading exempts
defendant from liability for that cause. That damage by "sea water" is
a shipper's risk, and that defendant is not liable.
Vicente Hilado for plaintiff-appellant.

J.A. Wolfson for defendant-appellant.
As a result of the trial upon such issues, the lower court rendered
judgment for the plaintiff for P2,080, with legal interest thereon from
the date of the final judgment, with costs, from which both parties
appealed, and the plaintiff assigns the following errors:
STATEMENT
After the promulgation of the decision rendered by the Second
Division of February 13, 1929,1 the defendant filed a motion to have
the case heard and decided in banc, and inasmuch as the legal
questions involved are important to the shipping interests, the court
thought it best to do so.
I. The lower court erred in holding that plaintiff's damage on account

of the loss of the damaged books in the partially damaged case can be
compensated with an indemnity of P450 instead of P750 as claimed
by plaintiff.
After the formal pleas, plaintiff alleges that he is the owner and
consignee of two cases of books, shipped in good order and condition
at New York, U.S.A., on board the defendant's steamship President
Garfield, for transport and delivery to the plaintiff in the City of
Manila, all freight charges paid. That the two cases arrived in Manila
on September 1, 1927, in bad order and damaged condition, resulting
in the total loss of one case and a partial loss of the other. That the
loss in one case is P1,630, and the other P700, for which he filed his
claims, and defendant has refused and neglected to pay, giving as its
reason that the damage in question "was caused by sea water." That
plaintiff never entered into any contract with the defendant limiting
defendant's liability as a common carrier, and when he wrote the
letter of September 3, 1927, he had not then ascertained the contents
of the damaged case, and could not determine their value. That he
never intended to ratify or confirm any agreement to limit the liability
of the defendant. That on September 9, 1927, when the other case
was found, plaintiff filed a claim for the real damage of the books
therein named in the sum of $375.
II. The lower court, consequently, also erred in giving judgment for
plaintiff for only P2,080 instead of P2,380.
III. The lower court erred in not sentencing defendant to pay legal
interest on the amount of the judgment, at least, from the date of the
rendition of said judgment, namely, January 30, 1928.
The defendant assigns the following errors:
I. The lower court erred in failing to recognize the validity of the
limited liability clause of the bill of lading, Exhibit 2.
II. The lower court erred in holding defendant liable in any amount
and in failing to hold, after its finding as a fact that the damage was
caused by sea water, that the defendant is not liable for such damage
by sea water.
III. The lower court erred in awarding damages in favor of plaintiff
and against defendant for P2,080 or in any other amount, and in
admitting, over objection, Exhibits G, H, I and J.
Plaintiff prays for corresponding judgment, with legal interest from

the filing of the complaint and costs.
For answer the defendant made a general and specific denial, and as a
separate and special defense alleges that the steamship President
Garfield at all the times alleged was in all respects seaworthy and
properly manned, equipped and supplied, and fit for the voyage. That
the damage to plaintiff's merchandise, if any, was not caused through
the negligence of the vessel, its master, agent, officers, crew, tackle or
appurtenances, nor by reason of the vessel being unseaworthy or
improperly manned, "but that such damage, if any, resulted from
faults or errors in navigation or in the management of said vessel." As
a second separate and special defense, defendant alleges that in the
JOHNS, J.:
Plaintiff's contention that he is entitled to P700 for his Encyclopedia
Britannica is not tenable. The evidence shows that the P400 that the
court allowed, he could buy a new set which could contain all of the
material and the subject matter of the one which he lost. Plaintiff's
third assignment of error is well taken, as under all of the authorities,
he is entitled to legal interest from the date of his judgement rendered
in the lower court and not the date when it becomes final. The lower
Choco Notes
court found that plaintiff's damage was P2,080, and that finding is
sustained by that evidence. There was a total loss of one case and a
partial loss of the other, and in the very nature of the things, plaintiff
could not prove his loss in any other way or manner that he did prove
it, and the trial court who heard him testify must have been convinced
of the truth of his testimony.
the shipper in bad order and condition, it then devolves upon the
shipowner to both allege and prove that the goods were damaged by
the reason of some fact which legally exempts him from liability;
otherwise, the shipper would be left without any redress, no matter
what may have caused the damage.
The lower court in its opinion says:
There is no claim or pretense that the plaintiff signed the bill of

lading or that he knew of his contents at the time that it was issued. In
that situation he was not legally bound by the clause which purports
to limit defendant's liability. That question was squarely met and
decided by this court in banc in Juan Ysmael and Co., vs. Gabino
Baretto and Co., (51 Phil., 90; see numerous authorities there cited).
The defendant has not even attempted to prove that the two cases
were wet with sea water by fictitious event, force majeure or nature
and defect of the things themselves. Consequently, it must be
presumed that it was by causes entirely distinct and in no manner
imputable to the plaintiff, and of which the steamer President
Garfield or any of its crew could not have been entirely unaware.
Among such authorities in the case of The Kengsington decided by

the Supreme Court of the U.S. January 6, 1902 (46 Law. Ed., 190), in
which the opinion was written by the late Chief Justice White, the
syllabus of which is as follows:
And the evidence for the defendant shows that the damage was
largely caused by "sea water," from which it contends that it is
exempt under the provisions of its bill of lading and the provisions of
the article 361 of the Code of Commerce, which is as follows:
1. Restrictions of the liability of a steamship company for its own

negligence or failure of duty toward the passenger, being against the
public policy enforced by the courts of the United States, will not to
be upheld, though the ticket was issued and accepted in a foreign
country and contained a condition making it subject to the law
thereof, which sustained such stipulation.
Merchandise shall be transported at the risk and venture of the

shipper, if the contrary was not expressly stipulated.
Therefore, all damages and impairment suffered by the goods during
the transportation, by reason of accident, force majeure, or by virtue
of the nature or defect of the articles, shall be for the account and risk
of the shipper.
2. The stipulation in a steamship passenger's ticket, which compels

him to value his baggage, at a certain sum, far less than it is worth, or,
in order to have a higher value put upon it, to subject it to the
provisions of the Harter Act, by which the carrier would be exempted
from all the liability therefore from errors in navigation or
management of the vessel of other negligence is unreasonable and in
conflict with public policy.
The proof of these accidents is incumbent on the carrier.

In the final analysis, the cases were received by the defendant in New
York in good order and condition, and when they arrived in Manila,
they were in bad condition, and one was a total loss. The fact that the
cases were damaged by "sea water," standing alone and within itself,
is not evidence that they were damaged by force majeure or for a
cause beyond the defendant's control. The words "perils of the sea,"
as stated in defendant's brief apply to "all kinds of marine casualties,
such as shipwreck, foundering, stranding," and among other things, it
is said: "Tempest, rocks, shoals, icebergs and other obstacles are
within the expression," and "where the peril is the proximate cause of
the loss, the shipowner is excused." "Something fortuitous and out of
the ordinary course is involved in both words 'peril' or 'accident'."
3. An arbitrary limitation of 250 francs for the baggage of any

steamship passenger unaccompanied by any right to increase the
amount of adequate and reasonable proportional payment, is void as
against public policy.
Both the facts upon which it is based and the legal principles
involved are square in point in this case.
The defendant having received the two boxes in good condition, its
legal duty was to deliver them to the plaintiff in the same condition in
which it received them. From the time of their delivery to the
defendant in New York until they are delivered to the plaintiff in
Manila, the boxes were under the control and supervision of the
defendant and beyond the control of the plaintiff. The defendant
having admitted that the boxes were damaged while in transit and in
its possession, the burden of proof then shifted, and it devolved upon
the defendant to both allege and prove that the damage was caused by
reason of some fact which exempted it from liability. As to how the
boxes were damaged, when or where, was a matter peculiarly and
exclusively within the knowledge of the defendant and in the very
nature of things could not be in the knowledge of the plaintiff. To
require the plaintiff to prove as to when and how the damage was
caused would force him to call and rely upon the employees of the
defendant's ship, which in legal effect would be to say that he could
not recover any damage for any reason. That is not the law.
Defendant also cites and relies on the case of Government of the

Philippine Islands vs. Ynchausti & Company (40 Phil., 219), but it
appears from a reading of that case that the facts are very different
and, hence, it is not in point. In the instant case, there is no claim or
pretense that the two cases were not in good order when received on
board the ship, and it is admitted that they were in bad order on their
arrival at Manila. Hence, they must have been damaged in transit. In
the very nature of things, if they were damaged by reason of a
tempest, rocks, icebergs, foundering, stranding or the perils of the
sea, that would be a matter exclusively within the knowledge of the
officers of defendant's ship, and in the very nature of things would
not be within plaintiff's knowledge, and upon all of such questions,
there is a failure of proof.
The judgment of the lower court will be modified, so as to give the
plaintiff legal interest on the amount of his judgment from the date of
its rendition in the lower court, and in all respects affirmed, with
costs. So ordered.
Shippers who are forced to ship goods on an ocean liner or any other
ship have some legal rights, and when goods are delivered on board
ship in good order and condition, and the shipowner delivers them to
Johnson, Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.
Choco Notes
the barge No. L-522 was so badly damaged that the gasoline it had on
Standard
Vacuum
v.
Luzon
board leaked out; and that the Tamban arrived at the place after the
Stevedoring
gasoline had already leaked out.
G.R. No. L-5203
April 18, 1956
Defendant is a private stevedoring company engaged in transporting

local products, including gasoline in bulk and has a fleet of about 140
tugboats and about 90 per cent of its business is devoted to
transportation. Though it is engaged in a limited contract of carriage
in the sense that it chooses its customers and is not opened to the
public, nevertheless, the continuity of its operation in this kind of
business have earned for it the level of a public utility. The contract
between the plaintiff and defendant comes therefore under the
provisions of the Code of Commerce. The pertinent law is article 361
which provides:
STANDARD VACUUM OIL COMPANY, plaintiff-appellant,

vs.
LUZON STEVEDORING CO., INC., defendant-appellee.
Ross, Selph, Carrascoso and Janda and Martin B. Laurena for
appellant.
Perkins, Ponce Enrile and Contreras for appellee.
BAUTISTA ANGELO, J.:
Plantiff entered into a contract with defendant to transport between
the ports of Manila and Nin Bay, Sangay, Iloilo, 2,916.44 barrels of
bulk gasoline belonging to plaintiff. The gasoline was delivered in
accordance with the contract but defendant failed to transport it to its
place of destination and so plaintiff brought his action in the Court of
First Instance of Manila to recover the sum of P75,578.50 as
damages.
ART. 361. The merchandise shall be transported at the risk and

venture of the shipper, if the contrary was not expressly stipulated.
Defendant, in its answer, pleaded that its failure to deliver the

gasoline was due to fortuitous event or caused by circumstances
beyond its control and not to its fault or negligence or that of any of
its employees. The court, after receiving the evidence, rendered
decision finding that the disaster that had befallen the tugboat was the
result of an avoidable accident and the loss of the gasoline was due to
a fortuitous even which was beyond the control of defendant and,
consequently, dismissed the case with costs against the plaintiff.
The proof of these accidents is incumbent on the carrier.
Therefore, all damages and impairment suffered by the goods during

the transportation, by reason of accident, force majeure, or by virtue
of the nature or defect of the articles, shall be for the account and risk
of the shipper.
It therefore appears that whenever merchandise is transported on the

sea by virtue of a contract entered into between the shipper and the
carrier, the merchandise is deemed transported at the risk and venture
of the shipper, if the contrary is not stipulated, and all damages
suffered by the merchandise during the transportation by reason of
accident or force majeure shall be for the account and risk of the
shipper, but the proof of these accidents is incumbent on the carrier.
Implementing this provision, our Supreme Court has held that all a
shipper has to prove in connection with sea carriage is delivery of the
merchandise in good condition and its non-delivery at the place of
destination in order that the burden of proof may shift to the carrier to
prove any of the accidents above adverted to. Thus, it was held that
"Shippers who are forced to ship goods on an ocean liner or any other
ship have some legal rights, and when goods are delivered on board a
ship in good order and condition, and the shipowner delivers them to
the shipper in bad order and condition, it then devolves upon the
shipowner to both allege and prove that the goods were damaged by
reason of some fact which legally exempts him from liability"
(Mirasol vs. Robert Dollar Co., 53 Phil., 129).
The facts as found by the trial court are: "that pursuant to an

agreement had between the parties, defendant's barge No. L-522 was
laden with gasoline belonging to the plaintiff to be transported from
Manila to the Port of Iloilo; that early in the morning of February 2,
1947, defendant's tugboat "Snapper" picked up the barge outside the
breakwater; that the barge was placed behind the tugboat, it being
connected to the latter by a tow rope ten inches in circumstances; that
behind the barge, three other barges were likewise placed, one laden
with some cargo while the other two containing hardly any cargo at
all; that the weather was good when on that day the tugboat with its
tow started on its voyage; that the weather remained good on
February 3, 1947, when it passed Santiago Point in Batangas; that at
about 3:00 o'clock in the morning of February 4, 1947, the engine of
the tugboat came to a dead stop; that the engineer on board the
tugboat found out that the trouble was due to a broken idler; that a
message was then sent to the defendant's radio station in Manila
informing its official of the engine trouble; that upon the receipt of
the message the defendant called up several shipping companies in
Manila to find out if they had any vessels in the vicinity where the
"Snapper' had stalled but sais companies replied in the negative; that
thereupon the defendant redioed its tugboat Tamban' which was
docked at Batangas, ordering it to proceed to the place where the
Snapper' was; that at about 6:00 o'clock in the same morning of
February 4, 1947, the master of the Snapper' attempted to cast anchor
but the water areas around Elefante Island were so deep that the
anchor did not touch bottom; that in the afternoon of the same day the
weather become worse as the wind increased in intensity and the
waves were likewise increased in size and force; that due to the rough
condition of the sea the anchor chains of the Snapper' and the four
barges broke one by one and as a consequence thereof they were
drifted and were finally dashed against the rocks a hole was opened
in the hull of the Snapper', which ultimately caused it to sink, while
The issue to be determined is: Has defendant proven that its failure to
deliver the gasoline to its place of destination is due to accident or
force majeure or to a cause beyond its control? This would require an
analysis of the facts and circumstances surrounding the transportation
of said gasoline.
It appears that the tugboat "Snapper" was acquired by defendant from
the foreign Liquidation Commission. It was a surplus property. It was
a deep-sea tugboat that had been in the service of the United States
Armed Forces prior to its purchase by the Luzon Stevedoring Co. The
tugboat was put into operation without first submitting it to an
overhaul in a dry-dock. It also appears that this tugboat had
previously made several trips and each time it had to obtain a special
permit from the Bureau of Customs because it had never been drydock and did not have complete equipment to be able to obtain the
permanent permit. The special permits that were issued by said
Bureau specifically state that they were issued "pending submission
of plans and load line certificate, including test and final inspection of
Choco Notes
equipment." It futher appears that, when the tugboat was inspected by
the Bureau of Customs on October 18, 1946, it found it to be
inadequately equipped and so the Bureau required defendant to
provide it with the requisite equipment but it was never able to
complete it. The fact that the tugboat was a surplus property, has not
been dry-docked, and was not provided with the requisite equipment
to make it seaworthy, shows that defendant did not use reasonable
diligence in putting the tugboat in such a condition as would make its
use safe for operation. It is true, as defendant contends, that there
were then no dry-dock facilities in the Philippines, but this does not
mean that they could not be obtained elsewhere. It being a surplus
property, a dry-dock inspection was a must to put the tugboat in a sea
going condition. It may also be true , as contended, that the
deficiency in the equipment was due to the fact that no such
equipment was available at the time, but this did not justify defendant
in putting such tugboat in business even if unequipped merely to
make a profit. Nor could the fact that the tugboat was given a special
permit by the Bureau of Customs to make the trip relieve defendant
from liability.
(1) Generally, seaworthiness is that strength, durability and

engineering skill made a part of a ship's construction and continued
maintenance, together with a competent and sufficient crew, which
would withstand the vicissitudes and dangers of the elements which
might reasonably be expected or encountered during her voyage
without loss or damage to her particular cargo. The Cleveco, D.C.
Ohio, 59 F. Supp. 71, 78, affirmed, C.C.A., 154 F. 2d 606. (80 C.J.S.
997, Footnote.).
Let us now come to the eeforts exerted by defendant in extending
help to the tugboat when it was notified of the breakage of the idler.
The evidence shows that the idler was broken at about 3:00 o'clock in
the morning of February 4, 1947. Within a few minutes, a massage
was sent to defendant by radio informing it of the engine trouble. The
weather was good until 12:00 o'clock noon when the wind started to
blow. According to defendant, since it received the message, it called
up different shipping lines in Manila asking them if they had any
vessel in the vicinity where the "Snapper" stalled but, unfortunately,
none was available at the time,and as its tug "Tamban" was then
docked in Batangas, Batangas, which was nearest to the place, it
radioed said tug to go to the aid of the "Snapper". Accordingly, the
tug "Tamban" set sail from Batangas for the rescue only to return to
secure a map of the vicinity where the "Snapper" had stalled, which
entailed a delay of two hours. In the meantime, the captain of the
"Snapper" attempted to cast anchor. The water areas off Elefante
Island were deep and the anchor would not touch bottom. Then the
sea became rough and the waves increased in size and force and
notwithstanding the efforts of the crew to prevent the tug from
drifting away, the force of the wind and the violence of the waves
dashed the tug and the barges against the rocks. The tug developed a
hole in her hull and sank. The barge carrying the gasoline was so
badly damaged that the gasoline leaked out. The tug "Tamban" was
finally able to locate the "Snapper" but it was too late.
Where owner buys old tug, licensed coastwise, and equips it for
ocean going, it is negligence to send tug out without stability test,
where history and performance with respect to crankiness and
tenderness are matters of official record. Sabine Towing Co. vs.
Brennan, C.C.A. Tex., 72 F 2d 490, certiorari denied 55 S. Ct. 141,
293 U.S. 632, 79 L. Ed. 717. (80 C.J. S. 803 Footnote).
There are other circumstances which show the lack of precaution and
diligence taken by defendant to make the travel of the tugboat safe.
One is the failure to carry on board the necessary spare parts. When
the idler was broken, the engineer of the tugboat examined it for the
first time and it was only then that he found that there were no spare
parts to use except a worn out spare driving chain. And the necessity
of carrying such spare parts was emphasized by the very defendant's
winess, Mr. Depree, who said that in vessels motored by diesel
engines it is necessary always to carry spare chains, ball bearings and
chain drives. And this was not done.
The foregoing acts only serve to emphasize that the efforts made by
defeandant fall short of that diligence and precaution that are
demanded by the situation to save the tugboat and the barge it was
towing from disaster for it appears that more than twenty-four hours
had elapsed befora the tug "Tamban" showed up to extend help. The
delay was caused not so much because of the lack of available ships
in the vicinity where the "Snapper" stalled but because defendant did
not have in readiness any tugboat sufficient in tonnage and equipment
to attend to the rescue. The tug "Tamban" that was ordered to extend
help was fully inadequate for the purpose. It was a small vessel that
was authorized to operate only within Manila Bay and did not even
have any map of the Visayan Islands. A public utility that is engaged
in sea transportation even for a limited service with a fleet of 140
tugboats should have a competent tug to rush for towing or repairs in
the event of untoward happening overseas. If defendant had only
such a tug ready for such an emergency, this disaster would not have
happened. Defendant could have avoided sending a poorly equipped
tug whic, as it is to be expected, failed to do job.
A tug engaged to tow a barge is liable for damage to the cargo of the
barge caused by faulty equipment of the tug. The Raleigh, D.C. Md.
50 F. Supp. 961. (80 C.J.S. Footnote.).
Another circumstance refers to the deficiency or incomplete in the
man power of the tug boat. According to law, a tugboat of the
tonnage and powers of one like the "Snapper" is required to have a
complement composed of one first mate, one second mate, one third
mate, one chief engineer, one second engineer, and one third
engineer, (section 1203, Revised Administrative Code), but when the
trip in question was undertaken, it was only manned by one master,
who was merely licensed as a bay, river and lake patron, one second
mate, who was licensed as a third mate, oner chief engineer who was
licensed as third motor engineer, one assistant engineer, who was
licensed as a bay, river, and lake motor engineer, and one second
assistant engineer, who was unlicensed. The employment of this crew
to perform functions beyond its competence and qualifications is not
onl;y risky but against the law and if a mishap is caused, as in this
case, one cannot but surmise that such incompetence has something
to do with the mishap. The fact that the tugboat had undertaken
several trips before with practically the same crew without any
untoward consequence, cannot furnish any justification for
continuing in its employ a deficient or incompetent personnel
contrary to law and the regulations of the Bureau of Customs.
While the breaking of the idler may be due to an accident, or to

something unexpected, the cause of the disaster which resulted in the
loss of the gasoline can only be attributed to the negligence or lack of
precaution to avert it on the part of defendant. Defendant had enough
time to effectuate the rescue if it had only a competent tug for the
purpose because the weather was good from 3:00 o'clock a.m. to
12:00 o'clock noon of February 4, 1947 and it was only in the
afternoon that the wind began to blow with some intensity,1 but
failed to do so because of that shortcoming. The loss of the gasoline
certainly cannot be said to be due to force majeure or unforeseen
Choco Notes
event but to the failure of defendant to extend adequate and proper
help. Considering these circumstances, and those we have discussed
elsewhere, we are persuaded to conclude that defendant has failed to
established that it is exempt from liability under the law.
Wherefore, the decision appealed from is reversed. Defendant is
hereby ordered to pay to plaintiff the sum of P75,578.50, with legal
interest from the date of the filing of the complaint, with costs.
At about 10:20 in the morning of June 8, 1979, a tractor operator,

named Danilo Librando and employed by the ARRASTRE, was
ordered to transfer the shipment to the Equipment Yard at Pier 3.
While Librando was maneuvering the tractor (owned and provided by
Maersk Line) to the left, the cargo fell from the chassis and hit one of
the container vans of American President Lines. It was discovered
that there were no twist lock at the rear end of the chassis where the
cargo was loaded.
Bengzon, Paras, C.J., Padilla, Montemayor, Reyes, A., Jugo,

Labrador,Concepcion, Reyes, J.B.L., and Endencia, JJ., concur.
There was heavy damage to the cargo as the parts of the machineries
were broken, denied, cracked and no longer useful for their purposes.
Firemans Fund v. Metro Port
The value of the damage was estimated at P187,500.00 which amount

was paid by the petitioner insurance company to the consignee,
Vulcan Industrial and Mining Corporation.
G.R. No. 83613
February 21, 1990
FIREMAN'S FUND INSURANCE CO., petitioner,

vs.
METRO PORT SERVICE, INC., (Formerly E. Razon, Inc.),
respondent.
Dollete, Blanco, Ejercito & Associates for petitioner.
The petitioner, under its subrogation rights, then filed a suit against
Maersk Line, Compania General de Tabacos (as agent) and E. Razon,
Inc., for the recovery of the amount it paid the assured under the
covering insurance policy. On October 26, 1980, the trial court
rendered judgment, the decretal portion of which reads as follows:
Cruz, Durian, Agabin, Atienza, Alday & Tuason for respondent.
xxx
This is a petition for review of the decision and resolution denying

reconsideration of the Court of Appeals in CA-G.R. CV No. 00673
entitled "Fireman's Fund Insurance Co. v. Maersk Line, Compaia
General de Tabacos de Filipinas and E. Razon, Inc."
Defendants are also ordered to pay, in solidum, the sum of

P10,000.00 as attorney's fees to the plaintiff, and to pay the costs of
this suit.
There shall be no award for exemplary damages in favor of the
plaintiff, for the reason that defendants are probably acting in good
faith in resisting the complaint. (Rollo, pp. 45-46)
The facts are as follows:

Vulcan Industrial and Mining Corporation imported from the United
States several machineries and equipment which were loaded on
board the SIS Albert Maersk at the port of Philadelphia, U.S.A., and
transhipped for Manila through the vessel S/S Maersk Tempo.
All the defendants appealed to the Court of Appeals. Eventually,

Maersk Line and Compania General de Tabacos negotiated with the
petitioner for the settlement of the latter's claim and no longer
pursued their appeal.
The cargo which was covered by a clean bill of lading issued by

Maersk Line and Compania General de Tabacos de Filipinas (referred
to as the CARRIER) consisted of the following:
xxx
xxx
WHEREFORE, judgment is hereby rendered in favor of the plaintiff

and against the defendants by ordering the latter to pay, jointly and
severally, the plaintiff the sum of P187,500.00, with legal interest
thereon from August 29, 1980 until full payment thereof.
GUTIERREZ, JR., J.:
xxx
xxx
On the appeal of the ARRASTRE, the Court of Appeals rendered a

decision with the following dispositive portion:
xxx
WHEREFORE, foregoing premises considered, the decision of the

court a quo insofar as herein defendant-appellant is concerned is
REVERSED It is hereby ordered that the complaint against herein
defendant-appellant be dismissed. No costs. (Rollo, p. 50)
1 piece truck mounted core drill

1 piece trailer mounted core drill
Reconsideration of the decision was denied in a resolution dated May

23, 1988.
1 (40') container of 321 pieces steel tubings

1 (40') container of 170 pieces steel tubings
Hence, the present recourse.
1 (40') container of 13 cases, 3 crates, 2 pallets and 26 mining

machinery parts. (Rollo, p. 4)
The petitioner raises this lone assignment of error:
The shipment arrived at the port of Manila on June 3, 1979 and was
turned over complete and in good order condition to the arrastre
operator E. Razon Inc. (now Metro Port Service Inc. and referred to
as the ARRASTRE).
THE HONORABLE COURT OF APPEALS ERRED IN LIMITING

LIABILITY SOLELY ON CO-DEFENDANT MAERSK LINES,
CONTRARY TO THE FINDINGS OF FACTS OF THE TRIAL
COURT A QUO AND OTHER FACTORS SHOWING CLEAR
JOINT LIABILITY OF DEFENDANTS IN SOLIDUM.
Choco Notes
There is merit in this petition.
and to deliver them in good condition to the consignee, such

responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with and
obligated to deliver the goods in good condition to the consignee.
This Court has held in a number of cases that findings of fact of the
Court of Appeals are, in general, conclusive on the Supreme Court
when supported by the evidence on record. The rule is not absolute,
however, and allows exceptions, which we find present in the case at
bar. The respondent court's findings of facts are contrary to those of
the trial court and appear to be contradicted by the evidence on record
thus calling for our review. (Metro Port Service, Inc. v. Court of
Appeals, 131 SCRA 365 [1984]).
In general, the nature of the work of an arrastre operator covers the

handling of cargoes at piers and wharves (Visayan Cebu Terminal
Co., Inc. v. Commissioner of Internal Revenue, 13 SCRA 357
[1965]). This is embodied in the Management Contract drawn
between the Bureau of Customs and E. Razon Inc., as the Arrastre
Operator. The latter agreed to bind itself, to wit:
In absolving the ARRASTRE, the respondent Court ruled that

although Librando was an employee of the ARRASTRE, since he
was included in its payroll, he was technically and strictly an
employee of Maersk Line in this particular instance when he drove
the tractor admittedly owned by the foreign shipping line. The Court
ruled that he received instructions not from Metro Port but from
Maersk Line relative to this job. He was performing a duty that
properly pertained to Maersk Line which, for lack of a tractor
operator, had to get or hire from the ARRASTRE as per their
management contract. Nevertheless, Librando was not remiss in his
duty as tractor-driver considering that the proximate and direct cause
of the damage was the absence of twist locks in the rear end of the
chassis which Maersk Line failed to provide. The respondent court
thereby placed the entire burden of liability on the owner of the
Chassis which in this case was the foreign shipping company, Maersk
Line.
CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES

1.
Claims. The CONTRACTOR shall, at its own expense handle all

merchandise in the piers and other designated places and at its own
expense perform all work undertaken by it hereunder diligently and
in skillful workmanlike and efficient manner; That the
CONTRACTOR shall be solely responsible as an independent
CONTRACTOR, and hereby agrees to accept liability and to
promptly pay to the s hip company, consignee, consignor or other
interested party or parties for the loss, damage, or non-delivery of
cargoes to the extent of the actual invoice value of each package
which in no case shall be more than Three Thousand Five Hundred
Pesos (P3,500.00) for each package unless the value of the
importation is otherwise specified or manifested or communicated in
writing together with the invoice value and supported by a certified
packing list to the CONTRACTOR by the interested party or parties
before the discharge of the goods, as well as all damage that may be
suffered on account of loss, damage, or destruction of any
merchandise while in custody or under the control of the
CONTRACTOR in any pier, shed, warehouse, facility; or other
designated place under the supervision of the BUREAU, but said
CONTRACTOR shall not be responsible for the condition of the
contents of any package received nor for the weight, nor for any loss,
injury or damage to the said cargo before or while the goods are
being received or remained on the piers, sheds, warehouse or facility
if the loss, injury or damage is caused by force majeure, or other
cause beyond the CONTRACTORS control or capacity to prevent or
remedy; ...
The foregoing conclusion disregarded the pertinent findings of facts

made by the lower court which are supported by the evidence on
record, to wit:
1.
The accident occurred while the cargoes were in the
custody of the arrastre operator.
2.
The tractor operator was an employee of the arrastre
operator.
xxx
xxx
xxx
4.
By the management contract inasmuch as the foreign
shipping company has no tractor operator in its employ, the arrastre
provided the operator.
xxx
xxx
xxx
Responsibility and Liability for Losses and Damages;
xxx
xxx
xxx
The CONTRACTOR shall be solely responsible for any and all
injury or damage that may arise on account of the negligence or
carelessness of the CONTRACTOR, its agent or employees in the
performance of the undertaking by it to be performed under the terms
of the contract, and the CONTRACTOR hereby agree to and hold the
BUREAU at all times harmless therefrom and whole or any part
thereof. (Original Records, pp. 110-112; Emphasis supplied)
8.
It was likewise the responsibility of the tractor operator, an
employee of the arrastre operator to inspect the chassis and tractor
before driving the same, but which obligation the operator failed to
do.
9.
It was also the responsibility of the supervisor in the
employ of the arrastre operator to see that their men complied with
their respective tasks, which included the examination if the chassis
has twist lock. (Rollo, pp. 44-45)
To carry out its duties, the ARRASTRE is required to provide cargo

handling equipment which includes among others trailers, chassis for
containers. In some cases, however, the shipping line has its own
cargo handling equipment.
The legal relationship between the consignee and the arrastre

operator is akin to that of a depositor and warehouseman (Lua Kian v.
Manila Railroad Co., 19 SCRA 5 [1967]). The relationship between
the consignee and the common carrier is similar to that of the
consignee and the arrastre operator (Northern Motors, Inc. v. Prince
Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the
ARRASTRE to take good care of the goods that are in its custody
In this particular instance, the records reveal that Maersk Line

provided the chassis and the tractor which carried the carried the
subject shipment. It merely requested the ARRASTRE to dispatch a
tractor operator to drive the tractor inasmuch as the foreign shipping
line did not have any truck operator in its employ. Such arrangement
Choco Notes
is allowed between the ARRASTRE and the CARRIER pursuant to
the Management Contract. It was clearly one of the services offered
by the ARRASTRE. We agree with the petitioner that it is the
ARRASTRE which had the sole discretion and prerogative to hire
and assign Librando to operate the tractor. It was also the
ARRASTRE's sole decision to detail and deploy Librando for the
particular task from among its pool of tractor operators or drivers. It
is, therefore, inacurrate to state that Librando should be considered an
employee of Maersk Line on that specific occasion.
Q
Before you operated the tractor which carried the mounted
cord drill truck and trailer did you examine if the chasiss had any
twist locks?
A
No, sir, because I presumed that it had twist locks and I was
confident that it had twist locks.
Q
As a matter of procedure and according to you, you
examined the tractor, do you not make it a practice to examine
whether the chassis had any twist locks?
Handling cargo is mainly the s principal work so its driver/operators,

"cargadors", or employees should observe the stand" and
indispensable measures necessary to prevent losses and damage to
shipments under its custody. Since the ARRASTRE offered its
drivers for the operation of tractors in the handling of cargo and
equipment, then the ARRASTRE should see to it that the drivers
under its employ must exercise due diligence in the performance of
their work. From the testimonies of witnesses presented, we gather
that driver/operator Librando was remiss in his duty. Benildez
Cepeda, an arrastre-investigator of Metro Port admitted that Librando
as tractor-operator should first have inspected the chassis and made
sure that the cargo was securely loaded on the chassis. He testified:
xxx
xxx
A
I used to do that but in that particular instance I thought it
had already its twist locks. (p. 8, T.S.N., October 5, 1981)
It is true that Maersk Line is also at fault for not providing twist locks
on the chassis. However, we find the testimony of Manuel Heraldez
who is the Motor Pool General Superintendent of Metro Port rather
significant. On cross-examination, he stated that:
Q
In your experience, Mr. witness, do you know which is
ahead of the placing of the container van or the placing of the twist
lock on the chassis?
xxx
A
The twist lock is already permanently attached on the
chassis, sir.
Q
My question is in your investigation report including
enclosures, the principal reason was that the chassis has no rear twist
lock?
Q
Earlier, you mentioned that you cannot see the twist lock if
the chassis is loaded, correct?
Yes, sir.
Q
Did you investigate whether the driver Librando inspected
the the truck before he operated the same whether there was rear twist
lock or not?
Yes, sir.
Q
Do you what to impress upon the Honorable Court that, by
mere looking at a loaded chassis, the twist lock cannot be seen by the
naked eye? Because the van contained a hole in which the twist lock
thus entered inside the hold and locked itself. It is already loaded. So.
you cannot no longer see it.
A
I have asked him about that question whether he had
inspected the has any rear twist lock and the answer he did not
inspect, sir.
Q
But if you closely examine this chassis which has a load of
container van. You can see whether a twist lock is present or not?
Q
As a operator, do you agree with me that it is the duty also
of Librando to see to it that the truck is in good condition and fit to
travel, is that correct?
Q
In other words, if the driver of this tractor closely examined
this van, he could have detected whether or not a twist lock is
present?
Yes, sir.
Q
And as a tractor operator it is his duty to see to it that the
van mounted on top of the tractor was properly is that correct?
A
A
Yes, sir. (pp. 33-35, T.S.N., March 23, 1982; Emphasis
supplied)
Yes, sir. (At pp. 18-20, T.S.N., February 17, 1982)

Whether or not the twist lock can be seen by the naked eye when the
cargo has been loaded on the chassis, an efficient and diligent tractor
operator must nevertheless check if the cargo is securely loaded on
the chassis.
Again Danilo Librando also admitted that it was usually his practice
to inspect not only the tractor but the chassis as well but failed to do
so in this particular instance.
xxx
xxx
xxx
We, therefore, find Metro Port Service Inc., solidarily liable in the
instant case for the negligence of its employee. With respect to the
limited liability of the ARRASTRE, the records disclose that the
value of the importation was relayed to the arrastre operator and in
fact processed by its chief claims examiner based on the documents
submitted.
Q
You mentioned of the absence of a twist lock. Will you tell
us where is this twist lock supposed to be located?
A
Yes, sir. A twist lock is present.
At the rear end of the chassis.
WHEREFORE, the appealed judgment of respondent Court of

Appeals is hereby REVERSED and SET ASIDE and that of the Court
Choco Notes
of First Instance of Manila, 6th Judicial District, Branch II is
REINSTATED. No costs.
Not satisfied therewith, Aboitiz appealed to the Court of Appeals

wherein in due course a decision was rendered on March 9, 1989
affirming in toto the appealed decision, with costs against defendant
Aboitiz . 2
SO ORDERED.
Aboitiz v. CA
G.R. No. 89757
A motion for reconsideration of said decision filed by Aboitiz was

denied in a resolution dated August 15, 1989.
August 6, 1990
Hence the herein petition for review alleging that the Court of
Appeals decided the case not in accordance with law when
ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
COURT OF APPEALS AND GENERAL ACCIDENT FIRE AND
LIFE ASSURANCE CORPORATION, LTD., respondents.
1.
The Court of Appeals held that "findings of administrative
bodies are not always binding on court . This is especially so in the
case at bar where GAFLAC was not a party in the BMI proceedings
and which proceedings was not adversary in characther." This ruling
is contrary to the principle established in Vasquez vs. Court of
Appeals (138 SCRA 559), where it was held that since the BMI
possesses the required expertise in shipping matters and is imbued
with quasi-judicial powers, its factual findings are conclusive and
binding on the court. Likewise, the case of Timber Export Inc. vs.
Retla Steamship Co. (CA-G.R. No. 66143-R) also established the
rule that decision of BMI must be given "great materiality and weight
to the determination and resolution of the case."
Sycip, Salazar, Hernandez & Gatmaitan for petitioner.

Dollete, Blanco, Ejercito & Associates for private respondent.
GANCAYCO, J.:
The extent of the liability of a carrier of goods is again brought to the
fore in this case.
2.
The Court of Appeals also held that the trial court did not
err when it fixed the liability of Aboitiz not on the basis of the
stipulation in the bills of lading at US$500.00 per package/container
but on the actual value of the shipment lost notwithstanding the long
line of cases decided by this Honorable Supreme Court holding a
contrary opinion, as shown below.
On October 28, 1980, the vessel M/V "P. Aboitiz" took on board in
Hongkong for shipment to Manila some cargo consisting of one (1)
twenty (20)-footer container holding 271 rolls of goods for apparel
covered by Bill of Lading No. 515-M and one (1) forty (40)-footer
container holding four hundred forty- seven (447) rolls, ten (10) bulk
and ninety-five (95) cartons of goods for apparel covered by Bill of
Lading No. 505-M. The total value, including invoice value,
freightage, customs duties, taxes and similar imports amounts to
US$39,885.85 for the first shipment while that of the second
shipment amounts to US$94,190.55. Both shipments were consigned
to the Philippine Apparel, Inc. and insured with the General Accident
Fire and Life Assurance Corporation, Ltd. (GAFLAC for short). The
vessel is owned and operated by Aboitiz Shipping Corporation
(Aboitiz for short).
3.
The Court of Appeals also held that the trial court did not
abuse its discretion in granting GAFLAC's motion for execution
pending appeal notwithstanding the absence of reasonable and
justifiable grounds to support the same. 3
Under the first issue petitioner state that the sinking of the vessel
M/V "P. Aboitiz" was the subject of an administrative investigation
conducted by the Board of Marine Inquiry (BMI) whereby in a
decision dated December 26, 1984, it was found that the sinking of
the vessel may be attributed to force majeure on account of a
typhoon. Petitioner contends that these findings are conclusive on the
courts.
On October 31, 1980 on its way to Manila the vessel sunk and it was
declared lost with all its cargoes. GAFLAC paid the consignee the
amounts US$39,885.85 or P319,086.80 and US$94,190.55 or
P753,524.40 for the lost cargo. As GAFLAC was subrogated to all
the rights, interests and actions of the consignee against Aboitiz, it
filed an action for damages against Aboitiz in the Regional Trial
Court of Manila alleging that the loss was due to the fault and
negligence of Aboitiz and the master and crew of its vessel in that
they did not observe the extraordinary diligence required by law as
regards common carriers.
In rejecting the evidence offered by the petitioner the appellate court

ruled
But over and above all these considerations, the trial court did not err
in not giving weight to the finding of the BMI that the vessel sank
due to a fortuitous event. Findings of administrative bodies are not
always binding on courts. This is especially so in the case at bar
where plaintiff was not a party in the BMI proceedings and which
proceeding was not adversary in character. 4
After the issues were joined and the trial on the merits a decision was
rendered by the trial court on June 29, 1985, the dispositive part of
which reads as follows:
As a general rule, administrative findings of facts are not disturbed by

the courts when supported by substantial evidence unless it is tainted
with unfairness or arbitrariness that would amount to abuse of
discretion or lack of jurisdiction. 5 Even in Vasquez vs. Court of
Appeals, 6 which is cited by petitioner, this Court ruled that We
nevertheless disagree with the conclusion of the BMI exonerating the
captain from any negligence "since it obviously had not taken into
account the legal responsibility of a common carrier towards the
security of the passengers involved."
PREMISES CONSIDERED, the Court finds in favor of the plaintiff

and against the defendant, ordering the latter to pay the former actual
damages in the sum of P1,072,611.20 plus legal interest from the date
of the filing of the complaint on October 28, 1981, until full payment
thereof, attorney's fees in the amount of 20% of the total claim and to
pay the costs.
SO ORDERED. 1
10
Choco Notes
Q.
How about this moderate breeze as described under this
Force 4 of the Beaufort Scale, how will you interpret that?
This case was brought to court on October 28, 1981. The trial court
was never informed of a parallel administrative investigation that was
being conducted by the BMI in any of the pleadings of the petitioner.
It was only on March 22, 1985 when petitioner revealed to the trial
court the decision of the BMI dated December 26, 1984 (one day
after Christmas day). 7 The said decision appears to have been
rendered over three (3) years after the case was brought to court.
A.
Moderate breeze will only give winds of 29 kilometers per
hour which is equivalent to just extending your hand out of a running
car at that speed.
Q.
This weather condition between October 28 and November
1, 1980, will you classify this as extraordinary or ordinary?
Moreover, said administrative investigation was conducted

unilaterally. Private respondent GAFLAC was not notified or given
an opportunity to participate therein. It cannot thereby be bound by
said findings and conclusions of the BMI.
The trial court and the appellate court found that the sinking of the
M/V "P. Aboitiz" was not due to the waves caused by tropical storm
"Yoning" but due to the fault and negligence of petitioner, its master
and crew. The court reproduces with approval said findings
xxx
xxx
A.
It was ordinary.
Q.
When you said ordinary, was it usual or unusual?
A.
It is usual.
Q.
When you said it is usual it is foreseeable and predictable?
A.
For an experienced meteorologist like a ship captain, it is
foreseeable.
xxx
After a careful examination of the evidence, the Court is convinced in

the plaintiffs claim that the M/V "Aboitiz" and its cargo were not lost
due to fortuitous event or force majeure.
Q.
When it is foreseeable, necessarily it follows that the
weather could be predicted based on the weather bulletin or report?
A.
To begin with, paragraph 4 of the marine protest (Exh. "4", also

Exhibit "M"), which is defendant's own evidence, shows that the
wind force when the ill-fated ship foundered was 10 to 15 knots.
According to the Beaufort Scale (Exhibit "I"), which is admittedly an
accurate reference for measuring wind velocity, the wind force of 10
to 15 knots is classified as scale No. 4 and described as "moderate
breeze," small waves, becoming longer, fairly frequent white horses.
Meteorologist Justo Iglesias, Jr. himself affirms the above description
of a wind force of 10 to 15 knots and adds that the weather condition
prevailing under said wind force is usual and forseeable. Thus
Iglesias, Jr. testified:
Q.
And usually the bulletin states the condition in other words,
this weather condition which you testified to and reflected in your
Exhibit "7" is an ordinary occurrence within that area of Philippine
responsibility?
A.
It will be under Force 4 of the Beaufort Scale.
Q.
What is the basis of your answer?
A.
4.
10 to 15 falls within this scale of the Beaufort Scale, Force
Yes, sir.
Q.
And in fact this weather condition is to be anticipated at
that time of the year with respect to weather condition which is
reflected in Exhibit "7"?
Q.
In the marine protest of the master of the vessel of Aboitiz,
there is reference to wind force from ten to 15 knots. In this Beaufort
Scale, will you be able to clarify what this wind force of 10 to 15 as
stated in the marine protest?
A.
Yes, sir.
A.
It is a regular occurrence.
xxx
xxx
xxx
Moreover, Capt. Racines again admitted in Court that his ill-fated

vessel was 200 miles away from the storm 'Yoning when it sank. Said
Capt. Racines:
Q.
How far were you from this depression or weather
disturbance on October 30, 1980?
A.
Two hundred miles.
xxx
xxx
Atty. Dollete:
May I read into the records, Your Honor. Force 4, descriptive term
moderate breeze. Near velocity in knots 11-16 meters per second,
5.5-7.9 in kilometers per hour to 20 to 28 kilometers per hour and 13
to 18 miles per hour. Sea the description of this will be small waves
becoming longer fairly frequent white horse (sic).
Q.
horses?
xxx
Q.
In other words, this depression was far from your route
because it took a northern approach whereas you were towards the
south approach?
A.
As I have said, I was 200 miles away from the disturbance.
xxx
xxx
In the layman's language how do you interpret this white
A.
It means white forms. At the top of the crest they were
beginning to form white foams.
xxx
Considering the foregoing reasons, the Court holds that the vessel
M/V "Aboitiz" and its cargo were not lost due to fortuitous event or
force majeure.
11
Choco Notes
package/container contemplated by the law to limit the liability of the
carrier should be sensibly related to the unit in which the shipper
packed the goods and described them, not a large metal object,
functionally a part of the ship, in which the carrier used them to be
contained. 10 Such "container" must be given the same meaning and
classification as a "package" and "customary freight unit."
In accordance with Article 1732 of the Civil Code, the defendant

common carrier, from the nature of its business and for reasons of
public policy, is bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by it according to all the circumstances of each case.
While the goods are in the possession of the carrier, it is but fair that
it exercise extra ordinary diligence in protecting them from loss or
damage, and if its occurs the law presumes that it was due to the
carrier's fault or negligence; that is necessary to protect the interest of
the shipper which is at the mercy of the carrier (Article 1756, Civil
Code; Anuran vs. Puno, 17 SCRA 224; Nocum vs. Laguna Tayabas
Bus Co., 30 SCRA 69; Landigan vs. Pangasinan Transportation
Company, 88 SCRA 284). In the case at bar, the defendant failed to
prove that the loss of the subject cargo was not due to its fault or
negligence. 8
The appellate court in disposing this issue quoted its decision in

Allied Guarantee Insurance Co. Inc. vs. Aboitiz Shipping
Corporation, CA GR. CV No. 04121, March 23, 1987, viz;
Third. Still it is contended that the carrier's liability is limited to
$500.00, pursuant to section 8 of the Bill of Lading which provides
that 'The liability of the Carrier for any loss or damage to the goods
shall in no case exceed the sum of U.S. $500.00 per
package/container/customary freight unit, unless the value of the
goods has been correctly declared and extra freight paid, prior to the
shipment and a signed declaration to this effect appears in the bill of
lading, duly confirmed by the Carrier. ... It is contended that the Bill
of Lading does not indicate the value of the goods. Nor was the
corresponding freight ... paid prior to shipment.
The said factual findings of the appellate court and the trial court are
finding on this Court. Its conclusion as to the negligence of the
petitioner is supported by the evidence.
The second issue raised to the effect that the liability of the petitioner
should be fixed at US$500.00 per package/container, as stipulated in
the bill of lading and not at the actual value of the cargo, should be
resolved against petitioner.
Generally speaking a stipulation, limiting the common carrier's

liability to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is valid. (Civil
Code, Art. 1749). Such stipulation, however, must be reasonable and
just under the circumstances and must have been fairly and freely
agreed upon. (St. Paul Fire & Marine Insurance Co. vs.
Macondray Co., 70 SCRA 122, 126-127 (1976) In the case at bar, the
goods shipped on the M/V "P. Aboitiz" were insured for P278,530.50,
which may be taken as their value. To limit the liability of the carrier
to $500.00 would obviously put it in its power to have taken the
whole cargo. In Juan Ysmael & Co. vs. Gabino Barreto & Co., 51
Phil. 90 (1927), it was held that a stipulation limiting the carrier's
liability to $500.00 per package of silk when the value of such
package was P2,500.00 unless the true value had been declared and
the corresponding freight paid was "void as against public policy."
That ruling applies to this case.
While it is true that in the bill of lading there is such stipulation that
the
liability
of
the
carrier
is
US$500.00
per
package/container/customary freight, there is an exception, that is,
when the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This is
provided for in Section 4(5) of the Carriage of Goods by Sea Act to
wit
(5)
Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package of
lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been
inserted in the bill of lading. This declaration, if embodied in the bill
of lading, shall be prima facie evidence, but shall not be conclusive
on the carrier.
Moreover, by the weight of modern authority, a carrier cannot limit

its liability for injury or loss of goods shipped where such injury or
loss was caused by its own negligence. (Juan Ysmael & Co. v.
Gabino Barreto & Co., supra) Here to limit the liability of Aboitiz
Shipping to $500.00 would nullify the policy of the law imposing on
common carriers the duty to observe extraordinary diligence in the
carriage of goods.
By agreement between the carrier, master or agent of the carrier, and

the shipper another maximum amount than that mentioned in this
paragraph may be fixed: Provided, that such maximum shall not be
less than the figure above named. In no event shall the carrier be
liable for more than the amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any event for
loss or damage to or in connection with the transportation of the
goods if the nature or value thereof has been knowingly and
fraudulently mis-stated by the shipper in the bill of lading. (Emphasis
supplied.)
Indeed, it is even doubtful whether the word "container" in section 8

of the Bill of Lading includes containers which are a substitute for the
hold of a vessel. This provision limits the carrier's liability to "the
sum of US$500.00 per package /container customary freight unit."
By the rule of noscitur a sociis the word "container" must be given
the same meaning as package and customary freight unit and
therefore cannot possibly refer to modern containers which are used
for shipment of goods in bulk. 11
In this case the description of the nature and the value of the goods
shipped are declared and reflected in the bills of lading. Thus, it is the
basis of the liability of the carrier as the actual value of the loss.
In the same light, the third issue questioning the order of execution
pending appeal of the trial court must be resolved against petitioner
as well.
Moreover, it is absurd to interpret "container," as provided in the bill

of lading to be valued at US$500.00 each, to refer to the container
which is the modern substitute for the hold of the vessel. 9 The
The averments in the motion for execution pending appeal dated

December 8, 1985 are as follows
12
Choco Notes
Aside from the fact that petitioner can easily post a supersedeas bond
to stay execution, still other circumstances are present peculiar in the
incident of the sinking of M/V P. Aboitiz which would justify the
issuance of execution pending appeal. There are other decided cases
adjudging petitioner liable in the lower court in the same incident.
Other cases are on appeal, upcoming and about to be decided. The
value of cargo loss caused by the sinking of petitioner's vessel is in
the tune of no less than fifty million pesos inclusive of interests fees
and all claims. Its insurer has gone bankrupt and petitioner alone
must face and answer for all these claims. In one branch of the
Regional Trial Court of Manila alone there are twenty five (25) cases
pending against petitioner involving the same loss of cargoes aboard
M/V "P. Aboitiz" as per certification herewith attached as Annex "A".
This claim do not include others, pending in various courts in Metro
Manila which would have to be satisfied ultimately by petitioner, it
being a common carrier which failed to exercise extraordinary
diligence over the goods lost. The judgment sought to be enforced
may indeed be rendered imminently ineffectual in the ultimate
analysis.
88159, this Court in a resolution dated November 13, 1989 dismissed

the petition for lack of merit. Therein this Court held in part
The appellate court affirmed the decision of the lower court based on
its findings that the cause of sinking of the vessel was due to its
unseaworthiness and the failure of its crew and the master to exercise
extraordinary diligence.
The petitioner, however, contends that the appellate court erred on
this matter and insists that the contrary findings of the Board of
Marine Inquiry (BMI), which conducted a separate investigation to
the effect that the proximate cause of the sinking of the vessel was
due to force majeure and that the officers and crew had exhausted all
preventive measures to save the vessel and her cargo but to no avail,
should prevail. This, according to the petitioner is based on the
doctrine of primary administrative jurisdiction.
This argument is untenable.
A cursory reading of the decision and resolution of the appellate court
shows that the same took into consideration not only the findings of
the lower court but also the findings of the BMI. Thus, the appellate
court stated:
The purpose of Sec. 2 Rule 39 would not be achieved or execution

pending appeal would not be achieved if insolvency would still be
awaited. The remedy is available to petitioner under Sec. 3 Rule 39 of
the Rules of Court but to place insolvency as a condition to issuance
of a writ of execution pending appeal would render it illusory and
ineffectual.
Indeed, the decision of the Board was based simply on its finding that
the Philippine Coast Guard had certified the vessel to be seaworthy
and that it sank because it was exposed later to an oncoming typhoon
plotted within the radius where the vessel was positioned. This
generalization certainly cannot prevail over the detailed explanation
of the trial court in this case as basis for its contrary conclusion.
(Rollo, at p. 42)
Justice and equity therefore dictates, that as a consequence of the

bond posted by private respondent and there being several other cases
against petitioner, decided as well as pending, the totality of which
claims may render the appealed decision imminently ineffectual and
the further fact that the appeal being interposed is evidently for delay
as a consequence of the several adverse decisions against it as a
common carrier in the lower court, a reconsideration of the decision
dated November 25, 1985 of the Honorable Court will be in
consonance with law, jurisprudence and equity.
We find no cogent reason to deviate from the factual findings of the

appellate court and rule that the doctrine of primary administrative
jurisdiction is not applicable in the case at bar.
The other issue raised is whether or not the carrier's liability is
limited to $500.00 pursuant to section 8 of the Bill of Lading. The
petitioner claims that the appellate court erred in disregarding the
limitation of liability stipulated in the bill of lading. It argues that the
consignee agreed to this amount (and) therefore is bound by this rate
and that there is no basis for the appellate court's finding that the rate
is unreasonable.
In order to erase all apprehensions that the aforesaid judgment award

will wind up ineffectual when not immediately executed, it is most
respectfully prayed that herein respondent be required to post a
supersedeas bond. The statutory undertaking of posting a bond will
then achieve a three-pronged direction of justice, (1) it will cast no
doubt on the solvency of the herein petitioner; (2) it will not defeat or
render phyrric a just resolution of the case whichever party prevails
in the end or in the main case on appeal, since both of their claims are
secured by their corresponding bonds; and (3) it will put to equitable
operation Sec. 3 Rule 39 of the Revised Rules of Court. 12
The argument is not well-taken. As aptly stated by the appellate

court:
Generally speaking any stipulation, limiting the common carrier's
liability to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value is valid. (Civil
Code, Art. 1749) Such stipulation, however, must be reasonable and
just under the circumstances and must have been fairly and freely
agreed upon. (St. Paul Fire & Marine Insurance Co. v. Macondray &
Co., 70 SCRA 122, 126-127 [1976] In the case at bar, the goods
shipped on the M/V "P. Aboitiz" were insured for P278,536.50, which
may be taken as their value. To limit the liability of the carrier to
$500.00 would obviously put in its power to have taken the whole
cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90
[1927], it was held that a stipulation limiting the carrier's liability to
P300.00 per package of silk, when the value of such package was
P2,500.00, unless the true value had been declared and the
corresponding freight paid; was void as against public policy. That
ruling applies to this case.
The foregoing allegations which were not traversed that petitioner is

facing many law suits arising from said sinking of its vessel
involving cargo loss of no less than 50 million pesos, in some cases
of which judgment had been rendered against Aboitiz, and
considering that its insurer is now bankrupt, leaving Aboitiz alone to
face and answer the suits, which may render any judgment for
GAFLAC ineffectual, that the appeal is interposed manifestly for
delay and the willingness of GAFLAC to put up a bond certainly are
cogent bases for the issuance of an order of execution pending
appeal.
Finally, in a similar case for damages arising from the same incident
entitled Aboitiz Shipping Corporation vs. Honorable Court of
Appeals and Allied Guaranteed Insurance Company, Inc., G.R. No.
13
Choco Notes
damage while it was under the care of the carrier, or of the arrastre
operator, it must be added.
As argued by the respondent, a limitation of liability in this case

would render inefficacious the extraordinary diligence required by
law of common carriers. 13
DECISION
The motion for reconsideration of said resolution filed by petitioner
was denied with finality in a resolution dated January 8, 1990. Said
resolution of the case had become final and executory, entry of
judgment having been made and the records remanded for execution
on March 22, 1990.
MELO, J.:
After the Court of Appeals in CA-G.R. CV No. 08226 (July 8, 1987,
Kapunan, Puno (P), Marigomen, JJ.,) affirmed the dismissal by
Branch XVI of the Regional Trial Court of Manila of petitioners
complaint for recovery of the amount it had paid its insured
concerning the loss of a portion of a shipment, petitioner has
interposed the instant petition for review on certiorari.
Said case is now the law of the case applicable to the present petition.
WHEREFORE, the petition is dismissed with costs against petitioner.
SO ORDERED.
Bankers and Manufacturers v. CA
Petitioner presents the following bare operative facts: 108 cases of

copper tubings were imported by Ali Trading Company. The tubings
were insured by petitioner and arrived in Manila on board the vessel
S/S "Oriental Ambassador" on November 4, 1978, and turned over to
private respondent E. Razon, the Manila arrastre operator upon
discharge at the waterfront. The carrying vessel is represented in the
Philippines by its agent, the other private respondent, F. E. Zuellig
and Co., Inc. Upon inspection by the importer, the shipment was
allegedly found to have sustained loses by way of theft and pilferage
for which petitioner, as insurer, compensated the importer in the
amount of P31,014.00.chanrobles lawlibrary : rednad
[G.R. No. 80256. October 2, 1992.]

BANKERS & MANUFACTURERS ASSURANCE CORP.,
Petitioner, v. COURT OF APPEALS, F. E. ZUELLIG & CO., INC.
and E. RAZON, INC., Respondents.
Dollete, Blanco, Ejercito and Associates for Petitioner.
SYLLABUS
Petitioner, in subrogation of the importer-consignee and on the basis

of what it asserts had been already established - that a portion of the
shipment was lost through theft and pilferage - forthwith concludes
that the burden of proof of proving a case of non-liability shifted to
private respondents, one of whom, the carrier, being obligated to
exercise extraordinary diligence in the transport and care of the
shipment. The implication of petitioners statement is that private
respondents have not shown why they are not liable. The premises of
the argument of petitioner may be well-taken but the conclusions are
not borne out or supported by the record.
1.
CIVIL LAW; TRANSPORTATION; SHIPMENT IN
CONTAINER; CARRIERS DUTY IS MERELY TO TRANSPORT.
It must be underscored that the shipment involved in the case at
bar was "containerized." The goods under this arrangement are
stuffed, packed, and loaded by the shipper at a place of his choice,
usually his own warehouse, in the absence of the carrier. The
container is sealed by the shipper and thereafter picked up by the
carrier. Consequently, the recital of the bill of lading for goods thus
transported ordinarily would declare "Said to Contain", "Shippers
Load and Count", "Full Container Load", and the amount or quantity
of goods in the container in a particular package is only prima facie
evidence of the amount or quantity which may be overthrown by
parol evidence. A shipment under this arrangement is not inspected or
inventoried by the carrier whose duty is only to transport and deliver
the containers in the same condition as when the carrier received and
accepted the containers for transport.
It must be underscored that the shipment involved in the case at bar

was "containerized." The goods under this arrangement are stuffed,
packed, and loaded by the shipper at a place of his choice, usually his
own warehouse, in the absence of the carrier. The container is sealed
by the shipper and thereafter picked up by the carrier. Consequently,
the recital of the bill of lading for goods thus transported ordinarily
would declare "Said to Contain", "Shippers Load and Count", "Full
Container Load", and the amount or quantity of goods in the
container in a particular package is only prima facie evidence of the
amount or quantity which may be overthrown by parol evidence.
2.
ID.; ID.; ID.; ID.; RULE ON PRIMA FACIE LIABILITY
OF CARRIER NOT APPLICABLE IN CASE AT BAR. If any of
the vans were found in bad condition, or if any inspection of the
goods was to be done in order to determine the condition thereof, the
same should have been done at pierside, the pier warehouse, or at any
time and place while the vans were under the care and custody of the
carrier or of the arrastre operator. Unfortunately for petitioner, even
as one of the three vans was inspected and stripped, the two other
vans were not similarly gone over. Rather, these two vans and the
contents of the one previously stripped were accepted without
exception as to any supposed bad order or condition by petitioners
own broker. To all appearances, therefore, the shipment was accepted
by petitioner in good order. It logically follows that the case at bar
presents no occasion for the necessity of discussing the diligence
required of a carrier or of the theory of prima facie liability of the
carrier, for from all indications, the shipment did not suffer loss or
A shipment under this arrangement is not inspected or inventoried by

the carrier whose duty is only to transport and deliver the containers
in the same condition as when the carrier received and accepted the
containers for transport. In the case at bar, the copper tubings were
placed in three containers. Upon arrival in Manila on November 4,
1978, the shipment was discharge in apparent good order and
condition and from the piers docking apron, the containers were
shifted to the container yard of Pier 3 for safekeeping. Three weeks
later, one of the container vans, said to contain 19 cases of the cargo,
was "stripped" in the presence of petitioners surveyors, and three
cases were found to be in bad order. The 19 cases of the van stripped
were then kept inside Warehouse No. 3 of Pier 3 pending delivery. It
14
Choco Notes
should be stressed at this point, that the three cases found in bad order
are not the cases for which the claim below was presented, for
although the three cases appeared to be in bad order, the contents
remained good and intact.
WHEREFORE, the petition is hereby DISMISSED and the decision

of the Court of Appeals AFFIRMED, with costs against petitioner.
SO ORDERED.
The two other container vans were not moved from the container
yard and they were not stripped. On December 8, 1978, the cargo was
released to the care of the consignees authorized customs broker, the
RGS Customs Brokerage. The broker, accepting the shipment without
exception as to bad order, caused the delivery of the vans to the
consignees warehouse in Makati. It was at that place, when the
contents of the two containers were removed and inspected, that
petitioners surveyors reported, that checked against the packing list,
the shipment in Container No. OOLU2559269 was short of seven
cases (see p. 18, Rollo).chanrobles law library
Summa Insurance Corp. v. CA

[G.R. No. 84680. February 5, 1996]
SUMMA INSURANCE CORPORATION, petitioner, vs. COURT OF
APPEALS and METRO PORT SERVICE, INC., respondents.
DECISION
PANGANIBAN, J.:
Is an arrastre operator legally liable for the loss of a shipment in its
custody? If so, what is the extent of its liability? These are the two
questions that this Court faced in this petition for review on certiorari
of the Decision[1] of the Court of Appeals[2] in CA-G.R. No. CV
04964 promulgated on April 27, 1988, which affirmed with
modification the decision of the Court of First Instance of Manila in
Civil Case No. 82-13988, ordering petitioner to pay private
respondent a sum of money, with legal interest, attorneys fees and
the costs of the suit.
Under the prevailing circumstances, it is, therefore, not surprising

why the Court of Appeals in sustaining the trial court, simply quoted
the latter, thus:jgc:chanrobles.com.ph
"It must be also considered that the subject container was not stripped
of its contents at the pier zone. The two unstripped containers
(together with the 19 cases removed from the stripped third
container) were delivered to, and received by, the customs broker for
the consignee without any exception or notation of bad order or
shortlanding (Exhs. 1, 2 and 3-Vessel). If there was any suspicion or
indication of irregularity or theft or pilferage, plaintiffs or
consignees representatives should have noted the same on the gate
passes or insisted that some form of protest form part of the
documents concerning the shipment. Yet, no such step was taken. The
shipment appears to have been delivered to the customs broker in
good order and condition and complete save for the three cases noted
as being apparently in bad order.
The Facts
On November 22, 1981, the S/S Galleon Sapphire, a vessel owned
by the National Galleon Shipping Corporation (NGSC), arrived at
Pier 3, South Harbor, Manila, carrying a shipment consigned to the
order of Caterpillar Far East Ltd. with Semirara Coal Corporation
(Semirara) as notify party. The shipment, including a bundle of PC
8 U blades, was covered by marine insurance under Certificate No.
82/012-FEZ issued by petitioner and Bill of Lading No. SF/MLA
1014. The shipment was discharged from the vessel to the custody of
private respondent, formerly known as E. Razon, Inc., the exclusive
arrastre operator at the South Harbor. Accordingly, three good-order
cargo receipts were issued by NGSC, duly signed by the ships
checker and a representative of private respondent.
Consider further that the stripping of the subject container was done
at the consignees warehouse where, according to plaintiffs surveyor,
the loss of the seven cases was discovered. The evidence is not settled
as whether the defendants representatives were notified of, and were
present at, the unsealing and opening of the containers in the bodega.
Nor is the evidence clear how much time elapsed between the release
of the shipment from the pier and the stripping of the containers at
consignees bodega. All these fail to discount the possibility that the
loss in question could have taken place after the containers had left
the pier." (pp. 20-21, Rollo)
On February 24, 1982, the forwarder, Sterling International

Brokerage Corporation, withdrew the shipment from the pier and
loaded it on the barge Semirara 8104. The barge arrived at its port
of destination, Semirara Island, on March 9, 1982. When Semirara
inspected the shipment at its warehouse, it discovered that the bundle
of PC8U blades was missing.
Verily, if any of the vans were found in bad condition, or if any

inspection of the goods was to be done in order to determine the
condition thereof, the same should have been done at pierside, the
pier warehouse, or at any time and place while the vans were under
the care and custody of the carrier or of the arrastre operator.
Unfortunately for petitioner, even as one of the three vans was
inspected and stripped, the two other vans were not similarly gone
over. Rather, these two vans and the contents of the one previously
stripped were accepted without exception as to any supposed bad
order or condition by petitioners own broker. To all appearances,
therefore, the shipment was accepted by petitioner in good
order.chanrobles law library : red
On March 15, 1982, private respondent issued a shortlanded

certificate stating that the bundle of PC8U blades was already
missing when it received the shipment from the NGSC vessel.
Semirara then filed with petitioner, private respondent and NGSC its
claim for P280,969.68, the alleged value of the lost bundle.
On September 29, 1982, petitioner paid Semirara the invoice value of
the lost shipment. Semirara thereafter executed a release of claim
and subrogation receipt. Consequently, petitioner filed its claims
with NGSC and private respondent but it was unsuccessful.
Petitioner then filed a complaint (Civil Case No. 82-13988) with the
Regional Trial Court, Branch XXIV, Manila, against NGSC and
private respondent for collection of a sum of money, damages and
attorneys fees.
It logically follows that the case at bar presents no occasion for the
necessity of discussing the diligence required of a carrier or of the
theory of prima facie liability of the carrier, for from all indications,
the shipment did not suffer loss or damage while it was under the
care of the carrier, or of the arrastre operator, it must be added.
15
Choco Notes
On August 2, 1984, the trial court rendered a decision absolving
NGSC from any liability but finding private respondent liable to
petitioner. The dispositive portion of the decision reads as follows:
Metro Port must answer for the value of the missing cargo.
Defendant NGSC is absolved of any liability for such loss.
On appeal, the Court of Appeals modified the decision of the trial
court and reduced private respondents liability to P3,500.00 as
follows[3]:
PREMISES CONSIDERED, judgment is hereby rendered ordering

defendant Metro Port Service, Inc. to pay plaintiff Summa Insurance
Corporation the sum of P280,969.68 with legal interest from
November 22, 1982, the date of the filing of the complaint, until full
payment, and attorneys fees in the sum of P20,000.00, with costs of
suit.
WHEREFORE, the judgment appealed from is MODIFIED in that

defendant Metro Port Service, Inc., is ordered to pay plaintiff Summa
Insurance Corporation:
The complaint as against defendant National Galleon Shipping

Corporation and the counterclaim interposed by said defendant are
hereby dismissed. (Rollo, p. 32).
(1) the sum of P3,500.00, with legal interest from November 22,
1982, until fully paid; and
(2) the sum of P7,000.00, as and for attorneys fees.
In resolving the issue as to who had custody of the shipment when it

was lost, the trial court relied more on the good-order cargo receipts
issued by NGSC than on the short-landed certificate issued by private
respondent. The trial court held:
Costs against defendant Metro Port Service, Inc.

Petitioner moved for reconsideration of the said decision but the
Court of Appeals denied the same. Hence, the instant petition.
As between the aforementioned two documentary exhibits, the

Court is more inclined to give credence to the cargo receipts. Said
cargo receipts were signed by a checker of defendant NGSC and a
representative of Metro Port. It is safe to presume that the cargo
receipts accurately describe the quantity and condition of the
shipment when it was discharged from the vessel. Metro Ports
representative would not have signed the cargo receipts if only four
(4) packages were discharged from the vessel and given to the
possession and custody of the arrastre operator. Having been signed
by its representative, the Metro Port is bound by the contents of the
cargo receipts.
The Issues
The issues brought by the parties could be stated as follows:
(1)
Is the private respondent legally liable for the loss of the
shipment in question?
(2)
If so, what is the extent of its liability?
The First Issue: Liability for Loss of Shipment
On the other hand, the Metro Ports shortlanded certificate could not
be given much weight considering that, as correctly argued by
counsel for defendant NGSC, it was issued by Metro Port alone and
was not countersigned by the representatives of the shipping
company and the consignee. Besides, the certificate was prepared by
Atty. Servillano V. Dolina, Second Deputy General Manager of
Metro Port, and there is no proof on record that he was present at the
time the subject shipment was unloaded from the vessel and received
by the arrastre operator. Moreover, the shortlanded certificate bears
the date of March 15, 1982, more than three months after the
discharge of the cargo from the carrying vessel.
Petitioner was subrogated to the rights of the consignee. The

relationship therefore between the consignee and the arrastre operator
must be examined. This relationship is much akin to that existing
between the consignee or owner of shipped goods and the common
carrier, or that between a depositor and a warehouseman.[4] In the
performance of its obligations, an arrastre operator should observe
the same degree of diligence as that required of a common carrier and
a warehouseman as enunciated under Article 1733 of the Civil Code
and Section 3(b) of the Warehouse Receipts Law, respectively. Being
the custodian of the goods discharged from a vessel, an arrastre
operators duty is to take good care of the goods and to turn them
over to the party entitled to their possession.
Neither could the Court give probative value to the marine report
(Exhibit J, also Exhibit 1-Razon). The attending surveyor who
attended the unloading of the shipment did not take the witness stand
to testify on said report. Although Transnational Adjustment Co.s
general manager, Mariano C. Remorin, was presented as a witness,
his testimony is not competent because he was not present at the time
of the discharge of the cargo.
In this case, it has been established that the shipment was lost while
in the custody of private respondent. We find private respondent
liable for the loss. This is an issue of fact determined by the trial
court and respondent Court, which is not reviewable in a petition
under Rule 45 of the Rules of Court.
The Second Issue: Extent of Liability
Under the foregoing considerations, the Court finds that the one (1)
bundle of PC8U blade in question was not lost while the cargo was in
the custody of the carrying vessel. Considering that the missing
bundle was discharged from the vessel unto the custody of defendant
arrastre operator and considering further that the consignee did not
receive this cargo from the arrastre operator, it is safe to conclude
from these facts that said missing cargo was lost while same was in
the possession and control of defendant Metro Port. Defendant
Metro Port has not introduced competent evidence to prove that the
loss was not due to its fault or negligence. Consequently, only the
In the performance of its job, an arrastre operator is bound by the

management contract it had executed with the Bureau of Customs.
However, a management contract, which is a sort of a stipulation
pour autrui within the meaning of Article 1311 of the Civil Code, is
also binding on a consignee because it is incorporated in the gate pass
and delivery receipt which must be presented by the consignee before
delivery can be effected to it.[5] The insurer, as successor-in-interest
of the consignee, is likewise bound by the management contract.[6]
Indeed, upon taking delivery of the cargo, a consignee (and
necessarily its successor-ininterest) tacitly accepts the provisions of
16
Choco Notes
the management contract, including those which are intended to limit
the liability of one of the contracting parties, the arrastre operator.[7]
Appellant claims that the above quoted provision is null and void, as
it limits the liability of appellee for the loss, destruction or damage of
any merchandise, to P500.00 per package, contending that to sustain
the validity of the limitation would be to encourage acts of
conversion and unjust enrichment on the part of the arrastre operator.
Appellant, however, overlooks the fact that the limitation of
appellees liability under said provision, is not absolute or
unqualified, for if the value of the merchandise is specified or
manifested by the consignee, and the corresponding arrastre charges
are paid on the basis of the declared value, the limitation does not
apply. Consequently, the questioned provision is neither unfair nor
abitrary, as contended, because the consignee has it in his hands to
hold, if he so wishes, the arrastre operator responsible for the full
value of his merchandise by merely specifying it in any of the various
documents required of him, in clearing the merchandise from the
customs. For then, the appellee arrastre operator, by reasons of the
payment to it of a commensurate charge based on the higher declared
value of the merchandise, could and should take extraordinary care of
the special or valuable cargo. In this manner, there would be
mutuality. What would, indeed, be unfair and arbitrary is to hold the
arrastre operator liable for the full value of the merchandise after the
consignee has paid the arrastre charges only (on) a basis much lower
than the true value of the goods.
However, a consignee who does not avail of the services of the

arrastre operator is not bound by the management contract.[8] Such
an exception to the rule does not obtain here as the consignee did in
fact accept delivery of the cargo from the arrastre operator.
Section 1, Article VI of the Management Contract between private
respondent and the Bureau of Customs[9] provides:
1. Responsibility and Liability for Losses and Damages - The
CONTRACTOR shall, at its own expense handle all merchandise in
the piers and other designated places and at its own expense perform
all work undertaken by it hereunder diligently and in a skillful
workmanlike and efficient manner; that the CONTRACTOR shall be
solely responsible as an independent CONTRACTOR, and hereby
agrees to accept liability and to promptly pay to the steamship
company, consignee, consignor or other interested party or parties for
the loss, damage, or non-delivery of cargoes to the extent of the
actual invoice value of each package which in no case shall be more
than Three Thousand Five Hundred Pesos (P3,500.00) for each
package unless the value of the importation is otherwise specified or
manifested or communicated in writing together with the invoice
value and supported by a certified packing list to the CONTRACTOR
by the interested party or parties before the discharge of the goods, as
well as all damage that may be suffered on account of loss, damage,
or destruction of any merchandise while in custody or under the
control of the CONTRACTOR in any pier, shed, warehouse, facility
or other designated place under the supervision of the BUREAU, x x
x (Italics supplied).
In this case, no evidence was offered by petitioner proving the

amount of arrastre fees paid to private respondent so as to put the
latter on notice of the value of the cargo. While petitioner alleged
that prior to the loss of the package, its value had been relayed to
private respondent through the documents the latter had processed,
petitioner does not categorically state that among the submitted
documents were the pro forma invoice value and the certified packing
list. Neither does petitioner pretend that these two documents were
prerequisites to the issuance of a permit to deliver or were
attachments thereto. Even the permit to deliver, upon which
petitioner anchors its arguments, may not be considered by the Court
because it was not identified and formally offered in evidence.[13]
Interpreting a similar provision in the management contract between

private respondents predecessor, E. Razon, Inc. and the Bureau of
Customs, the Court said in E. Razon Inc. vs. Court of Appeals:[10]
Indeed, the provision in the management contract regarding the
declaration of the actual invoice value before the arrival of the
goods must be understood to mean a declaration before the arrival of
the goods in the custody of the arrastre operator, whether it be done
long before the landing of the shipment at port, or immediately before
turn-over thereof to the arrastre operators custody. What is essential
is knowledge beforehand of the extent of the risk to be undertaken by
the arrastre operator, as determined by the value of the property
committed to its care that it may define its responsibility for loss or
damage to such cargo and to ascertain compensation commensurate
to such risk assumed x x x.
In civil cases, the burden of proof is on the party who would be

defeated if no evidence is given on either side. Said party must
establish his case by a preponderance of evidence, which means that
the evidence as a whole adduced by one side is superior to that of the
other.[14] Petitioner having asserted the affirmative of the issue in
this case, it should have presented evidence required to obtain a
favorable judgment.
On the other hand, on top of its denial that it had received the invoice
value and the packing list before the discharge of the shipment,
private respondent was able to prove that it was apprised of the value
of the cargo only after its discharge from the vessel, ironically
through petitioners claim for the lost package to which were attached
the invoice and packing list. All told, petitioner failed to convince the
Court that the requirement of the management contract had been
complied with to entitle it to recover the actual invoice value of the
lost shipment.
In the same case, the Court added that the advance notice of the
actual invoice of the goods entrusted to the arrastre operator is for
the purpose of determining its liability, that it may obtain
compensation commensurable to the risk it assumes, (and) not for the
purpose of determining the degree of care or diligence it must
exercise as a depository or warehouseman[11] since the arrastre
operator should not discriminate between cargoes of substantial and
small values, nor exercise care and caution only for the handling of
goods announced to it beforehand to be of sizeable value, for that
would be spurning the public service nature of its business.
Anent the attorneys fees, we find the award to be proper considering

that the acts and omissions of private respondent have compelled
petitioner to litigate or incur expenses to protect its rights.[15]
However, as to the amount of the award, we find no reason to reexamine the appellate courts determination thereon in view of the
amount of the principal obligation. Otherwise, we would be
disregarding the doctrine that discretion, when well exercised, should
not be disturbed.
On the same provision limiting the arrastre operators liability, the

Court held in Northern Motors, Inc. v. Prince Line[12]:
17
Choco Notes
petitioners failure to observe extraordinary diligence in the care of
Fatimas luggage and that petitioner dealt with them in bad faith from
the start. Petitioner, on the other hand, disowned any liability for the
loss on the ground that Fatima allegedly did not declare any excess
baggage upon boarding its bus.
WHEREFORE, the petition for review on certiorari is DENIED and

the decision of the Court of Appeals is AFFIRMED. Costs against
petitioner.
SO ORDERED.
On June 15, 1988, after trial on the merits, the court a quo adjudged
the case in favor of herein respondents, viz:
Sarkies Tours v. CA
[G.R. No. 108897. October 2, 1997]
PREMISES CONSIDERED, judgment is hereby rendered in favor

of the plaintiffs (herein respondents) and against the herein defendant
Sarkies Tours Philippines, Inc., ordering the latter to pay to the
former the following sums of money, to wit:
SARKIES TOURS PHILIPPINES,

INC.
petitioner vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR.
ELINO G. FORTADES, MARISOL A. FORTADES and FATIMA A.
FORTADES., respondent.
DECISION
ROMERO, J.:
1.
The sum of P30,000.00 equivalent to the value of the
personal belongings of plaintiff Fatima Minerva Fortades, etc. less
the value of one luggage recovered;
This petition for review is seeking the reversal of the decision of the
Court of Appeals in CA-G.R. CV No. 18979 promulgated on January
13, 1993, as well as its resolution of February 19, 1993, denying
petitioners motion for reconsideration for being a mere rehash of the
arguments raised in the appellants brief.
2.
The sum of P90,000.00 for the transportation expenses, as
well as moral damages;
3.
The sum of P10,000.00 by way of exemplary damages;
The case arose from a damage suit filed by private respondents Elino,
Marisol, and Fatima Minerva, all surnamed Fortades, against
petitioner for breach of contract of carriage allegedly attended by bad
faith.
4.
The sum of P5,000.00 as attorneys fees; and
On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5

in Manila on her way to Legazpi City. Her brother Raul helped her
load three pieces of luggage containing all of her optometry review
books, materials and equipment, trial lenses, trial contact lenses,
passport and visa, as well as her mother Marisols U.S. immigration
(green) card, among other important documents and personal
belongings. Her belongings was kept in the baggage compartment of
the bus, but during a stopover at Daet, it was discovered that all but
one bag remained in the open compartment. The others, including
Fatimas things, were missing and could have dropped along the way.
Some of the passengers suggested retracing the route to try to recover
the lost items, but the driver ignored them and proceeded to Legazpi
City.
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the

herein plaintiffs within 30 days from receipt of this Decision.
5.
The sum of P5,000.00 as litigation expenses or a total of
One Hundred Forty Thousand (P140,000.00) Pesos.
SO ORDERED.
On appeal, the appellate court affirmed the trial courts judgment, but
deleted the award of moral and exemplary damages. Thus,
WHEREFORE, premises considered, except as above modified,
fixing the award for transportation expenses at P30,000.00 and the
deletion of the award for moral and exemplary damages, the decision
appealed from is AFFIRMED, with costs against defendant-appellant.
SO ORDERED."
Fatima immediately reported the loss to her mother who, in turn,

went to petitioners office in Legazpi City and later at its head office
in Manila. The latter, however, merely offered her P1,000.00 for
each piece of luggage lost, which she turned down. After returning to
Bicol disappointed but not defeated, they asked assistance from the
radio stations and even from Philtranco bus drivers who plied the
same route on August 31st. The effort paid off when one of Fatimas
bags was recovered. Marisol also reported the incident to the
National Bureau of Investigations field office in Legazpi City, and to
the local police.
Its motion for reconsideration having was likewise rejected by the

Court of Appeals, so petitioner elevated its case to this Court for a
review.
After a careful scrutiny of the records of this case, we are convinced
that the trial and appellate courts resolved the issues judiciously
based on the evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with
her, and even if she did, none was declared at the start of the trip.
The documentary and testimonial evidence presented at the trial,
however, established that Fatima indeed boarded petitioners De
Luxe Bus No. 5 in the evening of August 31, 1984, and she brought
three pieces of luggage with her, as testified by her brother Raul,[2]
who helped her pack her things and load them on said bus. One of
the bags was even recovered with the help of a Philtranco bus driver.
In its letter dated October 1, 1984, petitioner tacitly admitted its
liability by apologizing to respondents and assuring them that efforts
were being made to recover the lost items.
On September 20, 1984, respondents, through counsel, formally

demanded satisfaction of their complaint from petitioner. In a letter
dated October 1, 1984, the latter apologized for the delay and said
that (a) team has been sent out to Bicol for the purpose of recovering
or at least getting the full detail[1] of the incident.
After more than nine months of fruitless waiting, respondents
decided to file the case below to recover the value of the remaining
lost items, as well as moral and exemplary damages, attorneys fees
and expenses of litigation. They claimed that the loss was due to
18
Choco Notes
The records also reveal that respondents went to great lengths just to
salvage their loss. The incident was reported to the police, the NBI,
and the regional and head offices of petitioner. Marisol even sought
the assistance of Philtranco bus drivers and the radio stations. To
expedite the replacement of her mothers lost U.S. immigration
documents, Fatima also had to execute an affidavit of loss.[3] Clearly,
they would not have gone through all that trouble in pursuit of a
fancied loss.
established, should be granted to respondents in the amount of

P20,000.00 and P5,000.00, respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated
January 13, 1993, and its resolution dated February 19, 1993, are
hereby AFFIRMED with the MODIFICATION that petitioner is
ordered to pay respondent an additional P20,000.00 as moral
damages and P5,000.00 as exemplary damages. Costs against
petitioner.
Fatima was not the only one who lost her luggage. Other passengers
suffered a similar fate: Dr. Lita Samarista testified that petitioner
offered her P1,000.00 for her lost baggage and she accepted it;[4]
Carleen Carullo-Magno also lost her chemical engineering review
materials, while her brother lost abaca products he was transporting
to Bicol.[5]
SO ORDERED.
Belgian Overseas
Insurance
v.
Phil.
First
[G.R. No. 143133. June 5, 2002]
Petitioners receipt of Fatimas personal luggage having been thus

established, it must now be determined if, as a common carrier, it is
responsible for their loss. Under the Civil Code, (c)ommon carriers,
from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the
goods x x x transported by them,[6] and this liability lasts from
the time the goods are unconditionally placed in the possession of,
and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier for transportation
until the same are delivered, actually or constructively, by the carrier
to x x x the person who has a right to receive them,[7] unless the
loss is due to any of the excepted causes under Article 1734 thereof.
[8]
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and

JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners, vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondent.
DECISION
PANGANIBAN, J.:
Proof of the delivery of goods in good order to a common carrier and
of their arrival in bad order at their destination constitutes prima facie
fault or negligence on the part of the carrier. If no adequate
explanation is given as to how the loss, the destruction or the
deterioration of the goods happened, the carrier shall be held liable
therefor.
Statement of the Case
The cause of the loss in the case at bar was petitioners negligence in
not ensuring that the doors of the baggage compartment of its bus
were securely fastened. As a result of this lack of care, almost all of
the luggage was lost, to the prejudice of the paying passengers. As
the Court of Appeals correctly observed:
Before us is a Petition for Review under Rule 45 of the Rules of

Court, assailing the July 15, 1998 Decision[1] and the May 2, 2000
Resolution[2] of the Court of Appeals[3] (CA) in CA-GR CV No.
53571. The decretal portion of the Decision reads as follows:
x x x. Where the common carrier accepted its passengers baggage

for transportation and even had it placed in the vehicle by its own
employee, its failure to collect the freight charge is the common
carriers own lookout. It is responsible for the consequent loss of the
baggage. In the instant case, defendant appellants employee even
helped Fatima Minerva Fortades and her brother load the
luggages/baggages in the bus baggage compartment, without asking
that they be weighed, declared, receipted or paid for (TSN, August 4,
1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither was
this required of the other passengers (TSN, August 4, 1986, p. 104;
February 5, 1988, p. 13).
WHEREFORE, in the light of the foregoing disquisition, the

decision appealed from is hereby REVERSED and SET ASIDE.
Defendants-appellees are ORDERED to jointly and severally pay
plaintiffs-appellants the following:
1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and
32/100 (P451,027.32) as actual damages, representing the value of
the damaged cargo, plus interest at the legal rate from the time of
filing of the complaint on July 25, 1991, until fully paid;
2) Attorneys fees amounting to 20% of the claim; and
Finally, petitioner questions the award of actual damages to

respondents. On this point, we likewise agree with the trial and
appellate courts conclusions. There is no dispute that of the three
pieces of luggage of Fatima, only one was recovered. The other two
contained optometry books, materials, equipment, as well as vital
documents and personal belongings. Respondents had to shuttle
between Bicol and Manila in their efforts to be compensated for the
loss. During the trial, Fatima and Marisol had to travel from the
United States just to be able to testify. Expenses were also incurred
in reconstituting their lost documents. Under these circumstances,
the Court agrees with the Court of Appeals in awarding P30,000.00
for the lost items and P30,000.00 for the transportation expenses, but
disagrees with the deletion of the award of moral and exemplary
damages which, in view of the foregoing proven facts, with
negligence and bad faith on the fault of petitioner having been duly
3) Costs of suit.[4]
The assailed Resolution
Reconsideration.
denied
petitioners
Motion
for
The CA reversed the Decision of the Regional Trial Court (RTC) of

Makati City (Branch 134), which had disposed as follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered, dismissing the complaint, as well as defendants
counterclaim.[5]
The Facts
19
Choco Notes
The factual antecedents of the case are summarized by the Court of
Appeals in this wise:
Issues
On June 13, 1990, CMC Trading A.G. shipped on board the MN

Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold
Rolled Steel sheets for transportation to Manila consigned 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 the subject cargo. Four (4) coils were found to be in
bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in
their damaged state to be unfit for the intended purpose, the
consignee Philippine Steel Trading Corporation declared the same as
total loss.
In their Memorandum, petitioners raise the following issues for the

Courts consideration:
I
Whether or not plaintiff by presenting only one witness who has
never seen the subject shipment and whose testimony is purely
hearsay is sufficient to pave the way for the applicability of Article
1735 of the Civil Code;
II
Despite receipt of a formal demand, defendants-appellees refused to

submit to the consignees claim. Consequently, plaintiff-appellant
paid the consignee five hundred six thousand eighty six & 50/100
pesos (P506,086.50), and was subrogated to the latters rights and
causes of action against defendants-appellees. Subsequently, plaintiffappellant instituted this complaint for recovery of the amount paid by
them, to the consignee as insured.
Whether or not the consignee/plaintiff filed the required notice of

loss within the time required by law;
III
Whether or not a notation in the bill of lading at the time of loading
is sufficient to show pre-shipment damage and to exempt herein
defendants from liability;
Impugning the propriety of the suit against them, defendantsappellees imputed that the damage and/or loss was due to preshipment damage, to the inherent nature, vice or defect of the goods,
or to perils, danger and accidents of the sea, or to insufficiency of
packing thereof, or to the act or omission of the shipper of the goods
or their representatives. In addition thereto, defendants-appellees
argued that their liability, if there be any, should not exceed the
limitations of liability provided for in the bill of lading and other
pertinent laws. Finally, defendants-appellees averred that, in any
event, they exercised due diligence and foresight required by law to
prevent any damage/loss to said shipment.[6]
IV
Whether or not the PACKAGE LIMITATION of liability under
Section 4 (5) of COGSA is applicable to the case at bar.[12]
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence
of a common carrier
Ruling of the Trial Court
2. Whether the notice of loss was timely filed
The RTC dismissed the Complaint because respondent had failed to

prove its claims with the quantum of proof required by law.[7]
3. Whether the package limitation of liability is applicable

This Courts Ruling
It likewise debunked petitioners counterclaim, because respondents

suit was not manifestly frivolous or primarily intended to harass
them.[8]
The Petition is partly meritorious.

First Issue:
Proof of Negligence
Ruling of the Court of Appeals

In reversing the trial court, the CA ruled that petitioners were liable
for the loss or the damage of the goods shipped, because they had
failed to overcome the presumption of negligence imposed on
common carriers.
Petitioners contend that the presumption of fault imposed on common

carriers should not be applied on the basis of the lone testimony
offered by private respondent. The contention is untenable.
Well-settled is the rule that common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence and vigilance with respect to the safety of the
goods and the passengers they transport.[13] Thus, common carriers
are required to render service with the greatest skill and foresight and
to use all reason[a]ble means to ascertain the nature and
characteristics of the goods tendered for shipment, and to exercise
due care in the handling and stowage, including such methods as their
nature requires.[14] The extraordinary responsibility lasts from the
time the goods are unconditionally placed in the possession of and
received for transportation by the carrier until they are delivered,
actually or constructively, to the consignee or to the person who has a
right to receive them.[15]
The CA further held as inadequately proven petitioners claim that the

loss or the deterioration of the goods was due to pre-shipment
damage.[9] It likewise opined that the notation metal envelopes rust
stained and slightly dented placed on the Bill of Lading had not been
the proximate cause of the damage to the four (4) coils.[10]
As to the extent of petitioners liability, the CA held that the package
limitation under COGSA was not applicable, because the words L/C
No. 90/02447 indicated that a higher valuation of the cargo had been
declared by the shipper. The CA, however, affirmed the award of
attorneys fees.
Hence, this Petition.[11]
20
Choco Notes
This strict requirement is justified by the fact that, without a hand or a
voice in the preparation of such contract, the riding public enters into
a contract of transportation with common carriers.[16] Even if it
wants to, it cannot submit its own stipulations for their approval.[17]
Hence, it merely adheres to the agreement prepared by them.
Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will
you inform the Honorable Court with what company you are
connected?
Owing to this high degree of diligence required of them, common

carriers, as a general rule, are presumed to have been at fault or
negligent if the goods they transported deteriorated or got lost or
destroyed.[18] That is, unless they prove that they exercised
extraordinary diligence in transporting the goods.[19] In order to
avoid responsibility for any loss or damage, therefore, they have the
burden of proving that they observed such diligence.[20]
Q. How is BM Santos Checkers Agency related or connected with

defendant Jardine Davies Transport Services?
However, the presumption of fault or negligence will not arise[21] if

the loss is due to any of the following causes: (1) flood, storm,
earthquake, lightning, or other natural disaster or calamity; (2) an act
of the public enemy in war, whether international or civil; (3) an act
or omission of 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.[22] This is a closed list. If the
cause of destruction, loss or deterioration is other than the
enumerated circumstances, then the carrier is liable therefor.[23]
A. I am the representative of BM Santos on board the vessel, sir, to

supervise the discharge of cargoes.
Corollary to the foregoing, mere proof of delivery of the goods in

good order to a common carrier and of their arrival in bad order at
their destination constitutes a prima facie case of fault or negligence
against the carrier. If no adequate explanation is given as to how the
deterioration, the loss or the destruction of the goods happened, the
transporter shall be held responsible.[24]
Q. And, on or about that date, do you recall having attended the

discharging and inspection of cold steel sheets in coil on board the
MV/AN ANGEL SKY?
A.
A.
BM Santos Checkers Agency, sir.
It is the company who contracts the checkers, sir.
Q. You mentioned that you are a Head Checker, will you inform
this Honorable Court your duties and responsibilities?
xxx
xxx
xxx
Q.
On or about August 1, 1990, were you still connected or
employed with BM Santos as a Head Checker?
A. Yes, sir.
A. Yes, sir, I was there.

xxx
That petitioners failed to rebut the prima facie presumption of

negligence is revealed in the case at bar by a review of the records
and more so by the evidence adduced by respondent.[25]
xxx
xxx
Q.
Based on your inspection since you were also present at that
time, will you inform this Honorable Court the condition or the
appearance of the bad order cargoes that were unloaded from the
MV/ANANGEL SKY?
First, as stated in the Bill of Lading, petitioners received the subject

shipment in good order and condition in Hamburg, Germany.[26]
ATTY. MACAMAY:
Second, prior to the unloading of the cargo, an Inspection Report[27]
prepared and signed by representatives of both parties showed the
steel bands broken, the metal envelopes rust-stained and heavily
buckled, and the contents thereof exposed and rusty.
Objection, Your Honor, I think the document itself reflects the

condition of the cold steel sheets and the best evidence is the
document itself, Your Honor that shows the condition of the steel
sheets.
Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine

Davies Transport Services, Inc., stated that the four coils were in bad
order and condition. Normally, a request for a bad order survey is
made in case there is an apparent or a presumed loss or damage.[29]
COURT:
Let the witness answer.
Fourth, the Certificate of Analysis[30] stated that, based on the

sample submitted and tested, the steel sheets found in bad order were
wet with fresh water.
A. The scrap of the cargoes is broken already and the rope is loosen
and the cargoes are dent on the sides.[32]
All these conclusively prove the fact of shipment in good order and
condition and the consequent damage to the four coils while in the
possession of petitioner,[33] who notably failed to explain why.[34]
Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel

Coating Corporation and dated October 12, 1990 -- admitted that they
were aware of the condition of the four coils found in bad order and
condition.
Further, petitioners failed to prove that they observed the

extraordinary diligence and precaution which the law requires a
common carrier to know and to follow, to avoid damage to or
destruction of the goods entrusted to it for safe carriage and delivery.
[35]
These facts were confirmed by Ruperto Esmerio, head checker of

BM Santos Checkers Agency. Pertinent portions of his testimony are
reproduce hereunder:
True, the words metal envelopes rust stained and slightly dented
were noted on the Bill of Lading; however, there is no showing that
21
Choco Notes
petitioners exercised due diligence to forestall or lessen the loss.[36]
Having been in the service for several years, the master of the vessel
should have known at the outset that metal envelopes in the said state
would eventually deteriorate when not properly stored while in
transit.[37] Equipped with the proper knowledge of the nature of steel
sheets in coils and of the proper way of transporting them, the master
of the vessel and his crew should have undertaken precautionary
measures to avoid possible deterioration of the cargo. But none of
these measures was taken.[38] Having failed to discharge the burden
of proving that they have exercised the extraordinary diligence
required by law, petitioners cannot escape liability for the damage to
the four coils.[39]
Inasmuch as the neither the Civil Code nor the Code of Commerce
states a specific prescriptive period on the matter, the Carriage of
Goods by Sea Act (COGSA)--which provides for a one-year period
of limitation on claims for loss of, or damage to, cargoes sustained
during transit--may be applied suppletorily to the case at bar.
In the present case, the cargo was discharged on July 31, 1990, while
the Complaint[51] was filed by respondent on July 25, 1991, within
the one-year prescriptive period.
Third Issue:
Package Limitation
In their attempt to escape liability, petitioners further contend that

they are exempted from liability under Article 1734(4) of the Civil
Code. They cite the notation metal envelopes rust stained and
slightly dented printed on the Bill of Lading as evidence that the
character of the goods or defect in the packing or the containers was
the proximate cause of the damage. We are not convinced.
Assuming arguendo they are liable for respondents claims,

petitioners contend that their liability should be limited to US$500
per package as provided in the Bill of Lading and by Section 4(5)[52]
of COGSA.[53]
On the other hand, respondent argues that Section 4(5) of COGSA is
inapplicable, because the value of the subject shipment was declared
by petitioners beforehand, as evidenced by the reference to and the
insertion of the Letter of Credit or L/C No. 90/02447 in the said
Bill of Lading.[54]
From the evidence on record, it cannot be reasonably concluded that

the damage to the four coils was due to the condition noted on the
Bill of Lading.[40] The aforecited exception refers to cases when
goods are lost or damaged while in transit as a result of the natural
decay of perishable goods or the fermentation or evaporation of
substances liable therefor, the necessary and natural wear of goods in
transport, defects in packages in which they are shipped, or the
natural propensities of animals.[41] None of these is present in the
instant case.
A bill of lading serves two functions. First, it is a receipt for the

goods shipped.[55] Second, it is a contract by which three parties -namely, the shipper, the carrier, and the consignee -- undertake
specific responsibilities and assume stipulated obligations.[56] In a
nutshell, the acceptance of the bill of lading by the shipper and the
consignee, with full knowledge of its contents, gives rise to the
presumption that it constituted a perfected and binding contract.[57]
Further, even if the fact of improper packing was known to the carrier
or its crew or was apparent upon ordinary observation, it is not
relieved of liability for loss or injury resulting therefrom, once it
accepts the goods notwithstanding such condition.[42] Thus,
petitioners have not successfully proven the application of any of the
aforecited exceptions in the present case.[43]
Further, a stipulation in the bill of lading limiting to a certain sum the

common carriers liability for loss or destruction of a cargo -- unless
the shipper or owner declares a greater value[58] -- is sanctioned by
law.[59] There are, however, two conditions to be satisfied: (1) the
contract is reasonable and just under the circumstances, and (2) it has
been fairly and freely agreed upon by the parties.[60] The rationale
for, this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.[61]
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the
Carriage of Goods by Sea Act[44] (COGSA), respondent should have
filed its Notice of Loss within three days from delivery. They assert
that the cargo was discharged on July 31, 1990, but that respondent
filed its Notice of Claim only on September 18, 1990.[45]
It is to be noted, however, that the Civil Code does not limit the
liability of the common carrier to a fixed amount per package.[62] In
all matters not regulated by the Civil Code, the right and the
obligations of common carriers shall be governed by the Code of
Commerce and special laws.[63] Thus, the COGSA, which is
suppletory to the provisions of the Civil Code, supplements the latter
by establishing a statutory provision limiting the carriers liability in
the absence of a shippers declaration of a higher value in the bill of
lading.[64] The provisions on limited liability are as much a part of
the bill of lading as though physically in it and as though placed there
by agreement of the parties.[65]
We are not persuaded. First, the above-cited provision of COGSA

provides that the notice of claim need not be given if the state of the
goods, at the time of their receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior to unloading the cargo,
an Inspection Report[46] as to the condition of the goods was
prepared and signed by representatives of both parties.[47]
Second, as stated in the same provision, a failure to file a notice of
claim within three days will not bar recovery if it is nonetheless filed
within one year.[48] This one-year prescriptive period also applies to
the shipper, the consignee, the insurer of the goods or any legal
holder of the bill of lading.[49]
In the case before us, there was no stipulation in the Bill of

Lading[66] limiting the carriers liability. Neither did the shipper
declare a higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words L/C No. 90/02447
cannot be the basis for petitioners liability.
In Loadstar Shipping Co., Inc. v. Court of Appeals,[50] we ruled that

a claim is not barred by prescription as long as the one-year period
has not lapsed. Thus, in the words of the ponente, Chief Justice
Hilario G. Davide Jr.:
First, a notation in the Bill of Lading which indicated the amount of

the Letter of Credit obtained by the shipper for the importation of
steel sheets did not effect a declaration of the value of the goods as
22
Choco Notes
required by the bill.[67] That notation was made only for the
convenience of the shipper and the bank processing the Letter of
Credit.[68]
INSURANCE COMPANY OF
NORTH AMERICA,
Respondent.
Second, in Keng Hua Paper Products v. Court of Appeals,[69] we

held that a bill of lading was separate from the Other Letter of Credit
arrangements. We ruled thus:
DECISION
REYES, R.T., J.:
THE RIGHT of subrogation attaches upon payment by the

insurer of the insurance claims by the assured. As subrogee, the
insurer steps into the shoes of the assured and may exercise only
those rights that the assured may have against the wrongdoer who
caused the damage.
Before Us is a petition for review on certiorari of the
Decision[1] of the Court of Appeals (CA) which reversed the
Decision[2] of the Regional Trial Court (RTC). The CA ordered
petitioner Aboitiz Shipping Corporation to pay the sum of
P280,176.92 plus interest and attorneys fees in favor of respondent
Insurance Company of North America (ICNA).
In the light of the foregoing, petitioners liability should be computed

based on US$500 per package and not on the per metric ton price
declared in the Letter of Credit.[71] In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court[72] we explained the meaning of
package:
The Facts
When what would ordinarily be considered packages are shipped in

a container supplied by the carrier and the number of such units is
disclosed in the shipping documents, each of those units and not the
container constitutes the package referred to in the liability
limitation provision of Carriage of Goods by Sea Act.
Culled from the records, the facts are as follows:

On June 20, 1993, MSAS Cargo International Limited and/or
Associated and/or Subsidiary Companies (MSAS) procured a marine
insurance policy from respondent ICNA UK Limited of London. The
insurance was for a transshipment of certain wooden work tools and
workbenches purchased for the consignee Science Teaching
Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu
City, Philippines.[3] ICNA issued an all-risk open marine policy,
[4] stating:
Considering, therefore, the ruling in Eastern Shipping Lines and the

fact that the Bill of Lading clearly disclosed the contents of the
containers, the number of units, as well as the nature of the steel
sheets, the four damaged coils should be considered as the shipping
unit subject to the US$500 limitation.
This Company, in consideration of a premium as agreed and subject

to the terms and conditions printed hereon, does insure for MSAS
Cargo International Limited &/or Associated &/or Subsidiary
Companies on behalf of the title holder: Loss, if any, payable to the
Assured or order.[5]
WHEREFORE, the Petition is partly granted and the assailed

Decision MODIFIED. Petitioners liability is reduced to US$2,000
plus interest at the legal rate of six percent from the time of the filing
of the Complaint on July 25, 1991 until the finality of this Decision,
and 12 percent thereafter until fully paid. No pronouncement as to
costs.
The cargo, packed inside one container van, was shipped

freight prepaid from Hamburg, Germany on board M/S Katsuragi.
A clean bill of lading[6] was issued by Hapag-Lloyd which stated the
consignee to be STIP, Ecotech Center, Sudlon Lahug, Cebu City.
SO ORDERED.
Aboitiz. v. ICNA
G.R. No. 168402
The container van was then off-loaded at Singapore and

transshipped on board M/S Vigour Singapore. On July 18, 1993, the
ship arrived and docked at the Manila International Container Port
where the container van was again off-loaded. On July 26, 1993, the
cargo was received by petitioner Aboitiz Shipping Corporation
(Aboitiz) through its duly authorized booking representative, Aboitiz
Transport System. The bill of lading[7] issued by Aboitiz contained
the notation grounded outside warehouse.
Present:
YNARES-SANTIAGO,
J.,
Chairperson,
- versus -
August 6, 2008
x-------------------------------------------------x
(T)he contract of carriage, as stipulated in the bill of lading in the

present case, must be treated independently of the contract of sale
between the seller and the buyer, and the contract of issuance of a
letter of credit between the amount of goods described in the
commercial invoice in the contract of sale and the amount allowed in
the letter of credit will not affect the validity and enforceability of the
contract of carriage as embodied in the bill of lading. As the bank
cannot be expected to look beyond the documents presented to it by
the seller pursuant to the letter of credit, neither can the carrier be
expected to go beyond the representations of the shipper in the bill of
lading and to verify their accuracy vis--vis the commercial invoice
and the letter of credit. Thus, the discrepancy between the amount of
goods indicated in the invoice and the amount in the bill of lading
cannot negate petitioners obligation to private respondent arising
from the contract of transportation.[70]
ABOITIZ SHIPPING
CORPORATION,
Petitioner,
Promulgated:
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
The container van was stripped and transferred to another

crate/container van without any notation on the condition of the cargo
23
Choco Notes
on the Stuffing/Stripping Report.[8] On August 1, 1993, the
container van was loaded on board petitioners vessel, MV Super
Concarrier I. The vessel left Manila en route to Cebu City on August
2, 1993.
In a Supplemental Report dated October 20, 1993,[15] CAC

reported to ICNA that based on official weather report from the
Philippine Atmospheric, Geophysical and Astronomical Services
Administration, it would appear that heavy rains on July 28 and 29,
1993 caused water damage to the shipment. CAC noted that the
shipment was placed outside the warehouse of Pier No. 4, North
Harbor, Manila when it was delivered on July 26, 1993. The
shipment was placed outside the warehouse as can be gleaned from
the bill of lading issued by Aboitiz which contained the notation
grounded outside warehouse. It was only on July 31, 1993 when
the shipment was stuffed inside another container van for shipment to
Cebu.
On August 3, 1993, the shipment arrived in Cebu City and

discharged onto a receiving apron of the Cebu International Port. It
was then brought to the Cebu Bonded Warehousing Corporation
pending clearance from the Customs authorities. In the Stripping
Report[9] dated August 5, 1993, petitioners checker noted that the
crates were slightly broken or cracked at the bottom.
On August 11, 1993, the cargo was withdrawn by the
representative of the consignee, Science Teaching Improvement
Project (STIP) and delivered to Don Bosco Technical High School,
Punta Princesa, Cebu City. It was received by Mr. Bernhard Willig.
On August 13, 1993, Mayo B. Perez, then Claims Head of petitioner,
received a telephone call from Willig informing him that the cargo
sustained water damage. Perez, upon receiving the call, immediately
went to the bonded warehouse and checked the condition of the
container and other cargoes stuffed in the same container. He found
that the container van and other cargoes stuffed there were
completely dry and showed no sign of wetness.[10]
Aboitiz refused to settle the claim. On October 4, 1993, ICNA

paid the amount of P280,176.92 to consignee. A subrogation receipt
was duly signed by Willig. ICNA formally advised Aboitiz of the
claim and subrogation receipt executed in its favor. Despite followups, however, no reply was received from Aboitiz.
RTC Disposition
ICNA filed a civil complaint against Aboitiz for collection of
actual damages in the sum of P280,176.92, plus interest and
attorneys fees.[16] ICNA alleged that the damage sustained by the
shipment was exclusively and solely brought about by the fault and
negligence of Aboitiz when the shipment was left grounded outside
its warehouse prior to delivery.
Perez found that except for the bottom of the crate which was
slightly broken, the crate itself appeared to be completely dry and had
no water
marks. But he confirmed that the tools which were stored inside the
crate were already corroded. He further explained that the grounded
outside warehouse notation in the bill of lading referred only to the
container van bearing the cargo.[11]
Aboitiz disavowed any liability and asserted that the claim had
no factual and legal bases. It countered that the complaint stated no
cause of action, plaintiff ICNA had no personality to institute the suit,
the cause of action was barred, and the suit was premature there
being no claim made upon Aboitiz.
In a letter dated August 15, 1993, Willig informed Aboitiz of

the damage noticed upon opening of the cargo.[12] The letter stated
that the crate was broken at its bottom part such that the contents
were exposed. The work tools and workbenches were found to have
been completely soaked in water with most of the packing cartons
already disintegrating. The crate was properly sealed off from the
inside with tarpaper sheets. On the outside, galvanized metal bands
were nailed onto all the edges. The letter concluded that apparently,
the damage was caused by water entering through the broken parts of
the crate.
On November 14, 2003, the RTC rendered judgment against

ICNA. The dispositive portion of the decision[17] states:
WHEREFORE, premises considered, the court holds that
plaintiff is not entitled to the relief claimed in the complaint for being
baseless and without merit. The complaint is hereby DISMISSED.
The defendants counterclaims are, likewise, DISMISSED for lack of
basis.[18]
The consignee contacted the Philippine office of ICNA for

insurance claims. On August 21, 1993, the Claimsmen Adjustment
Corporation (CAC) conducted an ocular inspection and survey of the
damage. CAC reported to ICNA that the goods sustained water
damage, molds, and corrosion which were discovered upon delivery
to consignee.[13]
The RTC ruled that ICNA failed to prove that it is the real party-ininterest to pursue the claim against Aboitiz. The trial court noted that
Marine Policy No. 87GB 4475 was issued by ICNA UK Limited with
address at Cigna House, 8 Lime Street, London EC3M 7NA.
However, complainant ICNA Phils. did not present any evidence to
show that ICNA UK is its predecessor-in-interest, or that ICNA UK
assigned the insurance policy to ICNA Phils. Moreover, ICNA Phils.
claim that it had been subrogated to the rights of the consignee must
fail because the subrogation receipt had no probative value for being
hearsay evidence. The RTC reasoned:
On September 21, 1993, the consignee filed a formal claim[14]

with Aboitiz in the amount of P276,540.00 for the damaged condition
of the following goods:
ten (10) wooden workbenches
three (3) carbide-tipped saw blades
one (1) set of ball-bearing guides
one (1) set of overarm router bits
twenty (20) rolls of sandpaper for stroke sander
While it is clear that Marine Policy No. 87GB 4475 was issued by
Insurance Company of North America (U.K.) Limited (ICNA UK)
with address at Cigna House, 8 Lime Street, London EC3M 7NA, no
evidence has been adduced which would show that ICNA UK is the
same as or the predecessor-in-interest of plaintiff Insurance Company
of North America ICNA with office address at Cigna-Monarch Bldg.,
dela Rosa cor. Herrera Sts., Legaspi Village, Makati, Metro Manila or
that ICNA UK assigned the Marine Policy to ICNA. Second, the
assured in the Marine Policy appears to be MSAS Cargo International
24
Choco Notes
Limited &/or Associated &/or Subsidiary Companies. Plaintiffs
witness, Francisco B. Francisco, claims that the signature below the
name MSAS Cargo International is an endorsement of the marine
policy in favor of Science Teaching Improvement Project. Plaintiffs
witness, however, failed to identify whose signature it was and
plaintiff did not present on the witness stand or took (sic) the
deposition of the person who made that signature. Hence, the claim
that there was an endorsement of the marine policy has no probative
value as it is hearsay.
P280,176.92 with interest thereon at the legal rate from the date of
the institution of this case until fully paid, and attorneys fees in the
sum of P50,000, plus the costs of suit.[21]
The CA opined that the right of subrogation accrues simply
upon payment by the insurance company of the insurance claim. As
subrogee, ICNA is entitled to reimbursement from Aboitiz, even
assuming that it is an unlicensed foreign corporation. The CA ruled:
At any rate, We find the ground invoked for the dismissal of the
complaint as legally untenable. Even assuming arguendo that the
plaintiff-insurer in this case is an unlicensed foreign corporation, such
circumstance will not bar it from claiming reimbursement from the
defendant carrier by virtue of subrogation under the contract of
insurance and as recognized by Philippine courts. x x x
Plaintiff, further, claims that it has been subrogated to the rights and
interest of Science Teaching Improvement Project as shown by the
Subrogation Form (Exhibit K) allegedly signed by a representative
of Science Teaching Improvement Project. Such representative,
however, was not presented on the witness stand. Hence, the
Subrogation Form is self-serving and has no probative value.[19]
(Emphasis supplied)
xxxx
The trial court also found that ICNA failed to produce evidence
that it was a foreign corporation duly licensed to do business in the
Philippines. Thus, it lacked the capacity to sue before Philippine
Courts, to wit:
Plaintiff insurer, whether the foreign company or its duly

authorized Agent/Representative in the country, as subrogee of the
claim of the insured under the subject marine policy, is therefore the
real party in interest to bring this suit and recover the full amount of
loss of the subject cargo shipped by it from Manila to the consignee
in Cebu City. x x x[22]
Prescinding from the foregoing, plaintiff alleged in its complaint that

it is a foreign insurance company duly authorized to do business in
the Philippines. This allegation was, however, denied by the
defendant. In fact, in the Pre-Trial Order of 12 March 1996, one of
the issues defined by the court is whether or not the plaintiff has legal
capacity to sue and be sued. Under Philippine law, the condition is
that a foreign insurance company must obtain licenses/authority to do
business in the Philippines. These licenses/authority are obtained
from the Securities and Exchange Commission, the Board of
Investments and the Insurance Commission. If it fails to obtain these
licenses/authority, such foreign corporation doing business in the
Philippines cannot sue before Philippine courts. Mentholatum Co.,
Inc. v. Mangaliman, 72 Phil. 524. (Emphasis supplied)
The CA ruled that the presumption that the carrier was at fault
or that it acted negligently was not overcome by any countervailing
evidence. Hence, the trial court erred in dismissing the complaint
and in not finding that based on the evidence on record and relevant
provisions of law, Aboitiz is liable for the loss or damage sustained
by the subject cargo.
Issues
The following issues are up for Our consideration:
CA Disposition
(1)
THE HONORABLE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN RULING THAT ICNA HAS A CAUSE
OF ACTION AGAINST ABOITIZ BY VIRTUE OF THE RIGHT OF
SUBROGATION BUT WITHOUT CONSIDERING THE ISSUE
CONSISTENTLY RAISED BY ABOITIZ THAT THE FORMAL
CLAIM OF STIP WAS NOT MADE WITHIN THE PERIOD
PRESCRIBED BY ARTICLE 366 OF THE CODE OF
COMMERCE; AND, MORE SO, THAT THE CLAIM WAS MADE
BY A WRONG CLAIMANT.
ICNA appealed to the CA. It contended that the trial court

failed to consider that its cause of action is anchored on the right of
subrogation under Article 2207 of the Civil Code. ICNA said it is
one and the same as the ICNA UK Limited as made known in the
dorsal portion of the Open Policy.[20]
On the other hand, Aboitiz reiterated that ICNA lacked a cause
of action. It argued that the formal claim was not filed within the
period required under Article 366 of the Code of Commerce; that
ICNA had no right of subrogation because the subrogation receipt
should have been signed by MSAS, the assured in the open policy,
and not Willig, who is merely the representative of the consignee.
(2)
REVERSIBLE ERROR IN RULING THAT THE SUIT FOR
REIMBURSEMENT AGAINST ABOITIZ WAS PROPERLY FILED
BY ICNA AS THE LATTER WAS AN AUTHORIZED AGENT OF
THE INSURANCE COMPANY OF NORTH AMERICA (U.K.)
(ICNA UK).
On March 29, 2005, the CA reversed and set aside the RTC
ruling, disposing as follows:
(3)
REVERSIBLE ERROR IN RULING THAT THERE WAS PROPER
INDORSEMENT OF THE INSURANCE POLICY FROM THE
ORIGINAL ASSURED MSAS CARGO INTERNATIONAL
LIMITED (MSAS) IN FAVOR OF THE CONSIGNEE STIP, AND
THAT THE SUBROGATION RECEIPT ISSUED BY STIP IN
FAVOR OF ICNA IS VALID NOTWITHSTANDING THE FACT
WHEREFORE, premises considered, the present appeal is

hereby GRANTED. The appealed decision of the Regional Trial
Court of Makati City in Civil Case No. 94-1590 is hereby
REVERSED and SET ASIDE. A new judgment is hereby rendered
ordering defendant-appellee Aboitiz Shipping Corporation to pay the
plaintiff-appellant Insurance Company of North America the sum of
25
Choco Notes
THAT IT HAS NO PROBATIVE VALUE AND IS MERELY
HEARSAY AND A SELF-SERVING DOCUMENT FOR FAILURE
OF ICNA TO PRESENT A REPRESENTATIVE OF STIP TO
IDENTIFY AND AUTHENTICATE THE SAME.
behalf of the title holder: Loss, if any, payable to the Assured or

Order.
The policy benefits any subsequent assignee, or holder, including the
consignee, who may file claims on behalf of the assured. This is in
keeping with Section 57 of the Insurance Code which states:
(4)
REVERSIBLE ERROR IN RULING THAT THE EXTENT AND
KIND OF DAMAGE SUSTAINED BY THE SUBJECT CARGO
WAS CAUSED BY THE FAULT OR NEGLIGENCE OF ABOITIZ.
[23] (Underscoring supplied)
A policy may be so framed that it will inure to the benefit of

whosoever, during the continuance of the risk, may become the
owner of the interest insured. (Emphasis added)
Elsewise stated, the controversy rotates on three (3) central

questions: (a) Is respondent ICNA the real party-in-interest that
possesses the right of subrogation to claim reimbursement from
petitioner Aboitiz? (b) Was there a timely filing of the notice of
claim as required under Article 366 of the Code of Commerce? (c) If
so, can petitioner be held liable on the claim for damages?
Respondents cause of action is founded on it being subrogated

to the rights of the consignee of the damaged shipment. The right of
subrogation springs from Article 2207 of the Civil Code, which
states:
Article 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury. (Emphasis
added)
Our Ruling
We answer the triple questions in the affirmative.
A foreign corporation not licensed to do business in the
Philippines is not absolutely incapacitated from filing a suit in local
courts. Only when that foreign corporation is transacting or doing
business in the country will a license be necessary before it can
institute suits.[24] It may, however, bring suits on isolated business
transactions, which is not prohibited under Philippine law.[25] Thus,
this Court has held that a foreign insurance company may sue in
Philippine courts upon the marine insurance policies issued by it
abroad to cover international-bound cargoes shipped by a Philippine
carrier, even if it has no license to do business in this country. It is
the act of engaging in business without the prescribed license, and not
the lack of license per se, which bars a foreign corporation from
access to our courts.[26]
As this Court held in the case of Pan Malayan Insurance

Corporation v. Court of Appeals,[28] payment by the insurer to the
assured operates as an equitable assignment of all remedies the
assured may have against the third party who caused the damage.
Subrogation is not dependent upon, nor does it grow out of, any
privity of contract or upon written assignment of claim. It accrues
simply upon payment of the insurance claim by the insurer.[29]
Upon payment to the consignee of indemnity for damage to the
insured goods, ICNAs entitlement to subrogation equipped it with a
cause of action against petitioner in case of a contractual breach or
negligence.[30]
This right of subrogation, however, has its
limitations. First, both the insurer and the consignee are bound by the
contractual stipulations under the bill of lading.[31] Second, the
insurer can be subrogated only to the rights as the insured may have
against the wrongdoer. If by its own acts after receiving payment
from the insurer, the insured releases the wrongdoer who caused the
loss from liability, the insurer loses its claim against the latter.[32]
In any case, We uphold the CA observation that while it was

the ICNA UK Limited which issued the subject marine policy, the
present suit was filed by the said companys authorized agent in
Manila. It was the domestic corporation that brought the suit and not
the foreign company. Its authority is expressly provided for in the
open policy which includes the ICNA office in the Philippines as one
of the foreign companys agents.
As found by the CA, the RTC erred when it ruled that there was no
proper indorsement of the insurance policy by MSAS, the shipper, in
favor of STIP of Don Bosco Technical High School, the consignee.
The giving of notice of loss or injury is a condition precedent

to the action for loss or injury or the right to enforce the carriers
liability. Circumstances peculiar to this case lead Us to conclude that
the notice requirement was complied with. As held in the case of
Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc.,
[33] this notice requirement protects the carrier by affording it an
opportunity to make an investigation of the claim while the matter is
still fresh and easily investigated. It is meant to safeguard the carrier
from false and fraudulent claims.
The terms of the Open Policy authorize the filing of any claim
on the insured goods, to be brought against ICNA UK, the company
who issued the insurance, or against any of its listed agents
worldwide.[27] MSAS accepted said provision when it signed and
accepted the policy. The acceptance operated as an acceptance of the
authority of the agents. Hence, a formal indorsement of the policy to
the agent in the Philippines was unnecessary for the latter to exercise
the rights of the insurer.
Likewise, the Open Policy expressly provides that:
Under the Code of Commerce, the notice of claim must be made

within twenty four (24) hours from receipt of the cargo if the damage
is not apparent from the outside of the package. For damages that are
visible from the outside of the package, the claim must be made
immediately. The law provides:
The Company, in consideration of a premium as agreed and subject

to the terms and conditions printed hereon, does insure MSAS Cargo
International Limited &/or Associates &/or Subsidiary Companies in
26
Choco Notes
than a strict construction.[37] We give due consideration to the fact
that the final destination of the damaged cargo was a school
institution where authorities are bound by rules and regulations
governing their actions. Understandably, when the goods were
delivered, the necessary clearance had to be made before the package
was opened. Upon opening and discovery of the damaged condition
of the goods, a report to this effect had to pass through the proper
channels before it could be finalized and endorsed by the institution
to the claims department of the shipping company.
Article 366. Within twenty four hours following the receipt of the
merchandise, the claim against the carrier for damages or average
which may be found therein upon opening the packages, may be
made, provided that the indications of the damage or average which
give rise to the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted only at the
time of receipt.
After the periods mentioned have elapsed, or the transportation
charges have been paid, no claim shall be admitted against the carrier
with regard to the condition in which the goods transported were
delivered. (Emphasis supplied)
The call to petitioner was made two days from delivery, a reasonable
period considering that the goods could not have corroded instantly
overnight such that it could only have sustained the damage during
transit. Moreover, petitioner was able to immediately inspect the
damage while the matter was still fresh. In so doing, the main
objective of the prescribed time period was fulfilled. Thus, there was
substantial compliance with the notice requirement in this case.
The periods above, as well as the manner of giving notice may be

modified in the terms of the bill of lading, which is the contract
between the parties. Notably, neither of the parties in this case
presented the terms for giving notices of claim under the bill of
lading issued by petitioner for the goods.
To recapitulate, We have found that respondent, as subrogee of

the consignee, is the real party in interest to institute the claim for
damages against petitioner; and pro hac vice, that a valid notice of
claim was made by respondent.
The shipment was delivered on August 11, 1993. Although the letter
informing the carrier of the damage was dated August 15, 1993, that
letter, together with the notice of claim, was received by petitioner
only on September 21, 1993. But petitioner admits that even before it
received the written notice of claim, Mr. Mayo B. Perez, Claims
Head of the company, was informed by telephone sometime in
August 13, 1993. Mr. Perez then immediately went to the warehouse
and to the delivery site to inspect the goods in behalf of petitioner.
[34]
We now discuss petitioners liability for the damages sustained by the

shipment. The rule as stated in Article 1735 of the Civil Code is that
in cases where the goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence required by law.[38] Extraordinary diligence is that
extreme measure of care and caution which persons of unusual
prudence and circumspection use for securing and preserving their
own property rights.[39] This standard is intended to grant favor to
the shipper who is at the mercy of the common carrier once the goods
have been entrusted to the latter for shipment.[40]
In the case of Philippine Charter Insurance Corporation (PCIC) v.

Chemoil Lighterage Corporation,[35] the notice was allegedly made
by the consignee through telephone. The claim for damages was
denied. This Court ruled that such a notice did not comply with the
notice requirement under the law. There was no evidence presented
that the notice was timely given. Neither was there evidence
presented that the notice was relayed to the responsible authority of
the carrier.
Here, the shipment delivered to the consignee sustained water

damage. We agree with the findings of the CA that petitioner failed
to overturn this presumption:
x x x upon delivery of the cargo to the consignee Don Bosco
Technical High School by a representative from Trabajo Arrastre, and
the crates opened, it was discovered that the workbenches and work
tools suffered damage due to wettage although by then they were
already physically dry. Appellee carrier having failed to discharge
the burden of proving that it exercised extraordinary diligence in the
vigilance over such goods it contracted for carriage, the presumption
of fault or negligence on its part from the time the goods were
unconditionally placed in its possession (July 26, 1993) up to the time
the same were delivered to the consignee (August 11, 1993),
therefore stands. The presumption that the carrier was at fault or that
it acted negligently was not overcome by any countervailing
evidence. x x x[41] (Emphasis added)
As adverted to earlier, there are peculiar circumstances in the instant

case that constrain Us to rule differently from the PCIC case, albeit
this ruling is being made pro hac vice, not to be made a precedent for
other cases.
Stipulations requiring notice of loss or claim for damage as a
condition precedent to the right of recovery from a carrier must be
given a reasonable and practical construction, adapted to the
circumstances of the case under adjudication, and their application is
limited to cases falling fairly within their object and purpose.[36]
The shipment arrived in the port of Manila and was received by

petitioner for carriage on July 26, 1993. On the same day, it was
stripped from the container van. Five days later, on July 31, 1993, it
was re-stuffed inside another container van. On August 1, 1993, it
was loaded onto another vessel bound for Cebu. During the period
between July 26 to 31, 1993, the shipment was outside a container
van and kept in storage by petitioner.
Bernhard Willig, the representative of consignee who received the

shipment, relayed the information that the delivered goods were
discovered to have sustained water damage to no less than the Claims
Head of petitioner, Mayo B. Perez. Immediately, Perez was able to
investigate the claims himself and he confirmed that the goods were,
indeed, already corroded.
Provisions specifying a time to give notice of damage to common
carriers are ordinarily to be given a reasonable and practical, rather
The bill of lading issued by petitioner on July 31, 1993 contains the
notation grounded outside warehouse, suggesting that from July 26
27
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to 31, the goods were kept outside the warehouse. And since
evidence showed that rain fell over Manila during the same period,
We can conclude that this was when the shipment sustained water
damage.
SO ORDERED.
To prove the exercise of extraordinary diligence, petitioner must do

more than merely show the possibility that some other party could be
responsible for the damage. It must prove that it used all reasonable
means to ascertain the nature and characteristic of the goods tendered
for transport and that it exercised due care in handling them.[42]
Extraordinary diligence must include safeguarding the shipment from
damage coming from natural elements such as rainfall.
Exemption From Liability

Natural Disaster or Calamity art.
1734 (1); 1739; 1740
Aside from denying that the grounded outside warehouse notation

referred not to the crate for shipment but only to the carrier van,
petitioner failed to mention where exactly the goods were stored
during the period in question. It failed to show that the crate was
properly stored indoors during the time when it exercised custody
before shipment to Cebu. As amply explained by the CA:
Tan Chiong v. Inchausti
On the other hand, the supplemental report submitted by the

surveyor has confirmed that it was rainwater that seeped into the
cargo based on official data from the PAGASA that there was,
indeed, rainfall in the Port Area of Manila from July 26 to 31, 1993.
The Surveyor specifically noted that the subject cargo was under the
custody of appellee carrier from the time it was delivered by the
shipper on July 26, 1993 until it was stuffed inside Container No.
ACCU-213798-4 on July 31, 1993. No other inevitable conclusion
can be deduced from the foregoing established facts that damage
from wettage suffered by the subject cargo was caused by the
negligence of appellee carrier in grounding the shipment outside
causing rainwater to seep into the cargoes.
Haussermann, Cohn and Fisher for appellant.

O'Brien and DeWitt for appellee.
G.R. No. L-6092
March 8, 1912
TAN CHIONG SIAN, plaintiff-appellee,

vs.
INCHAUSTI AND CO., defendant-appellant.
TORRES, J.:
This is an appeal through bill of exceptions, by counsel for the firm
of Inchausti & Co., from a judgment rendered by the Honorable A.S.
Crossfield, judge.
On January 11, 1909, the Chinaman, Tan Chiong Sian or Tan Chinto,
filed a written complaint, which was amended on the 28th of the
same month and again amended on October 27 of the same year,
against the said firm, wherein he alleged, among other things, as a
cause of action: That, on or about November 25, 1908, the plaintiff
delivered to the defendant 205 bundles or cases of general
merchandise belonging to him, which Inchausti & Co., upon
receiving, bound themselves to deliver in the pueblo of Catarman,
Province of Samar, to the Chinaman, Ong Bieng Sip, and in
consideration of the obligations contracted by the defendant party, the
plaintiff obligated himself to pay to the latter the sum of P250
Philippine currency, which payment should be made upon the
delivery of the said merchandise in the said pueblo Catarman; but
that the defendant company neither carried nor delivered the
aforementioned merchandise to the said Ong Bieng Sip, in Catarman,
but unjustly and negligently failed to do so, with the result that the
said merchandise was almost totally lost; that, had the defendant
party complied well and faithfully with its obligation, according to
the agreement made, the merchandise concerned would have a value
of P20,000 in the said pueblo of Catarman on the date when it should
have been delivered there, wherefore the defendant party owed the
plaintiff the said sum of P20,000, which it had not paid him, or any
part thereof, notwithstanding the many demands of the plaintiff;
therefore the latter prayed for judgment against the defendant for the
said sum, together with legal interest thereon from November 25,
1908, and the costs of the suit.
Appellees witness, Mr. Mayo tried to disavow any

responsibility for causing wettage to the subject goods by claiming
that the notation GROUNDED OUTSIDE WHSE. actually refers
to the container and not the contents thereof or the cargoes. And yet
it presented no evidence to explain where did they place or store the
subject goods from the time it accepted the same for shipment on July
26, 1993 up to the time the goods were stripped or transferred from
the container van to another container and loaded into the vessel M/V
Supercon Carrier I on August 1, 1993 and left Manila for Cebu City
on August 2, 1993. x x x If the subject cargo was not grounded
outside prior to shipment to Cebu City, appellee provided no
explanation as to where said cargo was stored from July 26, 1993 to
July 31, 1993. What the records showed is that the subject cargo was
stripped from the container van of the shipper and transferred to the
container on August 1, 1993 and finally loaded into the appellees
vessel bound for Cebu City on August 2, 1993.
The
Stuffing/Stripping Report (Exhibit D) at the Manila port did not
indicate any such defect or damage, but when the container was
stripped upon arrival in Cebu City port after being discharged from
appellees vessel, it was noted that only one (1) slab was slightly
broken at the bottom allegedly hit by a forklift blade (Exhibit F).
[43] (Emphasis added)
Counsel for the defendant company, in his answer, set forth, that he
admitted the allegations of paragraphs 1 and 2 of the complaint,
amended for the second time, and denied those paragraphs 3, 4, 5, 6
and 7 of the same. As his first special defense, he alleged that on or
about November 28, 1908, his client, the said firm, received in
Manila from Ong Bieng Sip 205 bundles, bales, or cases of
merchandise to be placed on board the steamer Sorsogon, belonging
Petitioner is thus liable for the water damage sustained by the goods
due to its failure to satisfactorily prove that it exercised the
extraordinary diligence required of common carriers.
WHEREFORE, the petition is DENIED and the appealed
Decision AFFIRMED.
28
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to the defendant, for shipment to the port of Gubat, Province of
Sorsogon, to be in the said port transshipped into another of the
defendant's vessels for transportation to the port of Catarman, Samar,
and delivered to the aforesaid Chinaman, Ong Bieng Sip; that the
defendant company, upon receiving the said merchandise from the
latter, Ong Bieng Sip, and on its entering into a contract of maritime
transportation with him did not know and was not notified that the
plaintiff, Tan Chiong Sian, had any interest whatever in the said
merchandise and had made with the plaintiff no contract relative to
the transportation of such goods, for, on receiving the latter from the
said Ong Bieng Sip, for transportation, there were made out and
delivered to him three bills of lading, Nos. 38, 39 and 76, which
contained a list of the goods received and, printed on the back thereof
were the terms of the maritime transportation contract entered into by
and between the plaintiff and the defendant company, copies of which
bills of lading and contract, marked as Exhibits A, B, and C, are of
record, attached to and made an integral part of the said answer; that
Ong Bieng Sip accepted the said bills of lading and the contract
extended on the backs thereof; that the merchandise mentioned was
put on board the steamer Sorsogon and carried to the port of Gubat,
Province of Sorsogon, where this vessel arrived on November 28,
1908, on which date the lorcha Pilar, into which the said merchandise
was to be transshipped for carriage to Catarman, was not at Gubat,
and therefore the goods had to be unloaded and stored in the
defendant company's warehouses at Gubat; that, on the 4th of
December of the same year, the lorcha Pilar arrived at Gubat and,
after the termination of certain necessary work, the goods received
from Chinaman, Ong Bieng Sip, were taken aboard the same,
together with other merchandise belonging to the defendant party, for
the purpose of transportation to the port of Catarman; that, before the
said lorcha could leave for its destination, a strong wind arose which
in the course of the day increased in force until, early in the morning
of the following day, the lorcha was dragged and driven, by the force
of the storm, upon the shore, despite the means employed by the crew
to avoid the accident, and notwithstanding the five anchors that held
the craft, which was thus wrecked and completely destroyed and the
merchandise with which it was laden, including the 205 bundles or
packages taken aboard for the said Chinaman, was scattered on the
shore; that, on the occasion, the lorcha Pilar was in good condition,
provided with all the proper and necessary equipment and accessories
and carried a crew of sufficient number in command of a skillful
patron or master, wherefore the wreck of the said craft was solely due
to the irresistible force of the elements and of the storm which drove
it upon the shore; that the defendant company, with the greatest
possible diligence, gathered up the said shipwrecked goods that had
been shipped by the Chinaman, Ong Bieng Sip, but, owing to the
damage they had suffered, it was impossible to preserve them, so,
after having offered to deliver them to him, the defendant proceeded,
in the presence of a notary, to sell them at public auction and realized
from the sale thereof P1,693.67, the reasonable value of the same in
the condition in which they were after they had been gathered up and
salved from the wreck of the lorcha Pilar; that the expenses
occasioned by such salvage and sale of the said goods amounted to
P151.35, which were paid by the defendant party; that the latter
offered to the Chinese shipper, the plaintiff, the amount realized from
the sale of the said merchandise, less P151.35, the amount of the
expenses, and the sum of P250, the amount of the freight stipulated,
and is still willing to pay such products of the said sale to the
aforementioned Ong Bieng Sip or to any other person who should
establish his subrogation to the rights of the Chinaman, Ong Bieng
Sip, with respect to the said amount; that, as his client's second
special defense, the defendant company alleged that one of the
conditions of the shipping contract executed between it and the
Chinaman, Ong Bieng Sip, relative to the transportation of the said

merchandise, was that the said firm should not be held liable for more
than P25 for any bundle or package, unless the value of its contents
should be stated in the bill of lading, and that the shipper, Chinaman,
Ong Bieng Sip, did not state in the bill of lading the value of any of
the bundles or packages in which the goods shipped by him were
packed. Counsel for the defendant company, therefore, prayed the
court to absolve his client from the complaint, with costs against the
plaintiff.
After the hearing of the case and the introduction of testimony by the
parties, judgment was rendered, on March 18, 1910, in favor of the
plaintiff, Tan Chiong Sian or Tan Chinto, against the defendant
Inchausti and Co., for the sum of P14,642.63, with interest at the rate
of 6 per cent per annum from January 11, 1909, and for the costs of
the trial. The defendant party appealed from this judgment.
This suit was brought for the purpose of collecting a certain sum
which it is alleged the defendant firm owes the plaintiff for losses and
damages suffered by the latter as a result of the former's
noncompliance with the terms of an agreement or contract to
transport certain merchandise by sea from this city to the pueblo of
Catarman, Island of Samar, for the sum of P250.
The principal question to be determined is whether the defendant is
liable for the loss of the merchandise and for failure to deliver the
same at the place of destination, or whether he is relieved from
responsibility on the ground of force majeure.
Article 1601 of the Civil Code prescribes:
Carriers of goods by land or by water shall be subject with regard to
the keeping and preservation of the things entrusted to them, to the
same obligations as determined for innkeepers by articles 1783 and
1784.
The provisions of this article shall be understood without prejudice to
what is prescribed by the Code of Commerce with regard to
transportation by sea and land.
Article 1602 reads:
Carriers are also liable for the loss of and damage to the things which
they receive, unless they prove that the loss or damage arose from a
fortuitous event or force majeure.
The articles aforecited are as follows:
ART. 1783. The depositum of goods made by travelers in inns or
hostelries shall also be considered a necessary one. The keepers of
inns and hostelries are liable for them as such bailees, provided that
notice thereof may have been given to them or to their employees,
and that the travelers on their part take the precautions which said
innkeepers or their substitutes may have advised them concerning the
care and vigilance of said goods.
ART. 1784. The liability referred to in the preceding article shall
include damages to the goods of the travelers caused the servants or
employees of the keepers for inns or hostelries as well as by
strangers, but not those arising from robbery or which may be caused
by any other case of force majeure.
Article 361 of the Code of Commerce provides:
29
Choco Notes
driven upon the shore and wrecked, and its cargo, including the
Chinese shipper's 205 packages of goods, scattered on the beach.
Laborers or workmen of the defendant company, by its order, then
proceeded to gather up the plaintiff's merchandise and, as it was
impossible to preserve it after it was salved from the wreck of the
lorcha, it was sold at public auction before a notary for the sum of
P1,693.67.
Merchandise shall be transported at the risk and venture of the

shipper, unless the contrary was expressly stipulated.
Therefore, all damages and impairment suffered by the goods in
transportation, by reason of accident, force majeure, or by virtue of
the nature or defect of the articles, shall be for the account and risk of
the shipper.
The contract entered into between the Chinese shipper, Ong Bieng
Sip, and the firm of Inchausti & Co., provided that transportation
should be furnished from Manila to Catarman, although the
merchandise taken aboard the steamer Sorsogon was to be
transshipped at Gubat to another vessel which was to convey it from
that port to Catarman; it was not stipulated in the said contract that
the Sorsogon should convey the goods to their final destination, nor
that the vessel into which they were to be transshipped, should be a
steamer. The shipper, Ong Bieng Sip, therefore assented to these
arrangements and made no protest when his 205 packages of
merchandise were unloaded from the ship and, on account of the
absence of the lorcha Pilar, stored in the warehouses at Gubat nor did
he offer any objection to the lading of his merchandise on to this
lorcha as soon as it arrived and was prepared to receive cargo;
moreover, he knew that to reach the port of Catarman with
promptness and dispatch, the lorcha had to be towed by some vessel
like the launch Texas, which the defendant company had been
steadily using for similar operations in those waters.
The proof of these accidents in incumbent on the carrier.

ART. 362. The carrier, however, shall be liable for the losses and
damages arising from the causes mentioned in the foregoing article if
it is proved that they occurred on account of his negligence or
because he did not take the precautions usually adopted by careful
persons, unless the shipper committed fraud in the bill of lading,
stating that the goods were of a class or quality different from what
they really were.
If, notwithstanding the precaution referred to in this article, the goods
transported run the risk of being lost on account of the nature or by
reason of an unavoidable accident, without there being time for the
owners of the same to dispose thereof, the carrier shall proceed to
their sale, placing them for this purpose at the disposal of the judicial
authority or of the officials determined by special provisions.
ART. 363. With the exception of the cases prescribed in the second
paragraph of article 361, the carrier shall be obliged to deliver the
goods transported in the same condition in which, according to the
bill of lading, they were at the time of their receipt, without any
detriment or impairment, and should he not do so, he shall be obliged
to pay the value of the goods not delivered at the point where they
should have been and at the time the delivery should have taken
place.
Hence the shipper, Ong Bieng Sip, made no protest or objection to

the methods adopted by the agents of the defendant for the
transportation of his gods to the port of their destination, and the
record does not show that in Gubat the defendant possessed any other
means for the conveyance and transportation of merchandise, at least
for Catarman, than the lorcha Pilar, towed by said launch and
exposed during its passage to all sorts of accidents and perils from the
nature and seafaring qualities of a lorcha, from the circumstances
then present and the winds prevailing on the Pacific Ocean during the
months of November and December.
If part of the goods transported should be delivered the consignee

may refuse to receive them, when he proves that he can not make use
thereof without the others.
It is to be noted that a lorcha is not easily managed or steered when

the traveling, for, out at sea, it can only be moved by wind and sails;
and along the coast near the shore and in the estuaries where it
customarily travels, it can only move by poling. For this reason, in
order to arrive at the pueblo of Catarman with promptness and
dispatch, the lorcha was usually towed by the launch Texas.
On November 25, 1908, Inchausti & Co. received in Manila from the
Chinaman, Ong Bieng Sip, 205 bundles, bales or cases of goods to be
conveyed by the steamer Sorsogon to the port of Gubat, Province of
Sorsogon, where they were to be transshipped to another vessel
belonging to the defendant company and by the latter transported to
the pueblo of Catarman, Island of Samar, there to be delivered to the
Chinese shipper with whom the defendant party made the shipping
contract. To this end three bills of lading were executed, Nos. 38, 39,
and 76, copies of which, marked as Exhibits A, B, and C, are found
on pages 13, 14, and 15 of the record.
The record does not show that, from the afternoon of the 4th of
December, 1908, until the morning of the following day, the 5th, the
patron or master of the lorcha which was anchored in the cove of
Gubat, received any notice from the captain of the steamer Ton Yek,
also anchored near by, of the near approach of a storm. The said
captain, Juan Domingo Alberdi, makes no reference in his sworn
testimony of having given any such notice to the patron of the lorcha,
nor did the latter, Mariano Gadvilao, testify that he received such
notice from the captain of the Ton Yek or from the person in charge
of the Government observatory. Gadvilao, the patron, testified that
only between 10 and 11 o'clock of Saturday morning, the 5th of
December, was he informed by Inchausti & Co.'s agent in Gubat that
a baguio was approaching; that thereupon, on account of the
condition of the sea, he dropped the four anchors that the lorcha had
on board and immediately went ashore to get another anchor and a
new cable in order more securely to hold the boat in view of the
predicted storm. This testimony was corroborated by the said
representative, Melchor Muoz. So the lorcha, when the storm broke
The steamer Sorsogon, which carried the goods, arrived at the port of
Gubat on the 28th of that month and as the lorcha Pilar, to which the
merchandise was to be transshipped for its transportation to
Catarman, was not yet there, the cargo was unloaded and stored in the
defendant company's warehouses at that port.
Several days later, the lorcha just mentioned arrived at Gubat and,
after the cargo it carried had been unloaded, the merchandise
belonging to the Chinaman, Ong Bieng Sip, together with other
goods owned by the defendant Inchausti & Co., was taken aboard to
be transported to Catarman; but on December 5, 1908, before the
Pilar could leave for its destination, towed by the launch Texas, there
arose and, as a result of the strong wind and heavy sea, the lorcha was
30
Choco Notes
upon it, was held fast by five anchors and was, as testified by the
defendant without contradiction or evidence to the contrary, well
found and provided with all proper and necessary equipment and had
a sufficient crew for its management and preservation.
hurricane had already made its appearance and the wind was blowing
with all its fury and raising great waves.
The lorcha Pilar, loaded as it had been from the afternoon of
December 4, even though it could have been moved by means of
poles, without being towed, evidently could not have entered the
Sabang River on the morning of the 5th, when the wind began to
increase and the sea to become rough, on account of the low tide, the
shallowness of the channel, and the boat's draft.
The patron of the lorcha testified specifically that at Gubat or in its

immediate vicinity there is no port whatever adequate for the shelter
and refuge of vessels in cases of danger, and that, even though there
were, on being advised between 10 and 11 o'clock of the morning of
the 5th, of the approach of a storm from the eastern Pacific, it would
have been impossible to spread any sails or weigh anchor on the
lorcha without being dragged or driven against the reefs by the force
of the wind. As the craft was not provided with steam or other motive
power, it would not have been possible for it to change its anchorage,
nor move from the place where it lay, even several hours before the
notice was received by its patron. A lorcha can not be compared with
a steamer which does not need the help or assistance of any other
vessel in its movements.
The facts stated in the foregoing paragraph were proved by the said
chart which was exhibited in evidence and not rejected or assailed by
the plaintiff. They were also supported by the sworn testimony of the
patron of the lorcha, unrebutted by any oral evidence on the part of
the plaintiff such as might disprove the certainty of the facts related,
and, according to section 275 of the Code of Civil Procedure, the
natural phenomenon of the tides, mentioned in the official
hydrographic map, Exhibit 7, which is prima facie evidence on the
subject, of the hours of its occurrence and of the conditions and
circumstances of the port of Gubat, shall be judicially recognized
without the introduction of proof, unless the facts to the contrary be
proven, which was not done by the plaintiff, nor was it proven that
between the hours of 10 and 11 o'clock of the morning of December
5, 1908, there did not prevail a state of low tide in the port of Gubat.
Due importance must be given to the testimony of the weather

observer, Antonio Rocha, that the notice received from the Manila
Observatory on the afternoon of December 4, with regard to a storm
travelling from the east of the Pelew Islands toward the northwest,
was not made known to the people of Gubat and that he merely left a
memorandum notice on the desk of the station, intending to give
explanations thereof to any person who should request them of him.
So the notice of the storm sent by the Manila Observatory was only
known to the said observer, and he did not apprise the public of the
approach of the storm until he received another notice from Manila at
20 minutes past 8 o'clock on Saturday morning, December 5. Then he
made a public announcement and advised the authorities of the storm
that was coming.
The oral evidence adduced by the plaintiff with respect to the depth
of the Sabang River, was unable to overcome that introduced by the
defendant, especially the said chart. According to section 320 of the
Code of Civil Procedure, such a chart is prima facie evidence of
particulars of general notoriety and interest, such as the existence of
shoals of varying depths in the bar and mouth of the Sabang River
and which obstruct the entrance into the same; the distance, length,
and number of the said shoals, with other details apparently well
known to the patron of the lorcha Pilar, to judge from his testimony.
The patron of the lorcha Pilar is charged with gross negligence for
not having endeavored to remove his craft to a safe place in the
Sabang River, about half a mile from where it was anchored.
Vessels of considerable draft, larger than the said lorcha, might have
entered the Sabang River some seven or nine years before, according
to the testimony of the Chinaman, Antonio B. Yap Cunco, though he
did not state whether they did so at high tide; but, since 1901, or
previous years, until 1908, changes may have taken place in the bed
of the river, its mouth and its bar. More shoals may have formed or
those in existence may have increased in extent by the constant action
of the sea. This is the reason why the patron, Gadvilao, who was
acquainted with the conditions of the port and cove of Gubat,
positively declared that the lorcha Pilar could not, on account of her
draft, enter the Sabang River, on account of low water.
In order to find out whether there was or was not such negligence on
the part of the patron, it becomes necessary to determine, first,
whether the lorcha, on the morning of December 5, could be moved
by its own power and without being towed by any steamboat, since it
had no steam engine of its own; second, whether the lorcha, on
account of its draft and the shallowness of the mouth of the said river,
could have entered the latter before the storm broke.
The patron, Mariano Gadvilao, stated under oath that the weather
during the night of December 4 was not threatening and he did not
believe there would be a storm; that he knew the Sabang River; and
that the lorcha Pilar, when loaded, could not enter as there was not
sufficient water in its channel; that, according to an official chart of
the port of Gubat, the bar of the Sabang River was covered by only a
foot and a half of water at ordinary low tide and the lorcha Pilar,
when loaded, drew 6 feet and a half; that aside from the fact that the
condition of the sea would not have permitted the lorcha to take
shelter in the said river, even could it have relied upon the assistance
of a towboat, at half past 8 o'clock in the morning the tide was still
low; there was but little water in the river and still less over the bar.
The patron of the lorcha, after stating (p.58) that at Gubat or in its
vicinity there is no port that affords shelter, affirmed that it was
impossible to hoist the sails or weigh the anchors on the morning of
the 5th of December, owing to the force of the wind and because the
boat would immediately have been dragged or driven upon the
shoals; that furthermore the lorcha was anchored in a channel some
300 brazas wide, but, notwithstanding this width, the Pilar was, for
want of motive power, unable to move without being exposed to be
dashed against the coast by the strong wind and the heavy sea then
prevailing. The testimony of this witness was neither impugned nor
offset by any evidence whatever; he was a patron of long years of
service and of much practice in seafaring, especially in the port of
Gubat and its vicinity, who had commanded or been intrusted with
the command of other crafts similar to the lorcha Pilar and his
testimony was absolutely uncontradicted.
It was proven by the said official chart of the port of Gubat, that the
depth of water over the bar or entrance of the Sabang River is only
one foot and a half at ordinary low tide; that the rise and fall of the
tide is about 4__ feet, the highest tide being at 2 o'clock in the
afternoon of every day; and at that hour, on the 5th of December, the
31
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The patron Gadvilao, being cognizant of the duties imposed upon
him by rules 14 and 15 of article 612, and others, of the Code of
Commerce, remained with sailors, during the time the hurricane was
raging, on board the lorcha from the morning of December 5 until
early the following morning, the 6th, without abandoning the boat,
notwithstanding the imminent peril to which he was exposed, and
kept to his post until after the wreck and the lorcha had been dashed
against the rocks. Then he solicited help from the captain of the
steamer Ton Yek, and, thanks to the relief afforded by a small boat
sent by the latter officer, Gadvilao with his crew succeeded in
reaching land and immediately reported the occurrence to the
representative of Inchausti & Co. and to the public official from
whom he obtained the document of protest, Exhibit 1. By such
procedure, he showed that, as a patron skilled in the exercise of his
vocation, he performed the duties imposed by law in cases of
shipwreck brought about by force majeure.
Co., was what it regularly and usually did in the transportation by sea
from Manila to Catarman of all classes of merchandise. No attempt
has been made to prove that any course other than the foregoing was
pursued by that firm on this occasion; therefore the defendant party is
not liable for the damage occasioned as a result of the wreck or
stranding of the lorcha Pilar because of the hurricane that overtook
this craft while it was anchored in the port of Gubat, on December 5,
1908, ready to be conveyed to that of Catarman.
Treating of shipwrecks, article 840 of the Code of Commerce

prescribes:
According to the aforecited article 361 of the Code of Commerce,

merchandise shall be transported at the risk and venture of the
shipper, unless the contrary be expressly stipulated. No such
stipulation appears of record, therefore, all damages and impairment
suffered by the goods in transportation, by reason of accident, force
majeure, or by virtue of the nature or defect of the articles, are for the
account and risk of the shipper.
It is a fact not disputed, and admitted by the plaintiff, that the lorcha
Pilar was stranded and wrecked on the coast of Gubat during the
night of the 5th or early in the morning of the 6th of December, 1908,
as a result of a violent storm that came from the Pacific Ocean, and,
consequently, it is a proven fact that the loss or damage of the goods
shipped on the said lorcha was due to the force majeure which caused
the wreck of the said craft.
The losses and damages suffered by a vessel and her cargo by reason
of shipwreck or standing shall be individually for the account of the
owners, the part of the wreck which may be saved belonging to them
in the same proportion.
And Article 841 of the same code reads:
A final clause of this same article adds that the burden of proof of
these accidents is upon the carrier; the trial record fully discloses that
the loss and damage of the goods shipped by the Chinaman, Ong
Bieng Sip, was due to the stranding and wreck of the lorcha Pilar in
the heavy storm or hurricane aforementioned; this the plaintiff did not
deny, and admitted that it took place between the afternoon of the 5th
and early in the morning of the 6th of December, 1908, so it is
evident that the defendant is exempt from the obligation imposed by
the law to prove the occurrence of the said storm, hurricane, or
cyclone in the port of Gubat, and, therefore, if said goods were lost or
damaged and could not be delivered in Catarman, it was due to a
fortuitous event and a superior, irresistible natural force, or force
majeure, which completely disabled the lorcha intended for their
transportation to the said port of the Island of Samar.
If the wreck or stranding should arise through the malice, negligence,

or lack of skill of the captain, or because the vessel put to sea
insufficiently repaired and supplied, the owner or the freighters may
demand indemnity of the captain for the damages caused to the vessel
or cargo by the accident, in accordance with the provisions contained
in articles 610, 612, 614, and 621.
The general rule established in the first of the foregoing articles is
that the loss of the vessel and of its cargo, as the result of shipwreck,
shall fall upon the respective owners thereof, save for the exceptions
specified in the second of the said articles.
These legal provisions are in harmony with those of articles 361 and
362 of the Code of Commerce, and are applicable whenever it is
proved that the loss of, or damage to, the goods was the result of a
fortuitous event or of force majeure; but the carrier shall be liable for
the loss or the damage arising from the causes aforementioned, if it
shall have been proven that they occurred through his own fault or
negligence or by his failure to take the same precautions usually
adopted by diligent and careful persons.
The record bears no proof that the said loss or damage caused by the
stranding or wreck of the lorcha Pilar as a result of the storm
mentioned, occurred through carelessness or negligence on the part of
the defendant company, its agents or the patron of the said lorcha, or
because they did not take the precautions usually adopted by careful
and diligent persons, as required by article 362 of the Code of
Commerce; the defendant company, as well as its agents and the
patron of the lorcha, had a natural interest in preserving the craft and
its own goods laden therein an interest equal to that of the Chinese
shipper in preserving his own which were on board the ship lorcha
and, in fact, the defendant, his agents and the patron did take the
measures which they deemed necessary and proper in order to save
the lorcha and its cargo from the impending danger; accordingly, the
patron, as soon as he was informed that a storm was approaching,
proceeded to clear the boat of all gear which might offer resistance to
the wind, dropped the four anchors he had, and even procured an
extra anchor from the land, together with a new cable, and cast it into
the water, thereby adding, in so far as possible, to the stability and
security of the craft, in anticipation of what might occur, as presaged
by the violence of the wind and the heavy sea; and Inchausti &
Company's agent furnished the articles requested by the patron of the
lorcha for the purpose of preventing the loss of the boat; thus did they
all display all the diligence and care such as might have been
In the contract made and entered into by and between the owner of
the goods and the defendant, no term was fixed within which the said
merchandise should be delivered to the former at Catarman, nor was
it proved that there was any delay in loading the goods and
transporting them to their destination. From the 28th of November,
when the steamer Sorsogon arrived at Gubat and landed the said
goods belonging to Ong Bieng Sip to await the lorcha Pilar which
was to convey them to Catarman, as agreed upon, no vessel carrying
merchandise made the voyage from Gubat to the said pueblo of the
Island of Samar, and with Ong Bieng Sip's merchandise there were
also to be shipped goods belonging to the defendant company, which
goods were actually taken on board the said lorcha and suffered the
same damage as those belonging to the Chinaman. So that there was
no negligence, abandonment, or delay in the shipment of Ong Bieng
Sip's merchandise, and all that was done by the carrier, Inchausti &
32
Choco Notes
employed by anyone in similar circumstances, especially the patron
who was responsible for the lorcha under his charge; nor is it possible
to believe that the latter failed to adopt all the measures that were
necessary to save his own life and those of the crew and to free
himself from the imminent peril of shipwreck.
Carson and Trent, JJ., dissent.
Martini v. Macondray
[G.R. No. 13972. July 28, 1919.]
G. MARTINI, LTD., Plaintiff-Appellee, vs. MACONDRAY & CO.
(INC.), Defendant-Appellant.
In view of the fact that the lorcha Pilar had no means of changing its
anchorage, even supposing that there was a better one, and was
unable to accept help from any steamer that might have towed it to
another point, as wherever it might have anchored, it would
continually have been exposed to the lashing of the waves and to the
fury of the hurricane, for the port of Gubat is a cove or open
roadstead with no shelter whatever from the winds that sweep over it
from the Pacific Ocean, and in view of the circumstances that it was
impossible for the said lorcha, loaded as it then was, to have entered
the Sabang River, even though there had been a steamer to tow it, not
only because of an insufficient depth of water in its channel, but also
on account of the very high bar at the entrance of the said river, it is
incontrovertible that the stranding and wreck of the lorcha Pilar was
due to a fortuitous event or to force majeure and not to the fault and
negligence of the defendant company and its agents or of the patron,
Mariano Gadvilao, inasmuch as the record discloses it to have been
duly proved that the latter, in difficult situation in which
unfortunately the boat under his charge was placed, took all the
precautions that any diligent man should have taken whose duty it
was to save the boat and its cargo, and, by the instinct of selfpreservation, his own life and those of the crew of the lorcha;
therefore, considering the conduct of the patron of the lorcha and that
of the defendant's agent in Gubat, during the time of the occurrence
of the disaster, the defendant company has not incurred any liability
whatever for the loss of the goods, the value of which is demanded by
the plaintiff; it must, besides, be taken into account that the defendant
itself also lost goods of its own and the lorcha too.
DECISION
STREET, J.:
In September of the year 1916, the Plaintiff G. Martini, Ltd., arranged
with the Defendant company, as agents of the Eastern and Australian
Steamship Company, for the shipment of two hundred and nineteen
cases or packages of chemical products from Manila, Philippine
Islands, to Kobe, Japan. The goods were embarked at Manila on the
steamship Eastern, and were carried to Kobe on the deck of that ship.
Upon arrival at the port of destination it was found that the chemicals
comprised in the shipment had suffered damage from the effects of
both fresh and salt water; and the present action was instituted by the
Plaintiff to recover the amount of the damage thereby occasioned. In
the Court of First Instance judgment was rendered in favor of the
Plaintiffs for the sum of P34,997.56, with interest from March 24,
1917, and costs of the proceeding. From this judgment the Defendant
appealed.
That the damage was caused by water, either falling in the form of
rain or splashing aboard by the action of wind and waves, is
unquestionable; and the contention of the Plaintiff is that it was the
duty of the ships company to stow this cargo in the hold and not to
place it in an exposed position on the open deck. The defense is that
by the contract of affreightment the cargo in question was to be
carried on deck at the shippers risk; and attention is directed to the
fact that on the face of each bill of lading is clearly stamped with a
rubber stencil in conspicuous letters the words on deck at shippers
risk. In this connection the Defendant relies upon paragraph 19 of
the several bills of lading issued for transportation of this cargo,
which reads as follows:
From the moment that it is held that the loss of the said lorcha was
due to force majeure, a fortuitous event, with no conclusive proof or
negligence or of the failure to take the precautions such as diligent
and careful persons usually adopt to avoid the loss of the boat and its
cargo, it is neither just nor proper to attribute the loss or damage of
the goods in question to any fault, carelessness, or negligence on the
part of the defendant company and its agents and, especially, the
patron of the lorcha Pilar.
19.
Goods signed for on this bill of lading as carried on deck are
entirely at shippers risk, whether carried on deck or under hatches,
and the steamer is not liable for any loss or damage from any cause
whatever.
Moreover, it is to be noted that, subsequent to the wreck, the

defendant company's agent took all the requisite measures for the
salvage of such of the goods as could be recovered after the accident,
which he did with the knowledge of the shipper, Ong Bieng Sip, and,
in effecting their sale, he endeavored to secure all possible advantage
to the Chinese shipper; in all these proceedings, as shown by the
record, he acted in obedience to the law.
The Plaintiff insists that the agreement was that the cargo in question
should be carried in the ordinary manner, that is, in the ships hold,
and that the Plaintiff never gave its consent for the goods to be
carried on deck. The material facts bearing on this controverted point
appear to be these: On September 15, 1916, the Plaintiff applied to
the Defendant for necessary space on the steamship Eastern, and
received a shipping order, which constituted authority for the ships
officers to receive the cargo aboard. One part of this document
contained a form which, when signed by the mate, would constitute
the mates receipt, showing that the cargo had been taken on.
From all the foregoing it is concluded that the defendant is not liable
for the loss and damage of the goods shipped on the lorcha Pilar by
the Chinaman, Ong Bieng Sip, inasmuch as such loss and damage
were the result of a fortuitous event or force majeure, and there was
no negligence or lack of care and diligence on the part of the
defendant company or its agents.
Therefore, we hold it proper to reverse the judgment appealed from,
and to absolve, as we hereby do, the defendant, Inchausti & Co.,
without special findings as to costs.
Ordinarily the shipper is supposed to produce the mates receipt to

the agents of the ships company, who thereupon issue the bill of
lading to the shipper. When, however, the shipper, as not infrequently
happens, desires to procure the bill of lading before he obtains the
mates receipt, it is customary for him to enter into a written
Arellano, C.J., Mapa and Johnson, JJ., concur.
33
Choco Notes
obligation, binding himself, among other things, to abide by the terms
of the mates receipt. In the present instance the mates receipt did not
come to the Plaintiffs hand until Monday night, but as the Plaintiff
was desirous of obtaining the bills of lading on the Saturday morning
preceding in order that he might negotiate them at the bank, a request
was made for the delivery of the bills of lading on that day To
effectuate this, the Plaintiff was required to enter into the written
obligation, calling itself a letter of guarantee, which was introduced
in evidence as Exhibit D-C. This document is of the date of
September 16, 1916, and of the following tenor:
G. MARTINI, LTD.
By S. CODINA.
This letter was followed by another of the same date and of
substantially the same tenor but containing the following additional
statement:
It is the prevailing practice that, whenever a cargo is being carried
on deck, shipowners or agents give advice of it to shippers previous
to shipment taking place, and obtain their consent to it. If we had
been advised of it, shipment would not have been effected by us. We
regret very much this occurrence, but you will understand that in
view of your having acted in this case on your own responsibility, we
shall have to hold you amenable for any consequences that may be
caused from your action.
In consideration of your signing us clean B/L for the

undermentioned cargo per above steamer to be shipped on or under
deck at ships option, for Kobe without production of the mates
receipt, we hereby guarantee to hold you free from any responsibility
by your doing so, and for any expense should the whole or part of the
cargo be shut out, or otherwise, and to hand you said mates receipt as
soon as it reaches us and to abide by all clauses and notations on the
same.
The first of these letters was forthwith dispatched by messenger, and

upon receiving it, Macondray & Company called Codina by
telephone at about 4.30 p.m. and, referring to the communication just
received, told him that Macondray & Company could not accept the
cargo for transportation otherwise than on deck and that if Martini &
Company were dissatisfied, the cargo could be discharged from the
ship.
In conformity with the purpose of this document the bills of lading

were issued, and the negotiable copies were, upon the same day,
negotiated at the bank by the Plaintiff for 90 per cent of the invoice
value of the goods. As already stated these bills of lading contained
on their face, conspicuously stenciled, the words on deck at
shippers risks. The mates receipt, received by the Plaintiff two
days later also bore the notation on deck at shippers risk, written
with pencil, and evidently by the officer who took the cargo on board
and signed the receipt.
There is substantial conformity in the testimony of the two parties

with respect to the time of the conversation by telephone and the
nature of the message which Macondray & Company intended to
convey, though the witnesses differ as to some details and in respect
to what occurred immediately thereafter. Basa, who was in charge of
the shipping department of Macondray & Company and who
conducted the conversation on the part of the latter, says that he told
Codina that if Martini & Company was unwilling for the cargo to be
carried on deck that they could discharge it and further advised him
that Macondray & Companys empty boats were still at the ships
side ready to receive the cargo. In reply Codina stated that Martini,
the manager, was then out and that he would answer in a few
minutes, after communication with Martini. Within the course of half
an hour Codina called Basa up and said that as the cargo was already
stowed on deck, Martini & Company were willing for it to be carried
in this way, and that their protest was a mere formality. Codina
admits that he was informed by Basa that the cargo could not be
carried under the hatches, and that if Martini & Company were
dissatisfied to have it carried on deck, they could discharge it. He
denies being told that it could be taken off in Macondray &
Companys boats. Codina further states that when the conversation
was broken off for the purpose of enabling him to communicate with
Martini, he consulted with the latter, and was directed to say that
Martini & Company did not consent for the cargo to be carried on
deck and that it must be discharged. Upon returning to the telephone,
he found that the connection had been broken, and he says that he
was thereafter unable to get Macondray & Company by telephone
during that afternoon, although he attempted to do so more than once.
The Plaintiff insists that it had at no time agreed for the cargo to be
carried on deck; and G. Martini, manager of Martini & Company,
says that the first intimation he had of this was when, at about 4 p.m.
on that Saturday afternoon, he examined the nonnegotiable copies of
the bills of lading, which had been retained by the house, and
discovered the words on deck at shippers risk stamped thereon.
Martini says that upon seeing this, he at once called the attention of
S. Codina thereto, the latter being an employee of the house whose
duty it was to attend to all shipments of merchandise and who in fact
had entire control of all matters relating to the shipping of this cargo.
Codina pretends that up to the time when Martini directed his
attention to the fact, he himself was unaware that the cargo was being
stowed on deck; and upon the discovery of this fact the two
gentlemen mentioned expressed mutual surprise and dissatisfaction.
Martini says that he told Codina to protest at once to Macondray &
Company over the telephone, while Martini himself proceeded to
endite a letter, which appears in evidence as Exhibit D-T of the
Defendant and is in its material part as follows:
MANILA, September 16, 1916.
MESSRS. MACONDRAY & Co.,
Manila,
DEAR SIRS: In re our shipment per steamship Eastern, we are very
much surprised to see that the remark on deck at shippers risk has
been stamped on the bills of lading Nos. 8 to 23. . . . and although not
believing that the same have actually been shipped on deck we must
hold you responsible for any consequence, loss, or damage deriving
from your action should they have been shipped as stated.
In the light of all the evidence the conclusion seems clear enough
that, although Martini & Company would have greatly preferred for
the cargo to be carried under the hatches, they nevertheless consented
for it to go on deck. Codina, if attentive to the interests of his house,
must have known from the tenor of the guaranty to which his
signature is affixed that the Defendant had reserved the right to carry
it on deck, and when the bills of lading were delivered to the Plaintiff
they plainly showed that the cargo would be so carried.
Yours faithfully,
34
Choco Notes
signing a document different from that which he supposed himself to
be signing is wholly unsustained.
It must therefore be considered that the Plaintiff was duly affected

with notice as to the manner in which the cargo was shipped. No
complaint, however, was made until after the bills of lading had been
negotiated at the bank. When the manager of Martini & Company
first had his attention drawn to the fact that the cargo was being
carried on deck, he called Codina to account, and the latter found it to
his interest to feign surprise and pretend that he had been deceived by
Macondray & Company. Even then there was time to stop the
shipment, but Martini & Company failed to give the necessary
instructions, thereby manifesting acquiescence in the accomplished
fact.
The result of the discussion is that Martini & Company must be held
to have assented to the shipment of the cargo on deck and that they
are bound by the bills of lading in the form in which they were
issued. The trial court in our opinion erred in holding otherwise, and
in particular by ignoring, or failing to give sufficient weight to the
contract of guaranty.
Having determined that the Plaintiff consented to the shipment of the
cargo on deck, we proceed to consider whether the Defendant can be
held liable for the damage which befell the cargo in question. It of
course goes without saying that if a clean bill of lading had been
issued and the Plaintiff had not consented for the cargo to go on deck,
the ships company would have been liable for all damage which
resulted from the carriage on deck. In the case of The Paragon (1
Ware, 326; 18 Fed. Cas. No. 10708), decided in 1836 in one of the
district courts of the United States, it appeared that cargo was shipped
from Boston, Massachusetts, to Portland, Maine, upon what is called
a clean bill of lading, that is, one in the common form without any
memorandum in the margin or on its face showing that the goods are
to be carried on deck. It was proved that the shipper had not given his
consent for carriage on deck. Nevertheless, the master stowed the
goods on deck; and a storm having arisen, it became necessary to
jettison them. None of the cargo in the hold was lost. It was thus
evident that although the cargo in question was lost by peril of the
sea, it would not have been lost except for the fact that it was being
carried on deck. It was held that the ship was liable. In the course of
the opinion the following language was used:
In a later letter of October 25, 1916, addressed to Macondray &

Company, Martini, referring to the incident says: If previous to the
mailing of the documents, you had actually notified us by phone or
otherwise that you could not accept our cargo in any other way but on
deck, we should have promptly given you instructions to leave it on
the lighters and at our disposal.
From this it is inferable that one reason why the Plaintiff allowed the
cargo to be carried away without being discharged, was that the bills
had been discounted and to stop the shipment would have entailed the
necessity of refunding the money which the bank had advanced, with
the inconveniences incident thereto. Another reason apparently was
that Martini discerned, or thought he discerned the possibility of
shifting the risk so as to make it fall upon the ships company.
With reference to the practicability of discharging the cargo in the
late afternoon or evening of Saturday, September 16, before the ship
departed, as it did at 8 p.m. some evidence was introduced tending to
show that in order to get the cargo off certain formalities were
necessary which could not be accomplished, as for instance, the
return of the mates receipt (which had not yet come to the Plaintiffs
hands), the securing of a permit from the customs authorities, and the
securing of an order of discharge from the steamship company. In
view of the fact that the Plaintiff did nothing whatever looking
towards the discharge of the cargo, not even so much as to notify
Macondray & Company that the cargo must come off, the proof
relative to the practicability of discharge is inconclusive. If the
Plaintiff had promptly informed Macondray & Company of their
resolve to have the cargo discharged, and the latter had nevertheless
permitted the ship to sail without discharging it, there would have
been some ground for Plaintiffs contention that its consent had not
been given for the goods to be carried on deck. Needless to say we
attach no weight to the statement of Codina that he was unable to get
Macondray & Company by telephone in order to communicate
directions for the discharge of the cargo.
It is contended that the goods, in this case, having been lost by the
dangers of the seas, both the master and the vessel are exempted from
responsibility within the common exemption in bills of lading; and
the goods having been thrown overboard from necessity, and for the
safety of the vessel and cargo, as well as the lives of the crew, that it
presents a case for a general average or contribution, upon the
common principle that when a sacrifice is made for the benefit of all,
that the loss shall be shared by all. . . . In every contract of
affreightment, losses by the dangers of the seas are excepted from the
risks which the master takes upon himself, whether the exception is
expressed in the contract or not. The exception is made by the law,
and falls within the general principle that no one is responsible for
fortuitous events and accidents of major force. Casus fortuitous nemo
praestat. But then the general law is subject to an exception, that
when the inevitable accident is preceded by a fault of the debtor or
person bound without which it would not have happened, then he
becomes responsible for it. (Pothier, des Obligations, No. 542; Pret. a
Usage, No. 57; Story, Bailm., c. 4, No. 241; In Majorious casibus si
culpa ejus interveniat tenetur; Dig. 44, 7, 1, s. 4.)
The evidence submitted in behalf of the Defendant shows that there

was no space in the hold to take the cargo; and it was therefore
unnecessary to consider whether the chemicals to be shipped were of
an explosive or inflammable character, such as to require stowage on
deck. By reason of the fact that the cargo had to be carried on deck at
all events, if carried at all, the guaranty Exhibit D-C was so drawn as
to permit stowage either on or under deck at the ships option; and the
attention of Codina must have been drawn to this provision because
Macondray & Company refused to issue the bills of lading upon a
guaranty signed by Codina upon another form (Exhibit R), which
contained no such provision. The messenger between the two
establishments who was sent for the bills of lading accordingly had to
make a second trip and go back for a letter of guaranty signed upon
the desired form. The pretense of Codina that he was deceived into
The master is responsible for the safe and proper stowage of the
cargo, and there is no doubt that by the general maritime law he is
bound to secure the cargo safely under deck. . . . If the master carries
goods on deck without the consent of the shipper . . . he does it at his
own risk. If they are damaged or lost in consequence of their being
thus exposed, he cannot protect himself from responsibility by
showing that they were damaged or lost by the dangers of the
seas. . . . When the shipper consents to his goods being carried on
deck, he takes the risk upon himself of these peculiar perils. . . . This
is the doctrine of all the authorities, ancient and modern.
35
Choco Notes
Van Horn vs. Taylor (2 La. Ann., 587; 46 Am. Dec., 558), was a case
where goods stowed on deck were lost in a collision. The court found
that the ship carrying these goods was not at fault, and that the
shipper had notice of the fact that the cargo was being carried on
deck. It was held that the ship was not liable. Said the court:
that case (Jettison of deck load) responsible to the owner, unless the
goods were stowed on deck without the consent of the owner, or a
general custom binding him, and then he would be chargeable with
the loss.
In Gould vs. Oliver (4 Bing., N. C., 132), decided in the English
Court of Common Pleas in 1837, Tindal, C.J., said:
It is said that the Plaintiffs goods were improperly stowed on deck;

that the deck load only was thrown overboard by the collision, the
cargo in the hold not being injured. The goods were thus laden with
the knowledge and implied approbation of the Plaintiff. He was a
passenger on board the steamer, and does not appear to have made
any objection to the goods being thus carried, though the collision
occurred several days after the steamer commenced her voyage.
Where the loading on deck has taken place with the consent of the
merchant, it is obvious that no remedy against the shipowner or
master for a wrongful loading of the goods on deck can exist. The
foreign authorities are indeed express; on that point. And the general
rule of the English law, that no one can maintain an action for a
wrong, where he has consented or contributed to the act which
occasioned his loss, leads to the same conclusion.
In the case of The Thomas P. Thorn (8 Ben., 3; 23 Fed., Cas. No.

13927), decided in the District Court in the State of New York, it
appeared that tobacco was received upon a canal boat, with the
understanding that it was to be carried on deck, covered with
tarpaulins. Upon arrival at its destination it was found damaged by
water, for the most part on the top, and evidently as a consequence of
rains. At the same time a quantity of malt stowed below deck on the
same voyage was uninjured. In discussing the question whether upon
a contract to carry on deck, the vessel was liable for the wetting of
the tobacco, the court said:
The foregoing authorities fully sustain the proposition that where the
shipper consents to have his goods carried on deck he takes the risks
of any damage or loss sustained as a consequence of their being so
carried. In the present case it is indisputable that the goods were
injured during the voyage and solely as a consequence of their being
on deck, instead of in the ships hold. The loss must therefore fall on
the owner. And this would be true, under the authorities, even though
paragraph 19 of the bills of lading, quoted near the beginning of this
opinion, had not been made a term of the contract.
It is manifest that the injury to the tobacco arose simply from the
fact that it was carried on deck. The malt, carried below, although an
article easily injured, received no damage, and the voyage was
performed with usual care, and without disaster. Indeed, there is
evidence of a statement by the libelant, that tobacco must of necessity
be injured by being carried on deck. But, under a contract to carry
upon deck, the risk of any damage resulting from the place of
carriage rests upon the shipper, and, without proof of negligence
causing the damage, there can be no recovery. Here the evidence
shows that all reasonable care was taken of the tobacco during its
transportation; that the manner of stowing and covering it was known
to and assented to by the shipper; and the inference is warranted that
the injury arose, without fault of the carrier, from rain, to which
merchandise transported on deck must necessarily be in some degree
exposed. Any loss arising from damaged thus occasioned is to be
borne by the shipper.
It is undoubtedly true that, upon general principle, and momentarily

ignoring paragraph 19 of these bills of lading, the ships owner might
be held liable for any damage directly resulting from a negligent
failure to exercise the care properly incident to the carriage of the
merchandise on deck. For instance, if it had been improperly placed
or secured, and had been swept overboard as a proximate result of
such lack of care, the ship would be liable, to the same extent as if the
cargo had been deliberately thrown over without justification. So, if it
had been shown that, notwithstanding the stowage of these goods on
deck, the damage could have been prevented, by the exercise of
proper skill and diligence in the discharge of the duties incumbent on
the ship, the owner might still be held.
To put the point concretely, let it be supposed that a custom had been
proved among mariners to protect deck cargo from the elements by
putting a tarpaulin over it; or approaching still more to imaginable
conditions in the present case, let it be supposed that the persons
charged with the duty of transporting this cargo, being cognizant of
the probability of damage by water, had negligently and without good
reason failed to exercise reasonable care to protect it by covering it
with tarpaulins. In such case it could hardly be denied that the ships
company should be held liable for such damage as might have been
avoided by the use of such precaution.
Lawrence vs. Minturn (17 How [U.S,], 100; 15 L ed., 58), was a case
where goods stowed on deck with the consent of the shipper were
jettisoned during a storm at sea. In discussing whether this cargo was
entitled to general average, the Supreme Court of the United States
said:
The maritime codes and writers have recognized the distinction
between cargo placed on deck, with the consent of the shipper, and
cargo under deck.
But it should be borne in mind in this connection that it is incumbent

on the Plaintiff, if his cause of action is founded on negligence of this
character, to allege and prove that the damage suffered was due to
failure of the persons in charge of the cargo to use the diligence
properly incident to carriage under these conditions.
There is not one of them which gives a recourse against the master,
the vessel, or the owners, if the property lost had been placed on deck
with the consent of its owner, and they afford very high evidence of
the general and appropriate usages, in this particular, of merchants
and shipowners.
In Clark vs. Barnwell (12 How. [U.S.], 272; 13 L. ed., 985), the
Supreme Court distinguishes with great precision between the
situation where the burden of proof is upon the shipowner to prove
that the loss resulted from an excepted peril and that where the
burden of proof is upon the owner of the cargo to prove that the loss
was caused by negligence on the part of the persons employed in the
So the courts of this country and England, and the writers on this
subject, have treated the owner of goods on deck, with his consent, as
not having a claim on the master or owner of the ship in case of
jettison. The received law, on the point, is expressed by Chancellor
Kent, with his usual precision, in 3 Com., 240: Nor is the carrier in
36
Choco Notes
conveyance of the goods. The first two syllabi in Clark vs. Barnwell
read as follows:
EASTERN SHIPPING LINES, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents.
Where goods are shipped and the usual bill of lading given,
promising to deliver them in good order, the dangers of the seas
excepted, and they are found to be damaged the onus probandi is
upon the owners of the vessel, to show that the injury was occasioned
by one of the excepted causes.
No. 71478
May 29, 1987

vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and
DOWA FIRE & MARINE INSURANCE CO., LTD., respondents.
But, although the injury may have been occasioned by one of the
excepted causes, yet still the owners of the vessel are responsible if
the injury might have been avoided, by the exercise of reasonable
skill and attention on the part of the persons employed in the
conveyance of the goods. But the onus probandi then becomes shifted
upon the shipper, to show the negligence.
MELENCIO-HERRERA, J.:
The case just referred to was one where cotton thread, put up in
boxes, had deteriorated during a lengthy voyage in a warm climate,
owing to dampness and humidity. In discussing the question of the
responsibility of the ships owner, the court said:
These two cases, both for the recovery of the value of cargo
insurance, arose from the same incident, the sinking of the M/S
ASIATICA when it caught fire, resulting in the total loss of ship and
cargo.
Notwithstanding, therefore, the proof was clear that the damage was
occasioned by the effect of the humidity and dampness of the vessel,
which is one of the dangers of navigation, it was competent for the
libelants to show that the Respondents might have prevented it by
proper skill and diligence in the discharge of their duties; but no such
evidence is found in the record. For caught that appears every
precaution was taken that is usual or customary, or known to
shipmasters, to avoid the damage in question. And hence we are
obliged to conclude that it is to be attributed exclusively to the
dampness of the atmosphere of the vessel, without negligence or fault
on the part of the master or owners.
The basic facts are not in controversy:

In G.R. No. 69044, sometime in or prior to June, 1977, the M/S
ASIATICA, a vessel operated by petitioner Eastern Shipping Lines,
Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe,
Japan for transportation to Manila, 5,000 pieces of calorized lance
pipes in 28 packages valued at P256,039.00 consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare parts valued at
P92,361.75, consigned to Central Textile Mills, Inc. Both sets of
goods were insured against marine risk for their stated value with
respondent Development Insurance and Surety Corporation.
Exactly the same words might be used as applicable to the facts of

the present case; and as it is apparent that the damage here was
caused by rain and sea water the risk of which is inherently
incident to carriage on deck the Defendant cannot be held liable. It
is not permissible for the court, in the absence of any allegation or
proof of negligence, to attribute negligence to the ships employees in
the matter of protecting the goods from rains and storms. The
complaint on the contrary clearly indicates that the damage done was
due to the mere fact of carriage on deck, no other fault or delinquency
on the part of anybody being alleged.
In G.R. No. 71478, during the same period, the same vessel took on
board 128 cartons of garment fabrics and accessories, in two (2)
containers, consigned to Mariveles Apparel Corporation, and two
cases of surveying instruments consigned to Aman Enterprises and
General Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co., for US
$46,583.00, and the 2 cases by respondent Dowa Fire & Marine
Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank,
resulting in the total loss of ship and cargo. The respective respondent
Insurers paid the corresponding marine insurance values to the
consignees concerned and were thus subrogated unto the rights of the
latter as the insured.
It will be observed that by the terms of paragraph 19 of the bills of

lading, the ship is not to be held liable, in the case of goods signed for
as carried on deck, for any loss or damage from any cause whatever.
We are not to be understood as holding that this provision would have
protected the ship from liability for the consequences of negligent
acts, if negligence had been alleged and proved. From the discussion
in Manila Railroad Co. vs. Compania Transatlantica and Atlantic,
Gulf & Pacific Co. (38 Phil. Rep., 875), it may be collected that the
carrier would be held liable in such case, notwithstanding the
exemption contained in paragraph 19. But however that may be
damages certainly cannot be recovered on the ground of negligence,
even from a carrier, where negligence is neither alleged nor proved.
G.R. NO. 69044

On May 11, 1978, respondent Development Insurance & Surety
Corporation (Development Insurance, for short), having been
subrogated unto the rights of the two insured companies, filed suit
against petitioner Carrier for the recovery of the amounts it had paid
to the insured before the then Court of First instance of Manila,
Branch XXX (Civil Case No. 6087).
The judgment appealed from is reversed and the Defendant is

absolved from the complaint. No express pronouncement will be
made as to the costs of either instance. SO ORDERED.
Petitioner-Carrier denied liability mainly on the ground that the loss

was due to an extraordinary fortuitous event, hence, it is not liable
under the law.
Eastern v. IAC
G.R. No. L-69044 May 29, 1987
37
Choco Notes
On August 31, 1979, the Trial Court rendered judgment in favor of
Development Insurance in the amounts of P256,039.00 and
P92,361.75, respectively, with legal interest, plus P35,000.00 as
attorney's fees and costs. Petitioner Carrier took an appeal to the then
Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier should be held bound to said admission. As a

general rule, the facts alleged in a party's pleading are deemed
admissions of that party and binding upon it. 2 And an admission in
one pleading in one action may be received in evidence against the
pleader or his successor-in-interest on the trial of another action to
which he is a party, in favor of a party to the latter action. 3
Petitioner Carrier is now before us on a Petition for Review on

Certiorari.
The threshold issues in both cases are: (1) which law should govern
the Civil Code provisions on Common carriers or the Carriage of
Goods by Sea Act? and (2) who has the burden of proof to show
negligence of the carrier?
G.R. NO. 71478

On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co.
NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd.
(DOWA, for brevity), as subrogees of the insured, filed suit against
Petitioner Carrier for the recovery of the insured value of the cargo
lost with the then Court of First Instance of Manila, Branch 11 (Civil
Case No. 116151), imputing unseaworthiness of the ship and nonobservance of extraordinary diligence by petitioner Carrier.
On the Law Applicable

The law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss,
destruction or deterioration. 4 As the cargoes in question were
transported from Japan to the Philippines, the liability of Petitioner
Carrier is governed primarily by the Civil Code. 5 However, in all
matters not regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of Commerce and by
special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law,
is suppletory to the provisions of the Civil Code. 7
Petitioner Carrier denied liability on the principal grounds that the

fire which caused the sinking of the ship is an exempting
circumstance under Section 4(2) (b) of the Carriage of Goods by Sea
Act (COGSA); and that when the loss of fire is established, the
burden of proving negligence of the vessel is shifted to the cargo
shipper.
On the Burden of Proof
On September 15, 1980, the Trial Court rendered judgment in favor

of NISSHIN and DOWA in the amounts of US $46,583.00 and US
$11,385.00, respectively, with legal interest, plus attorney's fees of
P5,000.00 and costs. On appeal by petitioner, the then Court of
Appeals on September 10, 1984, affirmed with modification the Trial
Court's judgment by decreasing the amount recoverable by DOWA to
US $1,000.00 because of $500 per package limitation of liability
under the COGSA.
Under the Civil Code, common carriers, from the nature of their
extraordinary diligence in the vigilance over goods, according to all
the circumstances of each case. 8 Common carriers are responsible
for the loss, destruction, or deterioration of the goods unless the same
is due to any of the following causes only:
(1)
Flood, storm, earthquake, lightning or other natural disaster
or calamity;
Hence, this Petition for Review on certiorari by Petitioner Carrier.

xxx
Both Petitions were initially denied for lack of merit. G.R. No. 69044
on January 16, 1985 by the First Division, and G. R. No. 71478 on
September 25, 1985 by the Second Division. Upon Petitioner
Carrier's Motion for Reconsideration, however, G.R. No. 69044 was
given due course on March 25, 1985, and the parties were required to
submit their respective Memoranda, which they have done.
xxx
xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it
from liability under the phrase "natural disaster or calamity. "
However, we are of the opinion that fire may not be considered a
natural disaster or calamity. This must be so as it arises almost
invariably from some act of man or by human means. 10 It does not
fall within the category of an act of God unless caused by lightning
11 or by other natural disaster or calamity. 12 It may even be caused
by the actual fault or privity of the carrier. 13
On the other hand, in G.R. No. 71478, Petitioner Carrier sought

reconsideration of the Resolution denying the Petition for Review
and moved for its consolidation with G.R. No. 69044, the lowernumbered case, which was then pending resolution with the First
Division. The same was granted; the Resolution of the Second
Division of September 25, 1985 was set aside and the Petition was
given due course.
Article 1680 of the Civil Code, which considers fire as an

extraordinary fortuitous event refers to leases of rural lands where a
reduction of the rent is allowed when more than one-half of the fruits
have been lost due to such event, considering that the law adopts a
protection policy towards agriculture. 14
At the outset, we reject Petitioner Carrier's claim that it is not the

operator of the M/S Asiatica but merely a charterer thereof. We note
that in G.R. No. 69044, Petitioner Carrier stated in its Petition:
As the peril of the fire is not comprehended within the exception in

Article 1734, supra, Article 1735 of the Civil Code provides that all
cases than those mention in Article 1734, the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary deligence required by
law.
There are about 22 cases of the "ASIATICA" pending in various

courts where various plaintiffs are represented by various counsel
representing various consignees or insurance companies. The
common defendant in these cases is petitioner herein, being the
operator of said vessel. ... 1
In this case, the respective Insurers. as subrogees of the cargo

shippers, have proven that the transported goods have been lost.
Petitioner Carrier has also proved that the loss was caused by fire.
38
Choco Notes
The burden then is upon Petitioner Carrier to proved that it has
exercised the extraordinary diligence required by law. In this regard,
the Trial Court, concurred in by the Appellate Court, made the
following Finding of fact:
connection therewith. Consequently, the complete defense afforded

by the COGSA when loss results from fire is unavailing to Petitioner
Carrier.
On the US $500 Per Package Limitation:
The cargoes in question were, according to the witnesses defendant

placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto
Pastrana noticed that smoke was coming out from hatch No. 2 and
hatch No. 3; that where the smoke was noticed, the fire was already
big; that the fire must have started twenty-four 24) our the same was
noticed; that carbon dioxide was ordered released and the crew was
ordered to open the hatch covers of No, 2 tor commencement of fire
fighting by sea water: that all of these effort were not enough to
control the fire.
Petitioner Carrier avers that its liability if any, should not exceed US
$500 per package as provided in section 4(5) of the COGSA, which
reads:
(5)
Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package
lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in bill of lading.
This declaration if embodied in the bill of lading shall be prima facie
evidence, but all be conclusive on the carrier.
Pursuant to Article 1733, common carriers are bound to extraordinary

diligence in the vigilance over the goods. The evidence of the
defendant did not show that extraordinary vigilance was observed by
the vessel to prevent the occurrence of fire at hatches numbers 2 and
3. Defendant's evidence did not likewise show he amount of diligence
made by the crew, on orders, in the care of the cargoes. What appears
is that after the cargoes were stored in the hatches, no regular
inspection was made as to their condition during the voyage.
Consequently, the crew could not have even explain what could have
caused the fire. The defendant, in the Court's mind, failed to
satisfactorily show that extraordinary vigilance and care had been
made by the crew to prevent the occurrence of the fire. The
defendant, as a common carrier, is liable to the consignees for said
lack of deligence required of it under Article 1733 of the Civil Code.
15
By agreement between the carrier, master or agent of the carrier, and

the shipper another maximum amount than that mentioned in this
paragraph may be fixed: Provided, That such maximum shall not be
less than the figure above named. In no event shall the carrier be
Liable for more than the amount of damage actually sustained.
xxx
xxx
xxx
Article 1749 of the New Civil Code also allows the limitations of
liability in this wise:
Having failed to discharge the burden of proving that it had exercised

the extraordinary diligence required by law, Petitioner Carrier cannot
escape liability for the loss of the cargo.
Art. 1749.
A stipulation that the common carrier's liability as
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
And even if fire were to be considered a "natural disaster" within the

meaning of Article 1734 of the Civil Code, it is required under Article
1739 of the same Code that the "natural disaster" must have been the
"proximate and only cause of the loss," and that the carrier has
"exercised due diligence to prevent or minimize the loss before,
during or after the occurrence of the disaster. " This Petitioner Carrier
has also failed to establish satisfactorily.
It is to be noted that the Civil Code does not of itself limit the liability
of the common carrier to a fixed amount per package although the
Code expressly permits a stipulation limiting such liability. Thus, the
COGSA which is suppletory to the provisions of the Civil Code, steps
in and supplements the Code by establishing a statutory provision
limiting the carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of lading. The
provisions of the Carriage of Goods by.Sea Act on limited liability
are as much a part of a bill of lading as though physically in it and as
much a part thereof as though placed therein by agreement of the
parties. 16
Nor may Petitioner Carrier seek refuge from liability under the
Carriage of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss
or damage arising or resulting from
(b)
carrier.
Fire, unless caused by the actual fault or privity of the
xxx
xxx
In G.R. No. 69044, there is no stipulation in the respective Bills of

Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability
for the loss or destruction of the goods. Nor is there a declaration of a
higher value of the goods. Hence, Petitioner Carrier's liability should
not exceed US $500 per package, or its peso equivalent, at the time of
payment of the value of the goods lost, but in no case "more than the
amount of damage actually sustained."
xxx
In this case, both the Trial Court and the Appellate Court, in effect,
found, as a fact, that there was "actual fault" of the carrier shown by
"lack of diligence" in that "when the smoke was noticed, the fire was
already big; that the fire must have started twenty-four (24) hours
before the same was noticed; " and that "after the cargoes were stored
in the hatches, no regular inspection was made as to their condition
during the voyage." The foregoing suffices to show that the
circumstances under which the fire originated and spread are such as
to show that Petitioner Carrier or its servants were negligent in
The actual total loss for the 5,000 pieces of calorized lance pipes was
P256,039 (Exhibit "C"), which was exactly the amount of the
insurance coverage by Development Insurance (Exhibit "A"), and the
amount affirmed to be paid by respondent Court. The goods were
shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by
$500 would result in a product of $14,000 which, at the current
exchange rate of P20.44 to US $1, would be P286,160, or "more than
39
Choco Notes
the amount of damage actually sustained." Consequently, the
aforestated amount of P256,039 should be upheld.
the surgery. There is, in this regard, obvious wisdom in the Ninth
Circuit's conclusion in Hartford that technological advancements,
whether or not forseeable by the COGSA promulgators, do not
warrant a distortion or artificial construction of the statutory term
"package." A ruling that these large reusable metal pieces of transport
equipment qualify as COGSA packages at least where, as here,
they were carrier owned and supplied would amount to just such a
distortion.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their
actual value was P92,361.75 (Exhibit "I"), which is likewise the
insured value of the cargo (Exhibit "H") and amount was affirmed to
be paid by respondent Court. however, multiplying seven (7) cases by
$500 per package at the present prevailing rate of P20.44 to US $1
(US $3,500 x P20.44) would yield P71,540 only, which is the amount
that should be paid by Petitioner Carrier for those spare parts, and not
P92,361.75.
Certainly, if the individual crates or cartons prepared by the shipper

and containing his goods can rightly be considered "packages"
standing by themselves, they do not suddenly lose that character upon
being stowed in a carrier's container. I would liken these containers to
detachable stowage compartments of the ship. They simply serve to
divide the ship's overall cargo stowage space into smaller, more
serviceable loci. Shippers' packages are quite literally "stowed" in the
containers utilizing stevedoring practices and materials analogous to
those employed in traditional on board stowage.
In G.R. No. 71478, in so far as the two (2) cases of surveying

instruments are concerned, the amount awarded to DOWA which was
already reduced to $1,000 by the Appellate Court following the
statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two
(2) containers and insured with NISSHIN, the Appellate Court also
limited Petitioner Carrier's liability to $500 per package and affirmed
the award of $46,583 to NISSHIN. it multiplied 128 cartons
(considered as COGSA packages) by $500 to arrive at the figure of
$64,000, and explained that "since this amount is more than the
insured value of the goods, that is $46,583, the Trial Court was
correct in awarding said amount only for the 128 cartons, which
amount is less than the maximum limitation of the carrier's liability."
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.)

rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district
with many maritime cases followed Judge Beeks' reasoning in
Matsushita and similarly rejected the functional economics test.
Judge Kellam held that when rolls of polyester goods are packed into
cardboard cartons which are then placed in containers, the cartons
and not the containers are the packages.
We find no reversible error. The 128 cartons and not the two (2)
containers should be considered as the shipping unit.
xxx
xxx
xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the

Mitsui test:
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807
(1981), the consignees of tin ingots and the shipper of floor covering
brought action against the vessel owner and operator to recover for
loss of ingots and floor covering, which had been shipped in vessel
supplied containers. The U.S. District Court for the Southern
District of New York rendered judgment for the plaintiffs, and the
defendant appealed. The United States Court of Appeals, Second
Division, modified and affirmed holding that:
Eurygenes concerned a shipment of stereo equipment packaged by

the shipper into cartons which were then placed by the shipper into a
carrier- furnished container. The number of cartons was disclosed to
the carrier in the bill of lading. Eurygenes followed the Mitsui test
and treated the cartons, not the container, as the COGSA packages.
However, Eurygenes indicated that a carrier could limit its liability to
$500 per container if the bill of lading failed to disclose the number
of cartons or units within the container, or if the parties indicated, in
clear and unambiguous language, an agreement to treat the container
as the package.
When what would ordinarily be considered packages are shipped in a

container supplied by the carrier and the number of such units is
container constitutes the "package" referred to in liability limitation
provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea
Act, 4(5), 46 U.S.C.A.& 1304(5).
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package

Limitations and Third World Delivery Problems by Chester D.
Hooper & Keith L. Flicker, published in Fordham International Law
Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)
Even if language and purposes of Carriage of Goods by Sea Act left

doubt as to whether carrier-furnished containers whose contents are
disclosed should be treated as packages, the interest in securing
international uniformity would suggest that they should not be so
treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
In this case, the Bill of Lading (Exhibit "A") disclosed the following
data:
2 Containers
... After quoting the statement in Leather's Best, supra, 451 F 2d at

815, that treating a container as a package is inconsistent with the
congressional purpose of establishing a reasonable minimum level of
liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Although this approach has not completely escaped criticism, there

is, nonetheless, much to commend it. It gives needed recognition to
the responsibility of the courts to construe and apply the statute as
enacted, however great might be the temptation to "modernize" or
reconstitute it by artful judicial gloss. If COGSA's package limitation
scheme suffers from internal illness, Congress alone must undertake
Say: Two (2) Containers Only.

Considering, therefore, that the Bill of Lading clearly disclosed the
contents of the containers, the number of cartons or units, as well as
the nature of the goods, and applying the ruling in the Mitsui and
Eurygenes cases it is clear that the 128 cartons, not the two (2)
40
Choco Notes
containers should be considered as the shipping unit subject to the
$500 limitation of liability.
Petitioner Carrier was afforded ample time to present its side of the
case. 23 It cannot complain now that it was denied due process when
the Trial Court rendered its Decision on the basis of the evidence
adduced. What due process abhors is absolute lack of opportunity to
be heard. 24
True, the evidence does not disclose whether the containers involved
herein were carrier-furnished or not. Usually, however, containers are
provided by the carrier. 19 In this case, the probability is that they
were so furnished for Petitioner Carrier was at liberty to pack and
carry the goods in containers if they were not so packed. Thus, at the
dorsal side of the Bill of Lading (Exhibit "A") appears the following
stipulation in fine print:
On the Award of Attorney's Fees:

Petitioner Carrier questions the award of attorney's fees. In both
cases, respondent Court affirmed the award by the Trial Court of
attorney's fees of P35,000.00 in favor of Development Insurance in
G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in
G.R. No. 71478.
11.
(Use of Container) Where the goods receipt of which is
acknowledged on the face of this Bill of Lading are not already
packed into container(s) at the time of receipt, the Carrier shall be at
liberty to pack and carry them in any type of container(s).
Courts being vested with discretion in fixing the amount of attorney's

fees, it is believed that the amount of P5,000.00 would be more
reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No.
71478 is affirmed.
The foregoing would explain the use of the estimate "Say: Two (2)
Containers Only" in the Bill of Lading, meaning that the goods could
probably fit in two (2) containers only. It cannot mean that the
shipper had furnished the containers for if so, "Two (2) Containers"
appearing as the first entry would have sufficed. and if there is any
ambiguity in the Bill of Lading, it is a cardinal principle in the
construction of contracts that the interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the
obscurity. 20 This applies with even greater force in a contract of
adhesion where a contract is already prepared and the other party
merely adheres to it, like the Bill of Lading in this case, which is
draw. up by the carrier. 21
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in

that petitioner Eastern Shipping Lines shall pay the Development
Insurance and Surety Corporation the amount of P256,039 for the
twenty-eight (28) packages of calorized lance pipes, and P71,540 for
the seven (7) cases of spare parts, with interest at the legal rate from
the date of the filing of the complaint on June 13, 1978, plus P5,000
as attorney's fees, and the costs.
2)
In G.R.No.71478,the judgment is hereby affirmed.
On Alleged Denial of Opportunity to Present Deposition of Its

Witnesses: (in G.R. No. 69044 only)
SO ORDERED.
Petitioner Carrier claims that the Trial Court did not give it sufficient
time to take the depositions of its witnesses in Japan by written
interrogatories.
G.R. No. 94151
Eastern Shipping v. CA
vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE
ASSURANCE CORPORATION, respondents.
We do not agree. petitioner Carrier was given- full opportunity to

present its evidence but it failed to do so. On this point, the Trial
Court found:
xxx
xxx
Jimenez, Dala & Zaragoza for petitioner.
xxx
Reloy Law Office for private respondent.
Indeed, since after November 6, 1978, to August 27, 1979, not to

mention the time from June 27, 1978, when its answer was prepared
and filed in Court, until September 26, 1978, when the pre-trial
conference was conducted for the last time, the defendant had more
than nine months to prepare its evidence. Its belated notice to take
deposition on written interrogatories of its witnesses in Japan, served
upon the plaintiff on August 25th, just two days before the hearing set
for August 27th, knowing fully well that it was its undertaking on
July 11 the that the deposition of the witnesses would be dispensed
with if by next time it had not yet been obtained, only proves the lack
of merit of the defendant's motion for postponement, for which
reason it deserves no sympathy from the Court in that regard. The
defendant has told the Court since February 16, 1979, that it was
going to take the deposition of its witnesses in Japan. Why did it take
until August 25, 1979, or more than six months, to prepare its written
interrogatories. Only the defendant itself is to blame for its failure to
adduce evidence in support of its defenses.
xxx
xxx
April 30, 1991
GANCAYCO, J.:p
The extent of the liability of the common carrier and its insurer for
damage to the cargo upon its delivery to the arrastre operator is the
center of this controversy.
The findings of fact of the trial court which were adopted by the
appellate court and which are not disputed are as follows:
On September 4, 1978, thirteen coils of uncoated 7-wire stress
relieved wire strand for prestressed concrete were shipped on board
the vessel "Japri Venture," owned and operated by the defendant
Eastern Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek
Post-Tensioning Phils., Inc. in Manila, as evidenced by the bill of
lading, commercial invoice, packing list and commercial invoice
marked Exhibits A, B, C, D; 3, 4, 5 and 6-Razon which were insured
by the plaintiff First Nationwide Assurance Corporation for P171,923
(Exhibit E).
xxx 22
41
Choco Notes
UNDER CLEAN TALLY SHEETS, IT NEVERTHELESS
ARBITRARILY CONCLUDED PETITIONER AS LIABLE FOR
THE CLAIMED DAMAGES;
On September 16, 1978, the carrying vessel arrived in Manila and

discharged the cargo to the custody of the defendant E. Razon, Inc.
(Exhibits 1, 2, 3, 4 and 5-ESL), from whom the consignee's customs
broker received it for delivery to the consignee's warehouse.
III.
IT FAILED TO HOLD PETITIONER RELIEVED OF
ANY LIABILITY OVER THE CARGO NOTWITHSTANDING IT
FOUND THAT THE SAME WAS DISCHARGED AND
DELIVERED UNTO THE CUSTODY OF THE ARRASTRE
OPERATOR UNDER CLEAN TALLY SHEETS AND ERGO TO
BE CONSIDERED GOOD ORDER CARGO WHEN DELIVERED;
and,
On February 19, 1979, the plaintiff indemnified the consignee in the

amount of P171,923.00 for damage and loss to the insured cargo,
whereupon the former was subrogated for the latter (Exhibit I).
The plaintiff now seeks to recover from the defendants what it has
indemnified the consignee, less P48,293.70, the salvage value of the
cargo, or the total amount of P123,629.30.
IV.
IT ARBITRARILY AWARDED INTEREST AT THE
LEGAL RATE TO COMMENCE FROM THE DATE OF THE
COMPLAINT IN VIOLATION OF THE DOCTRINAL RULE
THAT IN CASE OF UNLIQUIDATED CLAIMS SUCH AS THE
CLAIM IN QUESTION, INTEREST SHOULD ONLY
COMMENCE FROM THE DATE OF THE DECISION OF THE
TRIAL COURT. 3
It appears that while enroute from Kobe to Manila, the carrying

vessel "encountered very rough seas and stormy weather" for three
days, more or less, which caused it to roll and pound heavily, moving
its master to execute a marine note of protest upon arrival at the port
of Manila on September 15, 1978 (Exhibit 1-Razon); that the coils
wrapped in burlap cloth and cardboard paper were stored in the lower
hold of the hatch of the vessel which was flooded with water about
one foot deep; that the water entered the hatch when the vessel
encountered heavy weather enroute to Manila (Exhibits G, 2, 2A, 2BRazon); that upon request, a survey of bad order cargo was conducted
at the pier in the presence of the representatives of the consignee and
the defendant E. Razon, Inc. and it was found that seven coils were
rusty on one side each (Exhibits F and 10-Razon); that upon survey
conducted at the consignee's warehouse it was found that the "wetting
(of the cargo) was caused by fresh water" that entered the hatch when
the vessel encountered heavy weather enroute to Manila (p. 3, Exhibit
G); and that all thirteen coils were extremely rusty and totally
unsuitable for the intended purpose (p. 3, Exhibit G), (pp. 217-218,
orig. rec.) 1
Under the first assigned error, petitioner contends that the appellate
court did not consider its counter-assignment of errors which was
only meant to sustain the decision of dismissal of the trial court. An
examination of the questioned decision shows that the appellate court
did not consider the counter-assignment of errors of petitioner as it
did not appeal the decision of the trial court.
Nevertheless, when such counter-assignments are intended to sustain
the judgment appealed from on other grounds, but not to seek
modification or reversal thereof, the appellate court should consider
the same in the determination of the case but no affirmative relief can
be granted thereby other than what had been obtained from the lower
court. 4 The contention of petitioner on this aspect is, thus, welltaken.
The complaint that was filed by the First Nationwide Assurance

Corporation (insurer) against Eastern Shipping Lines, Inc. and E.
Razon, Inc., in the Regional Trial Court, Manila, was dismissed in a
decision dated November 25, 1985. An appeal therefrom was
interposed by the insurer to the Court of Appeals wherein in due
course a decision was rendered on April 27, 1990, the dispositive part
of which reads as follows:
Be that as it may, under the second and third assigned errors,

petitioner claims it should not be held liable as the shipment was
discharged and delivered complete into the custody of the arrastre
operator under clean tally sheets.
While it is true the cargo was delivered to the arrastre operator in
apparent good order condition, it is also undisputed that while en
route from Kobe to Manila, the vessel encountered "very rough seas
and stormy weather", the coils wrapped in burlap cloth and cardboard
paper were stored in the lower hatch of the vessel which was flooded
with water about one foot deep; that the water entered the hatch; that
a survey of bad order cargo which was conducted in the pier in the
presence of representatives of the consignee and E. Razon, Inc.,
showed that seven coils were rusty on one side (Exhibits F and 10Razon); that a survey conducted at the consignee's warehouse also
showed that the "wetting (of the cargo) was caused by fresh water"
that entered the hatch when the vessel encountered heavy rain en
route to Manila (Exhibit G); and that all thirteen coils were extremely
rusty and totally unsuitable for the intended purpose. 5
WHEREFORE, the judgment appealed from is hereby SET ASIDE.

The appellees are ordered to pay the appellant the sum of
P123,629.30, with legal rate of interest from July 24, 1979 until fully
paid, Eastern Shipping Lines, Inc. to assume 8/13 thereof, and E.
Razon, Inc. to assume 5/13 thereof. No pronouncement as to costs.
SO ORDERED. 2
Only Eastern Shipping Lines, Inc. filed this petition for review by
certiorari based on the following assigned errors:
I.
IT REFUSED TO CONSIDER THE COUNTERASSIGNMENT OF ERRORS OF PETITIONER AS CONTAINED
IN ITS BRIEF FOR THE DEFENDANT-APPELLEE EASTERN
SHIPPING LINES, INC. AND WHICH ARE ONLY MEANT TO
SUSTAIN THE DECISION OF DISMISSAL OF THE TRIAL
COURT;
Consequently, based on these facts, the appellate court made the

following findings and conclusions:
Plainly, the heavy seas and rains referred to in the master's report
were not caso fortuito, but normal occurrences that an ocean-going
vessel, particularly in the month of September which, in our area, is a
month of rains and heavy seas would encounter as a matter of
routine. They are not unforeseen nor unforeseeable. These are
II.
AGAINST ITS OWN FINDINGS OF FACT THAT THE
CARGO WAS DISCHARGED AND DELIVERED COMPLETE
UNTO THE CUSTODY OF THE ARRASTRE OPERATOR
42
Choco Notes
conditions that ocean-going vessels would encounter and provide for,
in the ordinary course of a voyage. That rain water (not sea water)
found its way into the holds of the Jupri Venture is a clear indication
that care and foresight did not attend the closing of the ship's hatches
so that rain water would not find its way into the cargo holds of the
ship.
thereon at the legal rate from the date of the filing of the complaint on
March 25, 1983 until fully paid, and the costs.
The undisputed facts of the case are as follows: Alejandro Arada,
herein petitioner, is the proprietor and operator of the firm South
Negros Enterprises which has been organized and established for
more than ten (10) years. It is engaged in the business of small scale
shipping as a common carrier, servicing the hauling of cargoes of
different corporations and companies with the five (5) vessels it was
operating (Rollo, p. 121).
Moreover, under Article 1733 of the Civil Code, common carriers are
bound to observe "extra-ordinary vigilance over goods . . . .according
to all circumstances of each case," and Article 1735 of the same Code
states, to wit:
On March 24, 1982. petitioner entered into a contract with private

respondent to safely transport as a common carrier, cargoes of the
latter from San Carlos City, Negros Occidental to Mandaue City
using one of petitioner's vessels, M/L Maya. The cargoes of private
respondent consisted of 9,824 cases of beer empties valued at
P176,824.80, were itemized as follows:
Art. 1735.
In all cases other than those mentioned in Nos. 1,
2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed
or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in article 1733.
Since the carrier has failed to establish any caso fortuito, the
presumption by law of fault or negligence on the part of the carrier
applies; and the carrier must present evidence that it has observed the
extraordinary diligence required by Article 1733 of the Civil Code in
order to escape liability for damage or destruction to the goods that it
had admittedly carried in this case. No such evidence exists of record.
Thus, the carrier cannot escape liability.
NO. OF CASES
The Court agrees with and is bound by the foregoing findings of fact
made by the appellate court. The presumption, therefore, that the
cargo was in apparent good condition when it was delivered by the
vessel to the arrastre operator by the clean tally sheets has been
overturned and traversed. The evidence is clear to the effect that the
damage to the cargo was suffered while aboard petitioner's vessel.
PPW STENIE MTS
CARGO
VALUE
7,515 CS
P136.773.00
1,542 CS
PLW GRANDE MTS
The last assigned error is untenable. The interest due on the amount
of the judgment should commence from the date of judicial demand.
6
23,438.40
58 CS
WHEREFORE, the petition is DISMISSED, with costs against

petitioner.
G.E. PLASTIC MTS
SO ORDERED.
1,276.00
Arada v. CA
G.R. No. 98243
24 CS
July 1, 1992
PLP MTS
ALEJANDRO ARADA, doing business under the name and style

"SOUTH NEGROS ENTERPRISES", petitioner,
vs.
HONORABLE COURT OF APPEALS, respondents.
456.00
37 CS
CS WOODEN MTS
PARAS, J.:
673.40
This is a petition for review on certiorari which seeks to annul and set
aside the decision * of the Court of Appeals dated April 8, 1991 in
CA-G.R. CV No. 20597 entitled "San Miguel Corporation v.
Alejandro Arada, doing business under the name and style "South
Negros Enterprises", reversing the decision of the RTC, Seventh
Judicial Region, Branch XII, Cebu City, ordering petitioner to pay the
private respondent tho amount of P172,284.80 representing the value
of the cargo lost on board the ill-fated, M/L Maya with interest
8 CS
LAGERLITE PLASTIC MTS
128.00
640 CS
STENEI PLASTIC MTS
43
Choco Notes
14,080.00
(4)
Since the plaintiff has withheld the payment of P12,997.47
due the defendynt, the plaintiff should deduct the amount of
P4,849.20 from the P12,997.47 and the balance of P8,148.27 must be
paid to the defendant; and
9,824 CS
(5)
Defendant's counterclaim not having been substantiated by
evidence is likewise dismissed. NO COSTS. (Orig. Record, pp. 193195).
P176,824.80
On March 24, 1982, petitioner thru its crew master, Mr. Vivencio
Babao, applied for a clearance with the Philippine Coast Guard for
M/L Maya to leave the port of San Carlos City, but due to a typhoon,
it was denied clearance by SNI Antonio Prestado PN who was then
assigned at San Carlos City Coast Guard Detachment (Rollo, p. 122).
Thereafter, private respondent appealed said decision to the Court of

Appeals claiming that the trial court erred in
(1)
holding that nothing was shown that the defendant, or any
of his employees who manned the M/L Maya was negligent in any
way nor did they fail to observe extraordinary diligence over the
cargoes of the plaintiff; and
On March 25, 1982 M/L Maya was given clearance as there was no
storm and the sea was calm. Hence, said vessel left for Mandaue City.
While it was navigating towards Cebu, a typhoon developed and said
vessel was buffeted on all its sides by big waves. Its rudder was
destroyed and it drifted for sixteen (16) hours although its engine was
running.
(2)
holding that the sinking of said vessel was caused by the
storm, consequently, dismissing the claim of plaintiff in its first cause
of action for breach of contract of carriage of goods (Rollo, pp. 3334; Decision, pp. 3-4).
On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever
was left of its cargoes. The crew was rescued by a passing pump boat
and was brought to Calanggaman Island. Later in the afternoon, they
were brought to Palompon, Leyte, where Vivencio Babao filed a
marine protest (Rollo, p. 10).
In its decision Promulgated on April 8, 1991, the Court of Appeals

reversed the decision of the court a quo, the dispositive portion and
the dispositive part of its decision reads as:
WHEREFORE, that part of the Judgment appeal6d from is
REVERSED and the appellee Aleiandro Arada, doing business by the
name and style, "South Negros Enterprises", ordered (sic) to pay unto
the appellant San Miguel Corporation the amount of P176,824.80
representing the value of the cargo lost on board the ill-fated vessel,
M/L Maya, with interest thereon at the legal rate from date of the
filing of the complaint on March 25, 1983, until fully paid, and the
costs. (Rollo, p. 37)
On the basis of such marine protest, the Board of Marine Inquiry

conducted a hearing of the sinking of M/L Maya wherein private
respondent was duly represented. Said Board made its findings and
recommendation dated November 7, 1983, the dispositive portion of
which reads as:
WHEREFORE, premises considered, this Board recommends as it is
hereby recommended that the owner/operator, officers and crew of
M/L Maya be exonerated or absolved from any administrative
liability on account of this incident (Exh. 1).
The Court of Appeals ruled that "in view of his failure to observe
extraordinary diligence over the cargo in question and his negligence
previous to the sinking of the carrying vessel, as above shown, the
appellee is liable to the appellant for the value of the lost cargo.
The Board's report containing its findings and recommendation was

then forwarded to the headquarters of the Philippine Coast Guard for
appropriate action. On the basis of such report, the Commandant of
the Philippine Coast Guard rendered a decision dated December 21,
1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator
officers and crew of the ill-fated M/L Maya from any administrative
liability on account of said incident (Exh. 2).
Hence the present recourse.

On November 20, 1991, this Court gave due course to the petition.
The pivotal issue to be resolved is whether or not petitioner is liable
for the value of the lost cargoes.
Petitioner contends that it was not in the exercise of its function as a
common carrier when it entered into a contract with private
respondent,but was then acting as a private carrier not bound by the
requirement of extraordinary diligence (Rollo, p. 15) and that the
factual findings of the Board of Marine Inquiry and the Special Board
of Marine Inquiry are binding and conclusive on the Court (Rollo, pp.
16-17).
On March 25, 1983, Private respondent filed a complaint in the

Regional Trial Court its first cause of action being for the recovery of
the value of the cargoes anchored on breach of contract of carriage.
After due hearing, said court rendered a decision dated July 18, 1988,
the dispositive portion of which reads
WHEREFORE, judgment is hereby rendered as follows:
Private respondent counters that M/L Maya was in the exercise of its
function as a common carrier and its failure to observe the
extraordinary diligence required of it in the vigilance over their
cargoes makes Petitioner liable for the value of said cargoes.
(1)
With respect to the first cause of action, claim of plaintiff is
hereby dismissed;
(2)
Under the second cause of action, defendant must pay
plaintiff the sum of P2,000.00;
The petition is devoid of merit.
(3)
In the third cause of action, the defendant must pay plaintiff
the sum of P2,849.20;
44
Choco Notes
Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation offering their
services to the public (Art. 1732 of the New Civil Code).
xxx
How many vessels are you operating?
A.
There were all in all around five (5).
Respondent court's conclusion as to the negligence of petitioner is

supported by evidence. It will be noted that Vivencio Babao knew of
the impending typhoon on March 24, 1982 when the Philippine Coast
Guard denied M/L Maya the issuance of a clearance to sail. Less than
24 hours elapsed since the time of the denial of said clearance and the
time a clearance to sail was finally issued on March 25, 1982.
Records will show that Babao did not ascertain where the typhoon
was headed by the use of his vessel's barometer and radio (Rorlo, p.
142). Neither did the captain of the vessel monitor and record the
weather conditions everyday as required by Art, 612 of the Code of
Commerce (Rollo, pp. 142-143). Had he done so while navigating for
31 hours, he could have anticipated the strong winds and big waves
and taken shelter (Rollo, pp- 36; 145). His testimony on May 4, 1982
is as follows:
Q.
And you were entering to service hauling of cargoes to
different companies, is that correct?
A.
Yes, sir.
Q.
In one word, the South Negros Enterprises is engaged in
the business of common carriers, is that correct?
A.
Yes, sir,
Q.
And in fact, at the time of the hauling of the San Miguel
Beer, it was also in the same category as a common carrier?
A.
xxx
If only for the fact that he was first denied clearance to depart on
March 24, 1982, obviously because of a typhoon coming, Babao, as
master of the vessel, should have verified first where the typhoon was
before departing on March 25, 1982. True, the sea was calm at
departure time. But that might be the calm before the storm. Prudence
dictates that he should have ascertained first where the storm was
before departing as it might be on his path. (Rollo, pp. 35-36)
In the case at bar, there is no doubt that petitioner was exercising its
function as a common carrier when it entered into a contract with
private respondent to carry and transport the latter's cargoes. This fact
is best supported by the admission of petitioner's son, Mr. Eric Arada,
who testified as the officer-in-charge for operations of South Negros
Enterprises in Cebu City. In substance his testimony on January 14,
1985 is as follows:
Q.
xxx
Yes, sir,
Q.
Did you not check on your own where the typhoon was?
A.
No. sir. (TSN, May 4, 1982, pp. 58-59)
Noteworthy is the fact that as Per official records of the

Climatological Division of the Philippine Atmospheric, Geophysical
and Astronomical Services Administration (PAG-ASA for brevity)
issued by its Chief of Climatological Division, Primitivo G. Ballan,
Jr. as to the weather and sea conditions that prevailed in the vicinity
of Catmon, Cebu during the period March 25-27, 1982, the sea
conditions on March 25, 1982 were slight to rough and the weather
conditions then prevailing during those times were cloudy skies with
rainshowers and the small waves grew larger and larger, to wit:
(TSN. pp. 3-4, Jan. 29, 1985)

A common carrier, both from the nature of its business and for
insistent reasons of public policy is burdened by law with the duty of
exercising extraordinary diligence not only in ensuring the safety of
passengers, but in caring for the goods transported by it. The loss or
destruction or deterioration of goods turned over to the common
carrier for the conveyance to a designated destination raises instantly
a presumption of fault or negligence on the part of the carrier, save
only where such loss, destruction or damage arises from extreme
circumstances such as a natural disaster or calamity ... (Benedicto v.
IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547) (Emphasis
supplied).
SPEED
WAVE HT.
SEA
In order that the common carrier may be exempted from

responsibility, the natural disaster must have been the proximate and
only cause of the loss. However, the common carrier must exercise
due diligence to prevent or minimize the loss before, during and after
the occurrence of flood, storm or other natural disaster in order that
the common carrier may be exempted from liability for the
destruction or deterioration of the goods (Article 1739, New Civil
Code).
WEATHER
KNOTS
(METERS)
CONDITIONS
In the instant case, the appellate court was correct in finding that
petitioner failed to observe the extraordinary diligence over the cargo
in question and he or the master in his employ was negligent previous
to the sinking of the carrying vessel. In substance, the decision reads:
... VIVENCIO BABAO, the master of the carrying vessel, knew that
there was a typboon coming before his departure but did not check
where it was.
March 25
45
Choco Notes
white foam from
8 AM
15
1-2
slight
breaking waves
cloudy skies
begin to be blown
w/ rainshowers
2 PM
20-25
2.0-3.0
moderate
in streaks along
overcast skies
to rough
the direction of
w/ some rains
8 PM
30
3.7
rough
the wind;
sea heaps up
46
Choco Notes
the direction of the wind;
Spindrift begins
2 AM
30
3.7
rough
Spindrift begins
sea heaps up
(Exh. 3)
A common carrier is obliged to observe extraordinary diligence and
the failure of Babao to ascertain the direction of the storm and the
weather condition of the path they would be traversing, constitute
lack of foresight and minimum vigilance over its cargoes taking into
account the surrounding circumstances of the case.
While the goods are in the possession of the carrier, it is but fair that
it exercises extraordinary diligence in protecting them from loss or
damage, and if loss occurs, the law presumes that it was due to the
carrier's fault or negligence; that is necessary to protect the interest of
the shipper which is at the mercy of the carrier (Art. 1756, Civil
Code, Aboitiz Shipping Corporation v. Court of Appeals, G.R. No.
89757, Aug. 6, 1990, 188 SCRA 387).
white foam from
Furthermore, the records show that the crew of M/L Maya did not
have the required qualifications provided for in P.D. No. 97 or the
Philippine Merchant Marine Officers Law, all of whom were
unlicensed. While it is true that they were given special permit to man
the vessel, such permit was issued at the risk and responsibility of the
owner (Rollo, p. 36).
breaking waves
Finally, petitioner claims that the factual findings of the Special

Board of Marine Inquiry exonerating the owner/operator, crew
officers of the ill-fated vessel M/L Maya from any administrative
liability is binding on the court.
In rejecting petitioner's claim, respondent court was correct in ruling
that "such exoneration was but with respect to the administrative
liability of the owner/operator, officers and crew of the ill-fated"
vessel. It could not have meant exoneration of appellee from liability
as a common carrier for his failure to observe extraordinary diligence
in the vigilance over the goods it was transporting and for the
negligent acts or omissions of his employees. Such is the function of
the Court, not the Special Board of Marine Inquiry." (Rollo, P. 37,
Annex A, p. 7)
begin to be blown
The Philippine Merchant Marine Rules and Regulations particularly

Chapter XVI thereof entitled "Marine Investigation and Suspension
and Revocation Proceedings" prescribes the Rules governing
maritime casualties or accidents, the rules and Procedures in
administrative investigation of all maritime cases within the
jurisdiction or cognizance of the Philippine Coast Guard and the
grounds for suspension and revocation of licenses/certificates of
marine officers and seamen (1601 SCOPE); clearly, limiting the
jurisdiction of the Board of Marine Inquiry and Special Board of
Marine Inquiry to the administrative aspect of marine casualties in so
far as it involves the shipowners and officers.
in streaks along
47
Choco Notes
PREMISES CONSIDERED, the appealed decision is AFFIRMED.
cargo had to be suspended at 11:40 A.M. on October 17, 1985 due to

the heavy downpour, strong winds, and turbulent sea. To prevent
damage to the cargo all hatches of the vessel were closed and
secured. (Emphasis supplied ours)
SO ORDERED.
Philamgen v. CA
G.R. No. 101426
At the time the discharging of the cargo was suspended, a total of

59,625 bags of cement and 26 crates of GI sheets had already been
discharged.
May 17, 1993
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY,

INC., petitioner,
vs.
COURT OF APPEALS and TRANSPACIFIC TOWAGE, INC.,
respondents.
In further preparation for the typhoon the vessel was loaded with 22
tons of fresh water and 3,000 liters of fuel. The shipmaster ordered
the vessel to be moved about 300 meters seaward in order that it
would not hit the cat walk or the wooden bridge or the wharf, or the
rocks. The vessel was ready for any maneuver that may have to be
made.
Linsangan Law Office for petitioner.

Misa, Castro & Associates for private respondent.
According to the shipmaster who was plotting the typhoon's path in a

chart, the radius was so wide that there was no way the typhoon could
be evaded. From 8:00 P.M. of October 17, 1985 to 8:00 P.M. of
October 18, 1985 the typhoon raged in the area. It was at about 5:20
A.M. of October 18, 1985 when the shipmaster ordered the
maneuvering of the vessel but it could not be steered on account of
the strong winds and rough seas. The vessel's lines snapped, causing
her to be dragged against the rocks, and the anchor chain stopper
gave way. The vessel sustained holes in the engine room and there
was a power failure in the vessel. Water started to fill the engine
room and at about 6:15 A.M. the engine broke down.
PADILLA, J.:
In this petition for review on certiorari, Philippine American General
Insurance Company, Incorporated assails the decision * of the Court
of Appeals, dated 31 July 1991, rendered in CA-G.R. CV. No. 21252,
which reversed and set aside the decision of the Regional Trial Court
of Manila, Branch 16 1 and entered a new one dismissing the
petitioner's complaint which sought to collect the sum of
P1,511,210.00 from the private respondent.
The shipmaster had no choice but to order the ship to be abandoned.

He told the crew to secure the vessel while he went to the Municipal
Mayor of Pasacao to request for police assistance to prevent pilferage
of the vessel and its cargo. He was, however, unable to get any
assistance. When he returned to the vessel he found that it was being
continuously pounded by the strong sea waves against the rocks. This
caused the vessel to break into two (2) parts and to sink partially. The
shipmaster reported the incident to the Philippine Coast Guard but
inspite the presence of three (3) coast guards, nothing could be done
about the pilferage done on the vessel and its cargo. Almost the whole
barrio and because there were so many of them the crew and the
guards were helpless to stop the pilferage and looting. As a result of
the incident the cargo of cement was damaged while the GI sheets
were looted and nothing was left of the undischarged pieces.
The facts of the case, as found by the Court of Appeals, 2 are as

follows:
On September 4, 1985 the Davao Union Marketing Corporation of
Davao City shipped on board the vessel M/V "Crazy Horse" operated
by the Transpacific Towage, Inc. cargo consisting of 9,750 sheets of
union brand GI sheets with a declared value of P1,086,750.00 and
86,860 bags of union Pozzolan and union Portland Cement with a
declared value of P4,300,000.00. The cargo was consigned to the
Bicol Union Center of Pasacao, Camarines Sur, with a certain Pedro
Olivan as the "Notify-Party."
The cargo was insured by the Philippine American General Insurance
Co., Inc., under Marine Note No. 023408 covering 86,000, of Union
Pozzolan and POrtland cement for the amount of P3,440,000.00.
The total number of cement bags damaged and/or lost was 26,424
costing P1,056,960.00 while there were 4,000 pieces of the GI sheets
unrecovered, the cost of which was P454,250.00.
The vessel M/V "Crazy Horse" arrived on September 7, 1985 as

scheduled as the port of Pasacao, Camarines Sur. Upon arrival the
shipmaster notified the consignee's "Notify-Party" that the vessel was
already (sic) to discharge the cargo. The discharging could not be
affected immediately and continuously because of certain reasons.
First, the buoys were installed only on September 11, 1985; second,
the dischrage permit was secured by the consignee only on
September 13, 1985; third a wooden catwalk had to be installed and
extension of the wharf had to be made, which was completed only on
September 26, 1985; fourth, the discharging was not continuous
because there were intermittent rains and the stevedores supplied by
the consignee did not work during the town fiesta. (Emphasis
supplied ours)
Because the cargo was insured by it the Philippine American General

Insurance Co., Inc. paid the shipper Davao Union Marketing
Corporation the sum of P1,511,210.00. Thereafter, the said insurer
made demands upon the Transpacific Towage, Inc. for the payment of
said amount as subrogee of the insured, claiming that the loss of the
cargo was directly and exclusively brought about by the fault and
negligence of the shipmaster and the crew of M/V "Crazy Horse".
Because the latter refused to pay the amount of P1,511,210.00
demanded, the Philippine American General Insurance Co., Inc. filed
the present complaint.
The lower court found that although the immediate cause of the loss
may have been due to an act of God, the defendant carrier had
exposed the property to the accident. The court also found plaintiff
guilty of contributory negligence and mitigated the plaintiff's claim to
On October 16, 1985, a super typhoon code named "Saling" entered

the Philippine area of responsibility and was felt in the eastern coast
of the country on October 17, 1985. It had a strength of 240 KPH and
Pasacao was placed under Storm Signal No. 3. The discharging of the
48
Choco Notes
three-fourths (3/4) of its value. Thus the lower court, in its Decision,
ordered the defendant:
due diligence to prevent or minimize loss before, during and after the
occurrence of flood, storm, or other natural disaster in order that the
common carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods.
1)
To pay plaintiff the mitigated amount of P1,133,408.00 plus
12% legal interest per annum computed from the date of the filing of
herein complaint on May 15, 1986, until duly paid;
2)
To pay P8,000.00 as attorney's fees; and
3)
To pay costs of suit.
The appellate court ruled that the los of cargo in the present case was
due solely to typhoon "Saling" and that private respondent had shown
that it had observed due diligence before, during and after the
occurrence of "Saling"; hence, it should not be liable under Article
1739.
SO ORDERED.
Considering the disputed fact that there really was delay in
completing the unloading of the goods from the vessel, the Court
believes that the real issue at bar centers on the application of Article
1740 of the Civil Code. In short, the principal question, in
determining which of the parties in the present case should bear the
loss of the goods, is whether the delay involved in the unloading of
the goods is deemed negligently incurred in, so as not to free private
respondent from liability, notwithstanding the fact that the ultimate
cause of the loss of the goods was the sinking of the vessel brought
about by typhoon "Saling."
In its now assailed decision, respondent Court of Appeals reversed

the decision of the trial court and ruled instead that private
respondent, as a common carrier, is not responsible for the loss of the
insured cargo involved in the case at bar, as said loss was due solely
to a fortituous event.
Petitioner in the present petition contends that respondent appellate
court erred in not holding private respondent liable for the loss of the
said insured cargo.
We affirm the decision of the Court of Appeals.
Indeed, from the time the vessel arrived at port Pasacao on 7

September 1985 up to 17 October 1985 when the Pasacao area was
placed under storm signal No. 3 due to typhoon "Saling", forty (40)
days had passed. Under normal conditions, a period of forty (40) days
is undoubtedly more than enough time within which the unloading of
the cargo (given its nature) from the vessel could be completed.
Hence, the question boils down further to which party should be
faulted for this delay.
It is not disputed that private respondent is a common carrier as

defined in Article 1732 of the Civil Code. 3 The following facts are
also not contested: (1) that the cargo-carrying vessel was wrecked
and partially sank on 18 October 1985 due to typhoon "Saling"; (2)
that typhoon "Saling" was a fortuitous event; and (3) that at the time
said vessel sank, the remaining undischarged cargo, consisting of
26,424 cement bags and 4,000 pieces of G.I. sheets, were still on
board the vessel.
Private respondent argues that its duty to unload ceased on 7

September 1985 when the shipmaster notified the consignee's
"Notify-Party" that the vessel was ready to discharge the cargo. On
the other hand, petitioner contends that the duty to unload the cargo
from the vessel continued to remain with private respondent.
Respondent appellate court, however, ruled that the question as to
which party had the task to discharge the cargo is actually immaterial
under the circumstances, as the delay could not be attributed to any of
the parties, but to several causes such as the natural conditions of the
Pasacao port, the customs of the place and the weather conditions
obtaining at the time. The appellate court made the following
observations:
However, the Court notes the fact that as of 17 October 1985, the
time when the Pasacao area was placed under storm signal No. 3 due
to "Saling", the unloading of the cargo from the vessel was still
unfinished, notwithstanding the lapse of forty (40) days from the time
the vessel arrived in Pasacao on 7 September 1985, or the lapse of
thirty-four (34) days from the time actual discharge of the cargo
commenceds on 13 September 1985.
In the opinion of the trial court, this lapse of thirty four (34) days
with private respondent not having completed the unloading of the
goods, is tantamount to unreasonable delay, which delay exposed the
unloaded cargo to accident. The trial court held private respondent
liable for the loss of goods under Article 1740 of the Civil Code
which provides that if the common carrier negligently incurs in delay
in transporting the goods, a natural disaster shall not free the carrier
from responsibility.
xxx
xxx
xxx
To our mind whichever of the parties had the obligation to unload the
cargo is not material. For, analyzing the causes for the delay in such
unloading, we find that such delay was not due to the negligence of
any party but was occasioned by causes that may not be attributed
solely to human factors, among which were the natural conditions of
the port where the M/V "Crazy Horse" had docked, the customs of
the place, and the weather conditions.
On the other hand, the appellate court ruled out any negligence
committed by private respondent and held that the delay in fully
unloading the cargo from the vessel "was occasioned by causes that
may not be attributed solely to human factors, among which were the
natural conditions of the port where the M/V "Crazy Horse" had
docked, the customs of the place and the weather conditions. 4
The wharf where the vessel had to dock was shallow and rocky,
hence it had to drop anchor some distance away in a private port.
Buoys had to be constructed in order that the vessel may properly
moored. After the buoys were installed a wooden stage had to be
constructed so that the stevedores could reach the vessel. For this
they needed a floating crane which was not immediately available.
The barges that were to load the cargo from the vessel could not go
near the wharf because of the shallow and rocky condition. A catwalk
The appellate court in exempting private respondent from liability

applied Article 1739 of the Civil Code which provides as follows:
In order that the common carrier may be exempted from
49
Choco Notes
had to be installed between the barge and the wharf. This necessitated
the dismantling of the wooden stage previously installed.
judicata applies in the case at bar, because the Board of Marine

Inquiry rendered a decision dated 11 April 1988 (acting on the marine
protest filed on 19 October 1985 by the shipmaster of M/V "Crazy
Horse") holding that said shipmaster was not guilty of "negligence as
the proximate cause of the grounding and subsequent wreckage of
M/S "Crazy Horse", hence, recommending that the captain, his
officers and crew be absolved from any administrative liability
arising out of the subject incident." 7
Apart from these preparations and constructions that had to be made,

the weather was not cooperative. Even before the typhoon struck
there were intermittent rains, hence the unloading was not
continuous. The actual unloading started on September 13, 1985 and
could have been finished in 4 or 5 days but because of the rains it was
delayed. Another factor that caused further delay was the fact that the
fiesta of the Virgin of Penafrancia was celebrated and for the length
of time that the celebrations were held, the stevedores who were from
the place refused to work.
xxx
xxx
The resolution of the present case is not barred by the judgment of

the Board of Marine Inquiry. One of the requisites of the principle of
res judicata is that there must be, among other things, identity of
subject matters and causes of action between a first and second case
in order that the judgment in the prior case may bar that in the
subsequent case. 8
xxx
The Court of Appeals summarized the reasons which adversely

affected the completion of the unloading of the cargo from the time
the vessel arrived at the Pasacao area on 7 September 1985, namely:
first, the buoys were installed only on 11 September 1985; second,
the consignee secured the discharge permit only on 13 September
1985; third, a wooden catwalk had to be installed and the extension
of the wharf had to be made, which was completed only on 16
September 1985; fourth, there were intermittent rains and the
stevedores supplied by the consignee did not work during the town
fiesta of the Virgin of Penafrancia, hence, the unloading was not
continuous.
The cause of action in the marine protest was to enforce the

administrative liability of the shipmaster/captain of M/V "Crazy
Horse", its officers and crew for the wreckage and sinking of the
subject vessel. On the other hand, the cause of action at bar is to
enforce the civil liability of private respondent, a common carrier, for
its failure to unload the subject cargo within a period of time
considered unreasonably long by the petitioner. While it may be true
that the Court is bound to accord great weight to factual findings of
the Board, 9 we hold that the protest filed before it and the present
case assert different causes of action and seek different reliefs.
We respect the above-mentioned factual findings of the appellate

court as to the natural conditions of the port of Pasacao were the
vessel was docked, and several other factors which harshly affected
the completion of the discharge of the cargo, as these findings of fact
are substantially supported by evidence. 6
All told, we find private respondent not legally liable for the loss of
the insured cargo involved in the present case.
WHEREFORE, the petition is DENIED. The appealed decision of
the Court of Appeals, dated 31 July 1991, rendered in CA-G.R. CV
No. 21252, is hereby AFFIRMED.
While it is true that there was indeed delay in discharging the cargo
from the vessel, we agree with the Court of Appeals that neither of
the parties herein could be faulted for such delay, for the same (delay)
was due not to negligence, but to several factors earlier discussed.
The cargo having been lost due to typhoon "Saling", and the delay
incurred in its unloading not being due to negligence, private
respondent is exempt from liability for the loss of the cargo, pursuant
to Article 1740 of the Civil Code.
SO ORDERED.
Delsan Transporp. v. CA
[G.R. No. 127897. November 15, 2001]
DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON.
COURT OF APPEALS and AMERICAN HOME ASSURANCE
CORPORATION, respondents.
DECISION
DE LEON, JR., J.:
The records also show that before, during and after the occurrence of
typhoon "Saling", private respondent through its shipmaster exercised
due negligence to prevent or minimize the loss of the cargo, as shown
by the following facts: (1) at 5:20 a.m. of 18 October 1985, as
typhoon "Saling" continued to batter the Pasacao area, the shipmaster
tried to maneuver the vesel amidst strong winds and rough seas; (2)
when water started to enter the engine room and later the engine
broke down, the shipmaster ordered ths ship to be abandoned, but he
sought police assistance to prevent pilferage of the vessel and its
cargo; (3) after the vessel broke into two (2) parts and sank partially,
the shipmaster reported th eincident to the Philippine Coast Guard,
but unfortunately, despite the presence of three (3) coast guards,
nothing could be done to stop the pilferage as almost the entire barrio
folk came to loot the vessel and its cargo, including the G.I. sheets.
Before us is a petition for review on certiorari of the Decision[1] of

the Court of Appeals in CA-G.R. CV No. 39836 promulgated on June
17, 1996, reversing the decision of the Regional Trial Court of
Makati City, Branch 137, ordering petitioner to pay private
respondent the sum of Five Million Ninety-Six Thousand Six
Hundred
Thirty-Five
Pesos
and
Fifty-Seven
Centavos
(P5,096,635.57) and costs and the Resolution[2] dated January 21,
1997 which denied the subsequent motion for reconsideration.
The facts show that Caltex Philippines (Caltex for brevity) entered
into a contract of affreightment with the petitioner, Delsan Transport
Lines, Inc., for a period of one year whereby the said common carrier
agreed to transport Caltexs industrial fuel oil from the BatangasBataan Refinery to different parts of the country. Under the contract,
petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters
of industrial fuel oil of Caltex to be delivered to the Caltex Oil
Terminal in Zamboanga City. The shipment was insured with the
private respondent, American Home Assurance Corporation.
The diligennced exercised by the shipmaster further supports the

exemption of private respondent from liability for the loss of the
cargo, in accordance with Article 1739 of the Civil Code.
Although we find private respondent free from liability for the loss of
the cargo, we disagree with its contention that the doctrine of res
50
Choco Notes
On August 14, 1986, MT Maysun set sail from Batangas for
Zamboanga City. Unfortunately, the vessel sank in the early morning
of August 16, 1986 near Panay Gulf in the Visayas taking with it the
entire cargo of fuel oil.
Petitioner Delsan Transport Lines, Inc. invokes the provision of

Section 113 of the Insurance Code of the Philippines, which states
that in every marine insurance upon a ship or freight, or freightage, or
upon any thing which is the subject of marine insurance there is an
implied warranty by the shipper that the ship is seaworthy.
Consequently, the insurer will not be liable to the assured for any loss
under the policy in case the vessel would later on be found as not
seaworthy at the inception of the insurance. It theorized that when
private respondent paid Caltex the value of its lost cargo, the act of
the private respondent is equivalent to a tacit recognition that the illfated vessel was seaworthy; otherwise, private respondent was not
legally liable to Caltex due to the latters breach of implied warranty
under the marine insurance policy that the vessel was seaworthy.
Subsequently, private respondent paid Caltex the sum of Five Million

Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven
Centavos (P5,096,635.57) representing the insured value of the lost
cargo. Exercising its right of subrogation under Article 2207 of the
New Civil Code, the private respondent demanded of the petitioner
the same amount it paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand,
private respondent filed a complaint with the Regional Trial Court of
Makati City, Branch 137, for collection of a sum of money. After the
trial and upon analyzing the evidence adduced, the trial court
rendered a decision on November 29, 1990 dismissing the complaint
against herein petitioner without pronouncement as to cost. The trial
court found that the vessel, MT Maysun, was seaworthy to undertake
the voyage as determined by the Philippine Coast Guard per Survey
Certificate Report No. M5-016-MH upon inspection during its annual
dry-docking and that the incident was caused by unexpected
inclement weather condition or force majeure, thus exempting the
common carrier (herein petitioner) from liability for the loss of its
cargo.[3]
The petitioner also alleges that the Court of Appeals erred in ruling
that MT Maysun was not seaworthy on the ground that the marine
officer who served as the chief mate of the vessel, Francisco Berina,
was allegedly not qualified. Under Section 116 of the Insurance
Code of the Philippines, the implied warranty of seaworthiness of the
vessel, which the private respondent admitted as having been fulfilled
by its payment of the insurance proceeds to Caltex of its lost cargo,
extends to the vessels complement. Besides, petitioner avers that
although Berina had merely a 2nd officers license, he was qualified
to act as the vessels chief officer under Chapter IV(403), Category
III(a)(3)(ii)(aa) of the Philippine Merchant Marine Rules and
Regulations. In fact, all the crew and officers of MT Maysun were
exonerated in the administrative investigation conducted by the
Board of Marine Inquiry after the subject accident.[6]
The decision of the trial court, however, was reversed, on appeal, by

the Court of Appeals. The appellate court gave credence to the
weather report issued by the Philippine Atmospheric, Geophysical
and Astronomical Services Administration (PAGASA for brevity)
which showed that from 2:00 oclock to 8:00 oclock in the morning
on August 16, 1986, the wind speed remained at 10 to 20 knots per
hour while the waves measured from .7 to two (2) meters in height
only in the vicinity of the Panay Gulf where the subject vessel sank,
in contrast to herein petitioners allegation that the waves were
twenty (20) feet high. In the absence of any explanation as to what
may have caused the sinking of the vessel coupled with the finding
that the same was improperly manned, the appellate court ruled that
the petitioner is liable on its obligation as common carrier[4] to
herein private respondent insurance company as subrogee of Caltex.
The subsequent motion for reconsideration of herein petitioner was
denied by the appellate court.
In any event, petitioner further avers that private respondent failed,

for unknown reason, to present in evidence during the trial of the
instant case the subject marine cargo insurance policy it entered into
with Caltex. By virtue of the doctrine laid down in the case of Home
Insurance Corporation vs. CA,[7] the failure of the private respondent
to present the insurance policy in evidence is allegedly fatal to its
claim inasmuch as there is no way to determine the rights of the
parties thereto.
Hence, the legal issues posed before the Court are:
I
Whether or not the payment made by the private respondent to Caltex
for the insured value of the lost cargo amounted to an admission that
the vessel was seaworthy, thus precluding any action for recovery
against the petitioner.
Petitioner raised the following assignments of error in support of the

instant petition,[5] to wit:
I
II
THE COURT OF APPEALS ERRED IN REVERSING THE
DECISION OF THE REGIONAL TRIAL COURT.
Whether or not the non-presentation of the marine insurance policy

bars the complaint for recovery of sum of money for lack of cause of
action.
II
THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED
IN REBUTTING THE LEGAL PRESUMPTION THAT THE
VESSEL MT MAYSUN WAS SEAWORTHY.
We rule in the negative on both issues.

The payment made by the private respondent for the insured value of
the lost cargo operates as waiver of its (private respondent) right to
enforce the term of the implied warranty against Caltex under the
marine insurance policy. However, the same cannot be validly
interpreted as an automatic admission of the vessels seaworthiness
by the private respondent as to foreclose recourse against the
petitioner for any liability under its contractual obligation as a
III
THE COURT OF APPEALS ERRED IN NOT APPLYING THE
DOCTRINE OF THE SUPREME COURT IN THE CASE OF
HOME INSURANCE CORPORATION V. COURT OF APPEALS.
51
Choco Notes
common carrier. The fact of payment grants the private respondent
subrogatory right which enables it to exercise legal remedies that
would otherwise be available to Caltex as owner of the lost cargo
against the petitioner common carrier.[8] Article 2207 of the New
Civil Code provides that:
The appellate court also correctly opined that the petitioners

witnesses, Jaime Jarabe and Francisco Berina, ship captain and chief
mate, respectively, of the said vessel, could not be expected to testify
against the interest of their employer, the herein petitioner common
carrier.
Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
Neither may petitioner escape liability by presenting in evidence

certificates[16] that tend to show that at the time of dry-docking and
inspection by the Philippine Coast Guard, the vessel MT Maysun,
was fit for voyage. These pieces of evidence do not necessarily take
into account the actual condition of the vessel at the time of the
commencement of the voyage. As correctly observed by the Court of
appeals:
The right of subrogation has its roots in equity. It is designed to

promote and to accomplish justice and is the mode which equity
adopts to compel the ultimate payment of a debt by one who in
justice and good conscience ought to pay.[9] It is not dependent upon,
nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment by the
insurance company of the insurance claim.[10] Consequently, the
payment made by the private respondent (insurer) to Caltex (assured)
operates as an equitable assignment to the former of all the remedies
which the latter may have against the petitioner.
At the time of dry-docking and inspection, the ship may have

appeared fit. The certificates issued, however, do not negate the
presumption of unseaworthiness triggered by an unexplained sinking.
Of certificates issued in this regard, authorities are likewise clear as
to their probative value, (thus):
Seaworthiness relates to a vessels actual condition. Neither the
granting of classification or the issuance of certificates establishes
seaworthiness. (2-A Benedict on Admiralty, 7-3, Sec. 62)
And also:
From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of passengers transported
by them, according to all the circumstances of each case.[11] In the
event of loss, destruction or deterioration of the insured goods,
common carriers shall be responsible unless the same is brought
about, among others, by flood, storm, earthquake, lightning or other
natural disaster or calamity.[12] In all other cases, if the goods are
lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence.[13]
Authorities are clear that diligence in securing certificates of

seaworthiness does not satisfy the vessel owners obligation. Also
securing the approval of the shipper of the cargo, or his surveyor, of
the condition of the vessel or her stowage does not establish due
diligence if the vessel was in fact unseaworthy, for the cargo owner
has no obligation in relation to seaworthiness. (Ibid.)[17]
Additionally, the exoneration of MT Maysuns officers and crew by
the Board of Marine Inquiry merely concerns their respective
administrative liabilities. It does not in any way operate to absolve
the petitioner common carrier from its civil liability arising from its
failure to observe extraordinary diligence in the vigilance over the
goods it was transporting and for the negligent acts or omissions of
its employees, the determination of which properly belongs to the
courts.[18] In the case at bar, petitioner is liable for the insured value
of the lost cargo of industrial fuel oil belonging to Caltex for its
failure to rebut the presumption of fault or negligence as common
carrier[19] occasioned by the unexplained sinking of its vessel, MT
Maysun, while in transit.
In order to escape liability for the loss of its cargo of industrial fuel
oil belonging to Caltex, petitioner attributes the sinking of MT
Maysun to fortuitous event or force majeure. From the testimonies of
Jaime Jarabe and Francisco Berina, captain and chief mate,
respectively of the ill-fated vessel, it appears that a sudden and
unexpected change of weather condition occurred in the early
morning of August 16, 1986; that at around 3:15 oclock in the
morning a squall (unos) carrying strong winds with an approximate
velocity of 30 knots per hour and big waves averaging eighteen (18)
to twenty (20) feet high, repeatedly buffeted MT Maysun causing it
to tilt, take in water and eventually sink with its cargo.[14] This tale
of strong winds and big waves by the said officers of the petitioner
however, was effectively rebutted and belied by the weather
report[15] from the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA), the independent
government agency charged with monitoring weather and sea
conditions, showing that from 2:00 oclock to 8:00 oclock in the
morning on August 16, 1986, the wind speed remained at ten (10) to
twenty (20) knots per hour while the height of the waves ranged from
.7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf
where the subject vessel sank. Thus, as the appellate court correctly
ruled, petitioners vessel, MT Maysun, sank with its entire cargo for
the reason that it was not seaworthy. There was no squall or bad
weather or extremely poor sea condition in the vicinity when the said
vessel sank.
Anent the second issue, it is our view and so hold that the
presentation in evidence of the marine insurance policy is not
indispensable in this case before the insurer may recover from the
common carrier the insured value of the lost cargo in the exercise of
its subrogatory right. The subrogation receipt, by itself, is sufficient
to establish not only the relationship of herein private respondent as
insurer and Caltex, as the assured shipper of the lost cargo of
industrial fuel oil, but also the amount paid to settle the insurance
claim. The right of subrogation accrues simply upon payment by the
insurance company of the insurance claim.[20]
The presentation of the insurance policy was necessary in the case of
Home Insurance Corporation v. CA[21] (a case cited by petitioner)
because the shipment therein (hydraulic engines) passed through
several stages with different parties involved in each stage. First,
from the shipper to the port of departure; second, from the port of
52
Choco Notes
departure to the M/S Oriental Statesman; third, from the M/S Oriental
Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific
Conveyor to the port of arrival; fifth, from the port of arrival to the
arrastre operator; sixth, from the arrastre operator to the hauler,
Mabuhay Brokerage Co., Inc. (private respondent therein); and lastly,
from the hauler to the consignee. We emphasized in that case that in
the absence of proof of stipulations to the contrary, the hauler can be
liable only for any damage that occurred from the time it received the
cargo until it finally delivered it to the consignee. Ordinarily, it
cannot be held responsible for the handling of the cargo before it
actually received it. The insurance contract, which was not presented
in evidence in that case would have indicated the scope of the
insurers liability, if any, since no evidence was adduced indicating at
what stage in the handling process the damage to the cargo was
sustained.

Reconsideration.
petitioners
Motion
for
On the other hand, the disposition of the Regional Trial Courts[6]

Decision,[7] which was later reversed by the CA, states:
WHEREFORE, premises considered,
DISMISSED for lack of merit.
the
case
is
hereby
No cost.[8]
The Facts
The facts of the case are summarized by the appellate court in this
wise:
Hence, our ruling on the presentation of the insurance policy in the

said case of Home Insurance Corporation is not applicable to the case
at bar. In contrast, there is no doubt that the cargo of industrial fuel
oil belonging to Caltex, in the case at bar, was lost while on board
petitioners vessel, MT Maysun, which sank while in transit in the
vicinity of Panay Gulf and Cuyo East Pass in the early morning of
August 16, 1986.
Sometime on December 11, 1991, Nestor Angelia delivered to the

Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping
Lines), [petitioner] for brevity, cargo consisting of one (1) carton of
Christmas dcor and two (2) sacks of plastic toys, to be transported
on board the M/V Tandag on its Voyage No. T-189 scheduled to
depart from Cebu City, on December 12, 1991, for Tandag, Surigao
del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid,
covering the cargo. Nestor Angelia was both the shipper and
consignee of the cargo valued, on the face thereof, in the amount of
P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner],
consisting of two (2) cartons of plastic toys and Christmas decor, one
(1) roll of floor mat and one (1) bundle of various or assorted goods
for transportation thereof from Cebu City to Tandag, Surigao del Sur,
on board the said vessel, and said voyage. [Petitioner] issued Bill of
Lading No. 59 covering the cargo which, on the face thereof, was
valued in the amount of P14,000.00. Under the Bill of Lading,
Zosimo Mercado was both the shipper and consignee of the cargo.
WHEREFORE, the instant petition is DENIED. The Decision dated

June 17, 1996 of the Court of Appeals in CA-G.R. CV No. 39836 is
AFFIRMED. Costs against the petitioner.
SO ORDERED.
Philamgen v. MCG Marine Mar

2002 (case not found)
denied
8,
Edgar Cokaliong v. UCPB General

[G.R. No. 146018. June 25, 2003]
On December 12, 1991, Feliciana Legaspi insured the cargo,

covered by Bill of Lading No. 59, with the UCPB General Insurance
Co., Inc., [respondent] for brevity, for the amount of P100,000.00
against all risks under Open Policy No. 002/91/254 for which she
was issued, by [respondent], Marine Risk Note No. 18409 on said
date. She also insured the cargo covered by Bill of Lading No. 58,
with [respondent], for the amount of P50,000.00, under Open Policy
No. 002/91/254 on the basis of which [respondent] issued Marine
Risk Note No. 18410 on said date.
EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs.

UCPB GENERAL INSURANCE COMPANY, INC., respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by
stipulation in the bill of lading, be limited to the value declared by the
shipper. On the other hand, the liability of the insurer is determined
by the actual value covered by the insurance policy and the insurance
premiums paid therefor, and not necessarily by the value declared in
the bill of lading.
When the vessel left port, it had thirty-four (34) passengers and
assorted cargo on board, including the goods of Legaspi. After the
vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the
engine room, and, despite earnest efforts of the officers and crew of
the vessel, the fire engulfed and destroyed the entire vessel resulting
in the loss of the vessel and the cargoes therein. The Captain filed the
required Marine Protest.
The Case
Before the Court is a Petition for Review[1] under Rule 45 of the
Rules of Court, seeking to set aside the August 31, 2000 Decision[2]
and the November 17, 2000 Resolution[3] of the Court of Appeals[4]
(CA) in CA-GR SP No. 62751. The dispositive part of the Decision
reads:
Shortly thereafter, Feliciana Legaspi filed a claim, with

[respondent], for the value of the cargo insured under Marine Risk
Note No. 18409 and covered by Bill of Lading No. 59. She
submitted, in support of her claim, a Receipt, dated December 11,
1991, purportedly signed by Zosimo Mercado, and Order Slips
purportedly signed by him for the goods he received from Feliciana
Legaspi valued in the amount of P110,056.00. [Respondent]
approved the claim of Feliciana Legaspi and drew and issued UCPB
Check No. 612939, dated March 9, 1992, in the net amount of
P99,000.00, in settlement of her claim after which she executed a
IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED.

The Decision appealed from is REVERSED. [Petitioner] is hereby
condemned to pay to [respondent] the total amount of P148,500.00,
with interest thereon, at the rate of 6% per annum, from date of this
Decision of the Court. [Respondents] claim for attorneys fees [is]
DISMISSED. [Petitioners] counterclaims are DISMISSED.[5]
53
Choco Notes
Subrogation Receipt/Deed, for said amount, in favor of [respondent].
She also filed a claim for the value of the cargo covered by Bill of
Lading No. 58. She submitted to [respondent] a Receipt, dated
December 11, 1991 and Order Slips, purportedly signed by Nestor
Angelia for the goods he received from Feliciana Legaspi valued at
P60,338.00. [Respondent] approved her claim and remitted to
Feliciana Legaspi the net amount of P49,500.00, after which she
signed a Subrogation Receipt/Deed, dated March 9, 1992, in favor of
[respondent].
and Nestor Angelia as shippers/consignees, respectively; the engine

room of the M/V Tandag caught fire after it passed the
Mandaue/Mactan Bridge resulting in the total loss of the vessel and
its cargo; an investigation was conducted by the Board of Marine
Inquiry of the Philippine Coast Guard which rendered a Report, dated
February 13, 1992 absolving [petitioner] of any responsibility on
account of the fire, which Report of the Board was approved by the
District Commander of the Philippine Coast Guard; a few days after
the sinking of the vessel, a representative of the Legaspi Marketing
filed claims for the values of the goods under Bills of Lading Nos. 58
and 59 in behalf of the shippers/consignees, Nestor Angelia and
Zosimo Mercado; [petitioner] was able to ascertain, from the
shippers/consignees and the representative of the Legaspi Marketing
that the cargo covered by Bill of Lading No. 59 was owned by
Legaspi Marketing and consigned to Zosimo Mercado while that
covered by Bill of Lading No. 58 was purchased by Nestor Angelia
from the Legaspi Marketing; that [petitioner] approved the claim of
Legaspi Marketing for the value of the cargo under Bill of Lading
No. 59 and remitted to Legaspi Marketing the said amount under
Equitable Banking Corporation Check No. 20230486 dated August
12, 1992, in the amount of P14,000.00 for which the representative of
the Legaspi Marketing signed Voucher No. 4379, dated August 12,
1992, for the said amount of P14,000.00 in full payment of claims
under Bill of Lading No. 59; that [petitioner] approved the claim of
Nestor Angelia in the amount of P6,500.00 but that since the latter
owed Chester Marketing, Inc., for some purchases, [petitioner]
merely set off the amount due to Nestor Angelia under Bill of Lading
No. 58 against his account with Chester Marketing, Inc.; [petitioner]
lost/[misplaced] the original of the check after it was received by
Legaspi Marketing, hence, the production of the microfilm copy by
Noel Tanyu of the Equitable Banking Corporation; [petitioner] never
knew, before settling with Legaspi Marketing and Nestor Angelia that
the cargo under both Bills of Lading were insured with [respondent],
or that Feliciana Legaspi filed claims for the value of the cargo with
[respondent] and that the latter approved the claims of Feliciana
Legaspi and paid the total amount of P148,500.00 to her; [petitioner]
came to know, for the first time, of the payments by [respondent] of
the claims of Feliciana Legaspi when it was served with the summons
and complaint, on October 8, 1992; after settling his claim, Nestor
Angelia x x x executed the Release and Quitclaim, dated July 2,
1993, and Affidavit, dated July 2, 1993 in favor of [respondent];
hence, [petitioner] was absolved of any liability for the loss of the
cargo covered by Bills of Lading Nos. 58 and 59; and even if it was,
its liability should not exceed the value of the cargo as stated in the
Bills of Lading.
On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi,

filed a complaint anchored on torts against [petitioner], with the
Regional Trial Court of Makati City, for the collection of the total
principal amount of P148,500.00, which it paid to Feliciana Legaspi
for the loss of the cargo, praying that judgment be rendered in its
favor and against the [petitioner] as follows:
WHEREFORE, it is respectfully prayed of this Honorable Court that
after due hearing, judgment be rendered ordering [petitioner] to pay
[respondent] the following.
1. Actual damages in the amount of P148,500.00 plus interest
thereon at the legal rate from the time of filing of this complaint until
fully paid;
2. Attorneys fees in the amount of P10,000.00; and
3. Cost of suit.
[Respondent] further prays for such other reliefs and remedies as this
Honorable Court may deem just and equitable under the premises.
[Respondent] alleged, inter alia, in its complaint, that the cargo
subject of its complaint was delivered to, and received by, [petitioner]
for transportation to Tandag, Surigao del Sur under Bill of Ladings,
Annexes A and B of the complaint; that the loss of the cargo was
due to the negligence of the [petitioner]; and that Feliciana Legaspi
had executed Subrogation Receipts/Deeds in favor of [respondent]
after paying to her the value of the cargo on account of the Marine
Risk Notes it issued in her favor covering the cargo.
In its Answer to the complaint, [petitioner] alleged that: (a)
[petitioner] was cleared by the Board of Marine Inquiry of any
negligence in the burning of the vessel; (b) the complaint stated no
cause of action against [petitioner]; and (c) the shippers/consignee
had already been paid the value of the goods as stated in the Bill of
Lading and, hence, [petitioner] cannot be held liable for the loss of
the cargo beyond the value thereof declared in the Bill of Lading.
[Petitioner] did not anymore present any other witnesses on its

evidence-in-chief. x x x[9] (Citations omitted)
After [respondent] rested its case, [petitioner] prayed for and was
allowed, by the Court a quo, to take the depositions of Chester
Cokaliong, the Vice-President and Chief Operating Officer of
[petitioner], and a resident of Cebu City, and of Noel Tanyu, an
officer of the Equitable Banking Corporation, in Cebu City, and a
resident of Cebu City, to be given before the Presiding Judge of
Branch 106 of the Regional Trial Court of Cebu City. Chester
Cokaliong and Noel Tanyu did testify, by way of deposition, before
the Court and declared inter alia, that: [petitioner] is a family
corporation like the Chester Marketing, Inc.; Nestor Angelia had been
doing business with [petitioner] and Chester Marketing, Inc., for
years, and incurred an account with Chester Marketing, Inc. for his
purchases from said corporation; [petitioner] did issue Bills of Lading
Nos. 58 and 59 for the cargo described therein with Zosimo Mercado

The CA held that petitioner had failed to prove that the fire which
consumed the vessel and its cargo was caused by something other
than its negligence in the upkeep, maintenance and operation of the
vessel.[10]
Petitioner had paid P14,000 to Legaspi Marketing for the cargo
covered by Bill of Lading No. 59. The CA, however, held that the
payment did not extinguish petitioners obligation to respondent,
because there was no evidence that Feliciana Legaspi (the insured)
was the owner/proprietor of Legaspi Marketing. The CA also pointed
out the impropriety of treating the claim under Bill of Lading No. 58
54
Choco Notes
-- covering cargo valued therein at P6,500 -- as a setoff against
Nestor Angelias account with Chester Enterprises, Inc.
speaking, force majeure generally applies to a natural accident, such

as that caused by a lightning, an earthquake, a tempest or a public
enemy.[14] Hence, fire is not considered a natural disaster or
calamity. In Eastern Shipping Lines, Inc. v. Intermediate Appellate
Court,[15] we explained:
Finally, it ruled that respondent is not bound by the valuation of the

cargo under the Bills of Lading, x x x nor is the value of the cargo
under said Bills of Lading conclusive on the [respondent]. This is so
because, in the first place, the goods were insured with the
[respondent] for the total amount of P150,000.00, which amount may
be considered as the face value of the goods.[11]
x x x. This must be so as it arises almost invariably from some act

of man or by human means. It does not fall within the category of an
act of God unless caused by lighting or by other natural disaster or
calamity. It may even be caused by the actual fault or privity of the
carrier.
Hence this Petition.[12]

Issues
Article 1680 of the Civil Code, which considers fire as an

extraordinary fortuitous event refers to leases or rural lands where a
reduction of the rent is allowed when more than one-half of the fruits
have been lost due to such event, considering that the law adopts a
protective policy towards agriculture.
Petitioner raises for our consideration the following alleged errors of

the CA:
I
As the peril of fire is not comprehended within the exceptions in

Article 1734, supra, Article 1735 of the Civil Code provides that in
all cases other than those mentioned in Article 1734, the common
carrier shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the extraordinary
diligence required by law.
The Honorable Court of Appeals erred, granting arguendo that

petitioner is liable, in holding that petitioners liability should be
based on the actual insured value of the goods and not from actual
valuation declared by the shipper/consignee in the bill of lading.
II
Where loss of cargo results from the failure of the officers of a vessel
to inspect their ship frequently so as to discover the existence of
cracked parts, that loss cannot be attributed to force majeure, but to
the negligence of those officials.[16]
The Court of Appeals erred in not affirming the findings of the

Philippine Coast Guard, as sustained by the trial court a quo, holding
that the cause of loss of the aforesaid cargoes under Bill of Lading
Nos. 58 and 59 was due to force majeure and due diligence was
[exercised] by petitioner prior to, during and immediately after the
fire on [petitioners] vessel.
The law provides that a common carrier is presumed to have been

negligent if it fails to prove that it exercised extraordinary vigilance
over the goods it transported. Ensuring the seaworthiness of the
vessel is the first step in exercising the required vigilance. Petitioner
did not present sufficient evidence showing what measures or acts it
had undertaken to ensure the seaworthiness of the vessel. It failed to
show when the last inspection and care of the auxiliary engine fuel oil
service tank was made, what the normal practice was for its
maintenance, or some other evidence to establish that it had exercised
extraordinary diligence. It merely stated that constant inspection and
care were not possible, and that the last time the vessel was drydocked was in November 1990. Necessarily, in accordance with
Article 1735[17] of the Civil Code, we hold petitioner responsible for
the loss of the goods covered by Bills of Lading Nos. 58 and 59.
First Issue:
Liability for Loss
Second Issue:
Extent of Liability
Petitioner argues that the cause of the loss of the goods, subject of
this case, was force majeure. It adds that its exercise of due diligence
was adequately proven by the findings of the Philippine Coast Guard.
Respondent contends that petitioners liability should be based on the

actual insured value of the goods, subject of this case. On the other
hand, petitioner claims that its liability should be limited to the value
declared by the shipper/consignee in the Bill of Lading.
III
The Court of Appeals erred in not holding that respondent UCPB
General Insurance has no cause of action against the petitioner.[13]
In sum, the issues are: (1) Is petitioner liable for the loss of the
goods? (2) If it is liable, what is the extent of its liability?
This Courts Ruling
We are not convinced. The uncontroverted findings of the Philippine

Coast Guard show that the M/V Tandag sank due to a fire, which
resulted from a crack in the auxiliary engine fuel oil service tank.
Fuel spurted out of the crack and dripped to the heating exhaust
manifold, causing the ship to burst into flames. The crack was
located on the side of the fuel oil tank, which had a mere two-inch
gap from the engine room walling, thus precluding constant
inspection and care by the crew.
The records[18] show that the Bills of Lading covering the lost goods
contain the stipulation that in case of claim for loss or for damage to
the shipped merchandise or property, [t]he liability of the common
carrier x x x shall not exceed the value of the goods as appearing in
the bill of lading.[19] The attempt by respondent to make light of
this stipulation is unconvincing. As it had the consignees copies of
the Bills of Lading,[20] it could have easily produced those copies,
instead of relying on mere allegations and suppositions. However, it
presented mere photocopies thereof to disprove petitioners evidence
showing the existence of the above stipulation.
Having originated from an unchecked crack in the fuel oil service

tank, the fire could not have been caused by force majeure. Broadly
55
Choco Notes
up to One Hundred Thousand (Y100,000.00) Yen. However, the
shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited liability
of the carrier. Considering that the shipper did not declare a higher
valuation, it had itself to blame for not complying with the
stipulations. (Italics supplied)
A stipulation that limits liability is valid[21] as long as it is not

against public policy. In Everett Steamship Corporation v. Court of
Appeals,[22] the Court stated:
A stipulation in the bill of lading limiting the common carriers
liability for loss or destruction of a cargo to a certain sum, unless the
shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code which provides:
In the present case, the stipulation limiting petitioners liability is not

contrary to public policy. In fact, its just and reasonable character is
evident. The shippers/consignees may recover the full value of the
goods by the simple expedient of declaring the true value of the
shipment in the Bill of Lading. Other than the payment of a higher
freight, there was nothing to stop them from placing the actual value
of the goods therein. In fact, they committed fraud against the
common carrier by deliberately undervaluing the goods in their Bill
of Lading, thus depriving the carrier of its proper and just transport
fare.
Art. 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.
Concededly, the purpose of the limiting stipulation in the Bill of

Lading is to protect the common carrier. Such stipulation obliges the
shipper/consignee to notify the common carrier of the amount that the
latter may be liable for in case of loss of the goods. The common
carrier can then take appropriate measures -- getting insurance, if
needed, to cover or protect itself. This precaution on the part of the
carrier is reasonable and prudent. Hence, a shipper/consignee that
undervalues the real worth of the goods it seeks to transport does not
only violate a valid contractual stipulation, but commits a fraudulent
act when it seeks to make the common carrier liable for more than the
amount it declared in the bill of lading.
Such limited-liability clause has also been consistently upheld by

this Court in a number of cases. Thus, in Sea-Land Service, Inc. vs.
Intermediate Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods
by Sea Act did not exist, the validity and binding effect of the liability
limitation clause in the bill of lading here are nevertheless fully
sustainable on the basis alone of the cited Civil Code Provisions.
That said stipulation is just and reasonable is arguable from the fact
that it echoes Art. 1750 itself in providing a limit to liability only if a
greater value is not declared for the shipment in the bill of lading. To
hold otherwise would amount to questioning the justness and fairness
of the law itself, and this the private respondent does not pretend to
do. But over and above that consideration, the just and reasonable
character of such stipulation is implicit in it giving the shipper or
owner the option of avoiding accrual of liability limitation by the
simple and surely far from onerous expedient of declaring the nature
and value of the shipment in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by

undervaluing the goods in their respective Bills of Lading. Hence,
petitioner was exposed to a risk that was deliberately hidden from it,
and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged
actual value of the goods) the insurance company was paid the
correct higher premium by Feliciana Legaspi; while petitioner was
paid a fee lower than what it was entitled to for transporting the
goods that had been deliberately undervalued by the shippers in the
Bill of Lading. Between the two of them, the insurer should bear the
loss in excess of the value declared in the Bills of Lading. This is the
just and equitable solution.
Pursuant to the afore-quoted provisions of law, it is required that the

stipulation limiting the common carriers liability for loss must be
reasonable and just under the circumstances, and has been freely and
fairly agreed upon.
The bill of lading subject of the present controversy specifically
provides, among others:
In Aboitiz Shipping Corporation v. Court of Appeals,[23] the

description of the nature and the value of the goods shipped were
declared and reflected in the bill of lading, like in the present case.
The Court therein considered this declaration as the basis of the
carriers liability and ordered payment based on such amount.
Following this ruling, petitioner should not be held liable for more
than what was declared by the shippers/consignees as the value of the
goods in the bills of lading.
18.
All claims for which the carrier may be liable shall be
adjusted and settled on the basis of the shippers net invoice cost plus
freight and insurance premiums, if paid, and in no event shall the
carrier be liable for any loss of possible profits or any consequential
loss.
The carrier shall not be liable for any loss of or any damage to or in
any connection with, goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency (100,000.00) or its equivalent
in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this
amount is declared in writing by the shipper before receipt of the
goods by the carrier and inserted in the Bill of Lading and extra
freight is paid as required.
We find no cogent reason to disturb the CAs finding that Feliciana

Legaspi was the owner of the goods covered by Bills of Lading Nos.
58 and 59. Undoubtedly, the goods were merely consigned to Nestor
Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi
or her subrogee (respondent) was entitled to the goods or, in case of
loss, to compensation therefor. There is no evidence showing that
petitioner paid her for the loss of those goods. It does not even claim
to have paid her.
The above stipulations are, to our mind, reasonable and just. In the
bill of lading, the carrier made it clear that its liability would only be
56
Choco Notes
On the other hand, Legaspi Marketing filed with petitioner a claim
for the lost goods under Bill of Lading No. 59, for which the latter
subsequently paid P14,000. But nothing in the records convincingly
shows that the former was the owner of the goods. Respondent was,
however, able to prove that it was Feliciana Legaspi who owned
those goods, and who was thus entitled to payment for their loss.
Hence, the claim for the goods under Bill of Lading No. 59 cannot be
deemed to have been extinguished, because payment was made to a
person who was not entitled thereto.
off Baseco to seek shelter from the approaching typhoon. PSTSI III
was tied down to other barges which arrived ahead of it while
weathering out the storm that night. A few days after, the barge
developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water. The petitioner filed a Marine
Protest on August 28, 1990.[8] It likewise secured the services of
Gaspar Salvaging Corporation which refloated the barge.[9] The
hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally
headed towards the consignee's wharf on September 5, 1990. Upon
reaching the Sta. Mesa spillways, the barge again ran aground due to
strong current. To avoid the complete sinking of the barge, a portion
of the goods was transferred to three other barges.[10]
With regard to the claim for the goods that were covered by Bill of
Lading No. 58 and valued at P6,500, the parties have not convinced
us to disturb the findings of the CA that compensation could not
validly take place. Thus, we uphold the appellate courts ruling on
this point.
The next day, September 6, 1990, the towing bits of the barge broke.
It sank completely, resulting in the total loss of the remaining cargo.
[11] A second Marine Protest was filed on September 7, 1990.[12]
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The

assailed Decision is MODIFIED in the sense that petitioner is
ORDERED to pay respondent the sums of P14,000 and P6,500,
which represent the value of the goods stated in Bills of Lading Nos.
59 and 58, respectively. No costs.
On September 14, 1990, a bidding was conducted to dispose of the

damaged wheat retrieved and loaded on the three other barges.[13]
The total proceeds from the sale of the salvaged cargo was
P201,379.75.[14]
SO ORDERED.
Asia Lighterage and Shipping v. CA

[G.R. No. 147246. August 19, 2003]
On the same date, September 14, 1990, consignee sent a claim letter
to the petitioner, and another letter dated September 18, 1990 to the
private respondent for the value of the lost cargo.
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT

OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents.
DECISION
PUNO, J.:
On January 30, 1991, the private respondent indemnified the

consignee in the amount of P4,104,654.22.[15] Thereafter, as
subrogee, it sought recovery of said amount from the petitioner, but
to no avail.
On July 3, 1991, the private respondent filed a complaint against the
petitioner for recovery of the amount of indemnity, attorney's fees
and cost of suit.[16] Petitioner filed its answer with counterclaim.
[17]
On appeal is the Court of Appeals May 11, 2000 Decision[1] in CAG.R. CV No. 49195 and February 21, 2001 Resolution[2] affirming
with modification the April 6, 1994 Decision[3] of the Regional Trial
Court of Manila which found petitioner liable to pay private
respondent the amount of indemnity and attorney's fees.
The Regional Trial Court ruled in favor of the private respondent.

The dispositive portion of its Decision states:
First, the facts.
WHEREFORE, premises considered, judgment is hereby rendered

ordering defendant Asia Lighterage & Shipping, Inc. liable to pay
plaintiff Prudential Guarantee & Assurance Co., Inc. the sum of
P4,104,654.22 with interest from the date complaint was filed on July
3, 1991 until fully satisfied plus 10% of the amount awarded as and
for attorney's fees. Defendant's counterclaim is hereby DISMISSED.
With costs against defendant.[18]
On June 13, 1990, 3,150 metric tons of Better Western White Wheat
in bulk, valued at US$423,192.35[4] was shipped by Marubeni
American Corporation of Portland, Oregon on board the vessel M/V
NEO CYMBIDIUM V-26 for delivery to the consignee, General
Milling Corporation in Manila, evidenced by Bill of Lading No.
PTD/Man-4.[5] The shipment was insured by the private respondent
Prudential Guarantee and Assurance, Inc. against loss or damage for
P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.[6]
Petitioner appealed to the Court of Appeals insisting that it is not a

common carrier. The appellate court affirmed the decision of the trial
court with modification. The dispositive portion of its decision reads:
On July 25, 1990, the carrying vessel arrived in Manila and the cargo
was transferred to the custody of the petitioner Asia Lighterage and
Shipping, Inc. The petitioner was contracted by the consignee as
carrier to deliver the cargo to consignee's warehouse at Bo. Ugong,
Pasig City.
WHEREFORE, the decision appealed from is hereby AFFIRMED

with modification in the sense that the salvage value of P201,379.75
shall be deducted from the amount of P4,104,654.22. Costs against
appellant.
On August 15, 1990, 900 metric tons of the shipment was loaded on
barge PSTSI III, evidenced by Lighterage Receipt No. 0364[7] for
delivery to consignee. The cargo did not reach its destination.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was
likewise denied by the appellate court in a Resolution promulgated on
February 21, 2001.
It appears that on August 17, 1990, the transport of said cargo was
suspended due to a warning of an incoming typhoon. On August 22,
1990, the petitioner proceeded to pull the barge to Engineering Island
57
Choco Notes
carrying or transporting goods by water for compensation. Petitioner
is clearly a common carrier. In De Guzman, supra,[23] we
considered private respondent Ernesto Cendaa to be a common
carrier even if his principal occupation was not the carriage of goods
for others, but that of buying used bottles and scrap metal in
Pangasinan and selling these items in Manila.
Hence, this petition. Petitioner submits the following errors allegedly

committed by the appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN
A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN
IT HELD THAT PETITIONER IS A COMMON CARRIER.
We therefore hold that petitioner is a common carrier whether its

carrying of goods is done on an irregular rather than scheduled
manner, and with an only limited clientele. A common carrier need
not have fixed and publicly known routes. Neither does it have to
maintain terminals or issue tickets.

IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO
THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL
CODE APPLICABLE TO COMMON CARRIERS, THE LOSS OF
THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN
ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED.
To be sure, petitioner fits the test of a common carrier as laid down in

Bascos vs. Court of Appeals.[24] The test to determine a common
carrier is whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business
transacted.[25] In the case at bar, the petitioner admitted that it is
engaged in the business of shipping and lighterage,[26] offering its
barges to the public, despite its limited clientele for carrying or
transporting goods by water for compensation.[27]

IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED
TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN
ITS CARE AND CUSTODY OF THE CONSIGNEES CARGO.
On the second issue, we uphold the findings of the lower courts that
petitioner failed to exercise extraordinary diligence in its care and
custody of the consignees goods.
The issues to be resolved are:

(1)
Whether the petitioner is a common carrier; and,
Common carriers are bound to observe extraordinary diligence in the

vigilance over the goods transported by them.[28] They are
presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated.[29] To overcome the
presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however, exceptions to
this rule. Article 1734 of the Civil Code enumerates the instances
when the presumption of negligence does not attach:
(2)
Assuming the petitioner is a common carrier, whether it
exercised extraordinary diligence in its care and custody of the
consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons,
corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the public.
Art. 1734. Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to any of the
following causes only:
Petitioner contends that it is not a common carrier but a private

carrier. Allegedly, it has no fixed and publicly known route,
maintains no terminals, and issues no tickets. It points out that it is
not obliged to carry indiscriminately for any person. It is not bound
to carry goods unless it consents. In short, it does not hold out its
services to the general public.[20]
(1)
Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2)
civil;
Act of the public enemy in war, whether international or
We disagree.
(3)
In De Guzman vs. Court of Appeals,[21] we held that the definition

of common carriers in Article 1732 of the Civil Code makes no
distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity. We also did not distinguish between a
person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Further, we ruled that Article 1732
does not distinguish between a carrier offering its services to the
general public, and one who offers services or solicits business only
from a narrow segment of the general population.
(4)
The character of the goods or defects in the packing or in the
containers;
(5)
Act or omission of the shipper or owner of the goods;
Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits
broke, resulting in the total loss of its cargo. Petitioner claims that
this was caused by a typhoon, hence, it should not be held liable for
the loss of the cargo. However, petitioner failed to prove that the
typhoon is the proximate and only cause of the loss of the goods, and
that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss.[30] The
evidence show that, even before the towing bits of the barge broke, it
had already previously sustained damage when it hit a sunken object
In the case at bar, the principal business of the petitioner is that of

lighterage and drayage[22] and it offers its barges to the public for
58
Choco Notes
while docked at the Engineering Island. It even suffered a hole.
Clearly, this could not be solely attributed to the typhoon. The partlysubmerged vessel was refloated but its hole was patched with only
clay and cement. The patch work was merely a provisional remedy,
not enough for the barge to sail safely. Thus, when petitioner
persisted to proceed with the voyage, it recklessly exposed the cargo
to further damage. A portion of the cross-examination of Alfredo
Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states:
xxx
xxx
CROSS-EXAMINATION BY ATTY. IGNACIO:[34]
xxx
xxx
xxx
q - And then from ISLOFF Terminal you proceeded to the premises

of the GMC? Am I correct?
CROSS-EXAMINATION BY ATTY. DONN LEE:[31]

xxx
xxx
xxx
xxx
aThe next day, in the morning, we hired for additional two (2)
tugboats as I have stated.
q - Can you tell us what else transpired after that incident?
q - Despite of the threats of an incoming typhoon as you testified a

while ago?
a - After the first accident, through the initiative of the barge

owners, they tried to pull out the barge from the place of the accident,
and bring it to the anchor terminal for safety, then after deciding if the
vessel is stabilized, they tried to pull it to the consignees warehouse,
now while on route another accident occurred, now this time the
barge totally hitting something in the course.
aIt is already in an inner portion of Pasig River. The typhoon

would be coming and it would be dangerous if we are in the vicinity
of Manila Bay.
q - You said there was another accident, can you tell the court the
nature of the second accident?
q-
But the fact is, the typhoon was incoming? Yes or no?
a-
Yes.
qAnd yet as a standard operating procedure of your Company,

you have to secure a sort of Certification to determine the weather
condition, am I correct?
a - The sinking, sir.

q - Can you tell the nature . . . can you tell the court, if you know
what caused the sinking?
a-
a - Mostly it was related to the first accident because there was

already a whole (sic) on the bottom part of the barge.
q So, more or less, you had the knowledge of the incoming

typhoon, right?
xxx
xxx
a-
Yes, sir.
q-
And yet you proceeded to the premises of the GMC?
xxx
This is not all. Petitioner still headed to the consignees wharf

despite knowledge of an incoming typhoon. During the time that the
barge was heading towards the consignee's wharf on September 5,
1990, typhoon Loleng has already entered the Philippine area of
responsibility.[32] A part of the testimony of Robert Boyd, Cargo
Operations Supervisor of the petitioner, reveals:
aISLOFF Terminal is far from Manila Bay and anytime even

with the typhoon if you are already inside the vicinity or inside Pasig
entrance, it is a safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the
typhoon as force majeure to escape liability for the loss sustained by
the private respondent. Surely, meeting a typhoon head-on falls short
of due diligence required from a common carrier. More importantly,
the officers/employees themselves of petitioner admitted that when
the towing bits of the vessel broke that caused its sinking and the
total loss of the cargo upon reaching the Pasig River, it was no longer
affected by the typhoon. The typhoon then is not the proximate cause
of the loss of the cargo; a human factor, i.e., negligence had
intervened.
DIRECT-EXAMINATION BY ATTY. LEE:[33]

xxx
xxx
Yes, sir.
xxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just
allow the Barge to lie where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General
Milling Corporation, the consignee) as I have said was in a hurry for
their goods to be delivered at their Wharf since they needed badly the
wheat that was loaded in PSTSI-3. It was needed badly by the
consignee.
IN VIEW THEREOF, the petition is DENIED. The Decision of the

Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and
its Resolution dated February 21, 2001 are hereby AFFIRMED.
Costs against petitioner.
q - And this is the reason why you towed the Barge as you did?
SO ORDERED.
a - Yes, sir.
DSR-Senator
Phoenix
Lines
[G.R. No. 135377. October 7, 2003]
59
v.
Federal
Choco Notes
in favor of plaintiff and against the defendants who are hereby
ordered jointly and severally to pay plaintiff:
DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC.,

petitioners, vs. FEDERAL PHOENIX ASSURANCE CO., INC.,
respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
I. The amount of P941,439.61 (should be P941,429.61[6]) with legal

interest of 6% per annum from the date of the letter of demand of
February 8, 1993 (EXH. L) and 12% per annum from the date the
judgment becomes final and executory until its satisfaction (Eastern
Shipping Lines vs. Court of Appeals, G.R. No. 97412, July 12, 1994);
Before us is a petition for review on certiorari[1] assailing the

Decision[2] dated June 5, 1998 of the Court of Appeals in CA-G.R.
CV No. 50833 which affirmed the Decision of the Regional Trial
Court (RTC), Manila City, Branch 16, in Civil Case No. 94-69699,
Federal Phoenix Assurance Company, Inc. vs. DSR-Senator Lines
and C.F. Sharp & Co., Inc., for damages arising from the loss of
cargo while in transit.
II. The amount of P15,000.00 by way of reasonable attorneys fees;

and
III. To pay costs.
Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees
to C.F. Sharp and Company, Inc. (C.F. Sharp), the General Ship
Agent of DSR-Senator Lines, a foreign shipping corporation, for
transportation and delivery to the consignee, Al-Mohr International
Group, in Riyadh, Saudi Arabia. C.F. Sharp issued International Bill
of Lading No. SENU MNL-26548[3] for the cargo with an invoice
value of $34,579.60. Under the Bill of Lading, the port of discharge
for the cargo was at the Khor Fakkan port and the port of delivery
was Riyadh, Saudi Arabia, via Port Dammam. The cargo was loaded
in M/S Arabian Senator.
The counterclaim of defendants is DISMISSED.

SO ORDERED.[7]
On appeal, the Court of Appeals rendered a Decision dated June 5,
1998, affirming the RTC Decision, thus:
In the present recourse, the appellant carrier was presumed to have
acted negligently for the fire that gutted the feeder vessel and the
consequent loss or destruction of the cargo. Hence, the appellant
carrier is liable for appellees claim under the New Civil Code of the
Philippines.
Federal Phoenix Assurance Company, Inc. (Federal Phoenix

Assurance) insured the cargo against all risks in the amount of
P941,429.61.[4]
Contrary to C.F. Sharp and Co., Inc.s pose, its liability as ship agent
continued and remained until the cargo was delivered to the
consignee. The status of the appellant as ship agent subsisted and its
liability as a ship agent was co-terminous with and subsisted as long
as the cargo was not delivered to the consignee under the terms of the
Bill of Lading.
On June 7, 1993, M/S Arabian Senator left the Manila South

Harbor for Saudi Arabia with the cargo on board. When the vessel
arrived in Khor Fakkan Port, the cargo was reloaded on board DSRSenator Lines feeder vessel, M/V Kapitan Sakharov, bound for
Port Dammam, Saudi Arabia. However, while in transit, the vessel
and all its cargo caught fire.
IN LIGHT OF ALL THE FOREGOING, the appeal of the

appellants is DISMISSED. The Decision appealed from is affirmed.
With costs against the appellants.
On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V

Kapitan Sakharov with its cargo was gutted by fire and sank on or
about July 4, 1993. On December 16, 1993, C.F. Sharp issued a
certification to that effect.
SO ORDERED.[8]
On September 7, 1998, the Court of Appeals denied the motion for
reconsideration of DSR-Senator Lines and C.F. Sharp, prompting
them to file with this Court the instant petition.
Consequently, Federal Phoenix Assurance paid Berde Plants

P941,429.61 corresponding to the amount of insurance for the cargo.
In turn Berde Plants executed in its favor a Subrogation Receipt[5]
dated January 17, 1994.
We find the petition bereft of merit.
On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F.

Sharp demanding payment of P941,429.61 on the basis of the
Subrogation Receipt. C.F. Sharp denied any liability on the ground
that such liability was extinguished when the vessel carrying the
cargo was gutted by fire.
Article 1734 of the Civil Code provides:
Thus, on March 11, 1994, Federal Phoenix Assurance filed with the
RTC, Branch 16, Manila a complaint for damages against DSRSenator Lines and C.F. Sharp, praying that the latter be ordered to pay
actual damages of P941,429.61, compensatory damages of
P100,000.00 and costs.
(1)Flood, storm, earthquake, lightning, or other natural disaster or

calamity;
Art. 1734.
Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to
any of the following causes only:
(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;
On August 22, 1995, the RTC rendered a Decision in favor of Federal

Phoenix Assurance, the dispositive portion of which reads:
(4) The character of the goods or defects in the packing or in the

containers;
60
Choco Notes
(5) Order or act of competent public authority.
the present case, the weather condition encountered by petitioners

vessel was not a storm or a natural disaster comprehended in the
law. Given the known weather condition prevailing during the
voyage, the manner of stowage employed by the carrier was
insufficient to secure the cargo from the rolling action of the sea. The
carrier took a calculated risk in improperly securing the cargo.
Having lost that risk, it cannot now disclaim any liability for the loss.
Fire is not one of those enumerated under the above provision which
exempts a carrier from liability for loss or destruction of the cargo.
In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court,[9]
we ruled that since the peril of fire is not comprehended within the
exceptions in Article 1734, then the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence required by
law.
The Case
Before the Court is a Petition for Review[1] under Rule 45 of the
Rules of Court, seeking to reverse and set aside the March 23, 2001
Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 48915.
The assailed Decision disposed as follows:
Even if fire were to be considered a natural disaster within the

purview of Article 1734, it is required under Article 1739[10] of the
same Code that the natural disaster must have been the proximate and
only cause of the loss, and that the carrier has exercised due diligence
to prevent or minimize the loss before, during or after the occurrence
of the disaster.
WHEREFORE, the decision of the Regional Trial Court of Makati

City, Branch 148 dated August 4, 1994 is hereby MODIFIED in so
far as the award of attorneys fees is DELETED. The decision is
AFFIRMED in all other respects.[3]
We have held that a common carriers duty to observe the requisite

diligence in the shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession of, and
received by, the carrier for transportation until delivered to or until
the lapse of a reasonable time for their acceptance by the person
entitled to receive them. When the goods shipped either are lost or
arrive in damaged condition, a presumption arises against the carrier
of its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable.[11]
The CA denied petitioners Motion for Reconsideration in its

November 7, 2001 Resolution.[4]
The Facts
The factual antecedents, summarized by the trial court and adopted
by the appellate court, are as follows:
On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner]
received on board its vessel, the M/V Central Bohol, 376 pieces [of]
Philippine Apitong Round Logs and undertook to transport said
shipment to Manila for delivery to Alaska Lumber Co., Inc.
Common carriers are obliged to observe extraordinary diligence in

the vigilance over the goods transported by them. Accordingly, they
are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. There are very few
instances when the presumption of negligence does not attach and
these instances are enumerated in Article 1734. In those cases where
the presumption is applied, the common carrier must prove that it
exercised extraordinary diligence in order to overcome the
presumption.[12]
The cargo was insured for P3,000,000.00 against total loss under
[respondents] Marine Cargo Policy No. MCPB-00170.
On July 25, 1990, upon completion of loading of the cargo, the
vessel left Palawan and commenced the voyage to Manila.
Respondent Federal Phoenix Assurance raised the presumption of

negligence against petitioners. However, they failed to overcome it
by sufficient proof of extraordinary diligence.
At about 0125 hours on July 26, 1990, while enroute to Manila, the
vessel listed about 10 degrees starboardside, due to the shifting of
logs in the hold.
WHEREFORE, the instant petition is DENIED. The assailed

Decision of the Court of Appeals dated June 5, 1998, in CA-G.R. CV
No. 50833 is hereby AFFIRMED.
At about 0128 hours, after the listing of the vessel had increased to
15 degrees, the ship captain ordered his men to abandon ship and at
about 0130 hours of the same day the vessel completely sank. Due to
the sinking of the vessel, the cargo was totally lost.
SO ORDERED.
[Respondent] alleged that the total loss of the shipment was caused
by the fault and negligence of the [petitioner] and its captain and as
direct consequence thereof the consignee suffered damage in the sum
of P3,000,000.00.
Central Shipping v. Ins. Co. of North

Amer.
[G.R. No. 150751. September 20, 2004]
CENTRAL SHIPPING COMPANY, INC., petitioner, vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
DECISION
PANGANIBAN, J.:
The consignee, Alaska Lumber Co. Inc., presented a claim for the
value of the shipment to the [petitioner] but the latter failed and
refused to settle the claim, hence [respondent], being the insurer, paid
said claim and now seeks to be subrogated to all the rights and
actions of the consignee as against the [petitioner].
A common carrier is presumed to be at fault or negligent. It shall be

liable for the loss, destruction or deterioration of its cargo, unless it
can prove that the sole and proximate cause of such event is one of
the causes enumerated in Article 1734 of the Civil Code, or that it
exercised extraordinary diligence to prevent or minimize the loss. In
[Petitioner], while admitting the sinking of the vessel, interposed the

defense that the vessel was fully manned, fully equipped and in all
respects seaworthy; that all the logs were properly loaded and
secured; that the vessels master exercised due diligence to prevent or
61
Choco Notes
minimize the loss before, during and after the occurrence of the
storm.
The CA concluded that the doctrine of limited liability was not

applicable, in view of petitioners negligence -- particularly its
improper stowage of the logs.
It raised as its main defense that the proximate and only cause of the
sinking of its vessel and the loss of its cargo was a natural disaster, a
tropical storm which neither [petitioner] nor the captain of its vessel
could have foreseen.[5]

Issues
The RTC was unconvinced that the sinking of M/V Central Bohol
had been caused by the weather or any other caso fortuito. It noted
that monsoons, which were common occurrences during the months
of July to December, could have been foreseen and provided for by
an ocean-going vessel. Applying the rule of presumptive fault or
negligence against the carrier, the trial court held petitioner liable for
the loss of the cargo. Thus, the RTC deducted the salvage value of
the logs in the amount of P200,000 from the principal claim of
respondent and found that the latter was entitled to be subrogated to
the rights of the insured. The court a quo disposed as follows:
In its Memorandum, petitioner submits the following issues for our

consideration:
(i)
Whether or not the weather disturbance which caused the
sinking of the vessel M/V Central Bohol was a fortuitous event.
(ii)
Whether or not the investigation report prepared by
Claimsmen Adjustment Corporation is hearsay evidence under
Section 36, Rule 130 of the Rules of Court.
(iii)
Whether or not the finding of the Court of Appeals that the
logs in the hold shifted and such shifting could only be due to
improper stowage has a valid and factual basis.

in favor of the [respondent] and against the [petitioner] ordering the
latter to pay the following:
(iv)
1) the amount of P2,800,000.00 with legal interest thereof from the
filing of this complaint up to and until the same is fully paid;
2)
P80,000.00 as and for attorneys fees;
3)
Plus costs of suit.[6]
Whether or not M/V Central Bohol is seaworthy.
(v)
Whether or not the Court of Appeals erred in not giving
credence to the factual finding of the Board of Marine Inquiry (BMI),
an independent government agency tasked to conduct inquiries on
maritime accidents.
(vi)
Whether or not the Doctrine of Limited Liability is
applicable to the case at bar.[9]

The CA affirmed the trial courts finding that the southwestern
monsoon encountered by the vessel was not unforeseeable. Given
the season of rains and monsoons, the ship captain and his crew
should have anticipated the perils of the sea. The appellate court
further held that the weather disturbance was not the sole and
proximate cause of the sinking of the vessel, which was also due to
the concurrent shifting of the logs in the hold that could have resulted
only from improper stowage. Thus, the carrier was held responsible
for the consequent loss of or damage to the cargo, because its own
negligence had contributed thereto.
The issues boil down to two: (1) whether the carrier is liable for the
loss of the cargo; and (2) whether the doctrine of limited liability is
applicable. These issues involve a determination of factual questions
of whether the loss of the cargo was due to the occurrence of a
natural disaster; and if so, whether its sole and proximate cause was
such natural disaster or whether petitioner was partly to blame for
failing to exercise due diligence in the prevention of that loss.
The Courts Ruling
The Petition is devoid of merit.
The CA found no merit in petitioners assertion of the vessels

seaworthiness. It held that the Certificates of Inspection and
Drydocking were not conclusive proofs thereof. In order to consider
a vessel to be seaworthy, it must be fit to meet the perils of the sea.
First Issue:
Liability for Lost Cargo
From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence over
the goods they transport, according to all the circumstances of each
case.[10] In the event of loss, destruction or deterioration of the
insured goods, common carriers are responsible; that is, unless they
can prove that such loss, destruction or deterioration was brought
about -- among others -- by flood, storm, earthquake, lightning or
other natural disaster or calamity.[11] In all other cases not specified
under Article 1734 of the Civil Code, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence.[12]
Found untenable was petitioners insistence that the trial court should
have given greater weight to the factual findings of the Board of
Marine Inquiry (BMI) in the investigation of the Marine Protest filed
by the ship captain, Enriquito Cahatol. The CA further observed that
what petitioner had presented to the court a quo were mere excerpts
of the testimony of Captain Cahatol given during the course of the
proceedings before the BMI, not the actual findings and conclusions
of the agency. Citing Arada v. CA,[7] it said that findings of the BMI
were limited to the administrative liability of the owner/operator,
officers and crew of the vessel. However, the determination of
whether the carrier observed extraordinary diligence in protecting the
cargo it was transporting was a function of the courts, not of the BMI.
In the present case, petitioner disclaims responsibility for the loss of

the cargo by claiming the occurrence of a storm under Article
1734(1). It attributes the sinking of its vessel solely to the weather
62
Choco Notes
condition between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July
26, 1990.
successfully made when the injury could have been avoided by

human precaution.[28]
At the outset, it must be stressed that only questions of law[13] may

be raised in a petition for review on certiorari under Rule 45 of the
Rules of Court. Questions of fact are not proper subjects in this mode
of appeal,[14] for [t]he Supreme Court is not a trier of facts.[15]
Factual findings of the CA may be reviewed on appeal[16] only
under exceptional circumstances such as, among others, when the
inference is manifestly mistaken,[17] the judgment is based on a
misapprehension of facts,[18] or the CA manifestly overlooked
certain relevant and undisputed facts that, if properly considered,
would justify a different conclusion.[19]
Hence, if a common carrier fails to exercise due diligence -- or that

ordinary care that the circumstances of the particular case demand -to prevent or minimize the loss before, during and after the
occurrence of the natural disaster, the carrier shall be deemed to have
been negligent. The loss or injury is not, in a legal sense, due to a
natural disaster under Article 1734(1).[29]
We also find no reason to disturb the CAs finding that the loss of the
vessel was caused not only by the southwestern monsoon, but also by
the shifting of the logs in the hold. Such shifting could been due only
to improper stowage. The assailed Decision stated:
In the present case, petitioner has not given the Court sufficient
cogent reasons to disturb the conclusion of the CA that the weather
encountered by the vessel was not a storm as contemplated by
Article 1734(1). Established is the fact that between 10:00 p.m. on
July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V Central Bohol
encountered a southwestern monsoon in the course of its voyage.
Notably, in Master Cahatols account, the vessel encountered the

first southwestern monsoon at about 1[0]:00 in the evening. The
monsoon was coupled with heavy rains and rough seas yet the vessel
withstood the onslaught. The second monsoon attack occurred at
about 12:00 midnight. During this occasion, the master felt that the
logs in the hold shifted, prompting him to order second mate Percival
Dayanan to look at the bodega. Complying with the captains order,
2nd mate Percival Dayanan found that there was seawater in the
bodega. 2nd mate Dayanans account was:
The Note of Marine Protest,[20] which the captain of the vessel

issued under oath, stated that he and his crew encountered a
southwestern monsoon about 2200 hours on July 25, 1990, and
another monsoon about 2400 hours on July 26, 1990. Even petitioner
admitted in its Answer that the sinking of M/V Central Bohol had
been caused by the strong southwest monsoon.[21] Having made
such factual representation, it cannot now be allowed to retreat and
claim that the southwestern monsoon was a storm.
14.T Kung inyo pong natatandaan ang mga pangyayari, maari mo

bang isalaysay ang naganap na paglubog sa barkong M/V Central
Bohol?
S Opo, noong ika-26 ng Julio 1990 humigit kumulang alas 1:20 ng
umaga (dst) habang kami ay nagnanabegar patungong Maynila sa
tapat ng Cadlao Island at Cauayan Island sakop ng El Nido, Palawan,
inutusan ako ni Captain Enriquito Cahatol na tingnan ko ang bodega;
nang ako ay nasa bodega, nakita ko ang loob nang bodega na
maraming tubig at naririnig ko ang malakas na agos ng tubig-dagat
na pumapasok sa loob ng bodega ng barko; agad bumalik ako kay
Captain Enriquito Cahatol at sinabi ko ang malakas na pagpasok ng
tubig-dagat sa loob nang bodega ng barko na ito ay naka-tagilid
humigit kumulang sa 020 degrees, nag-order si Captain Cahatol na
standby engine at tinawag ang lahat ng mga officials at mga crew
nang maipon kaming lahat ang barko ay naka-tagilid at ito ay tuloytuloy ang pagtatagilid na ang ilan sa mga officials ay naka-hawak na
sa barandilla ng barko at di-nagtagal sumigaw nang ABANDO[N]
SHIP si Captain Cahatol at kami ay nagkanya-kanya nang talunan at
languyan sa dagat na malakas ang alon at nang ako ay lumingon sa
barko ito ay di ko na nakita.
The pieces of evidence with respect to the weather conditions

encountered by the vessel showed that there was a southwestern
monsoon at the time. Normally expected on sea voyages, however,
were such monsoons, during which strong winds were not unusual.
Rosa S. Barba, weather specialist of the Philippine Atmospheric
Geophysical and Astronomical Services Administration (PAGASA),
testified that a thunderstorm might occur in the midst of a southwest
monsoon. According to her, one did occur between 8:00 p.m. on July
25, 1990, and 2 a.m. on July 26, 1990, as recorded by the PAGASA
Weather Bureau.[22]
Nonetheless, to our mind it would not be sufficient to categorize the
weather condition at the time as a storm within the absolutory
causes enumerated in the law. Significantly, no typhoon was
observed within the Philippine area of responsibility during that
period.[23]
According to PAGASA, a storm has a wind force of 48 to 55 knots,
[24] equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort
Scale. The second mate of the vessel stated that the wind was
blowing around force 7 to 8 on the Beaufort Scale.[25] Consequently,
the strong winds accompanying the southwestern monsoon could not
be classified as a storm. Such winds are the ordinary vicissitudes
of a sea voyage.[26]
Additionally, [petitioners] own witnesses, boatswain Eduardo Vias

Castro and oiler Frederick Perena, are one in saying that the vessel
encountered two weather disturbances, one at around 10 oclock to 11
oclock in the evening and the other at around 12 oclock midnight.
Both disturbances were coupled with waves and heavy rains, yet, the
vessel endured the first and not the second. Why? The reason is
plain. The vessel felt the strain during the second onslaught because
the logs in the bodega shifted and there were already seawater that
seeped inside.[30]
Even if the weather encountered by the ship is to be deemed a natural

disaster under Article 1739 of the Civil Code, petitioner failed to
show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded
from the cause of injury or loss. In other words, the damaging effects
blamed on the event or phenomenon must not have been caused,
contributed to, or worsened by the presence of human participation.
[27] The defense of fortuitous event or natural disaster cannot be
The above conclusion is supported by the fact that the vessel

proceeded through the first southwestern monsoon without any
mishap, and that it began to list only during the second monsoon
immediately after the logs had shifted and seawater had entered the
hold. In the hold, the sloshing of tons of water back and forth had
created pressures that eventually caused the ship to sink. Had the
63
Choco Notes
logs not shifted, the ship could have survived and reached at least the
port of El Nido. In fact, there was another motor launch that had
been buffeted by the same weather condition within the same area,
yet it was able to arrive safely at El Nido.[31]
securing the cargo. Having lost that risk, it cannot now escape
responsibility for the loss.
Second Issue:
Doctrine of Limited Liability
In its Answer, petitioner categorically admitted the allegation of

respondent in paragraph 5 of the latters Complaint [t]hat at about
0125 hours on 26 July 1990, while enroute to Manila, the M/V
Central Bohol listed about 10 degrees starboardside, due to the
shifting of logs in the hold. Further, petitioner averred that [t]he
vessel, while navigating through this second southwestern monsoon,
was under extreme stress. At about 0125 hours, 26 July 1990, a thud
was heard in the cargo hold and the logs therein were felt to have
shifted. The vessel thereafter immediately listed by ten (10) degrees
starboardside.[32]
The doctrine of limited liability under Article 587 of the Code of

Commerce[36] is not applicable to the present case. This rule does
not apply to situations in which the loss or the injury is due to the
concurrent negligence of the shipowner and the captain.[37] It has
already been established that the sinking of M/V Central Bohol had
been caused by the fault or negligence of the ship captain and the
crew, as shown by the improper stowage of the cargo of logs.
Closer supervision on the part of the shipowner could have
prevented this fatal miscalculation.[38] As such, the shipowner was
equally negligent. It cannot escape liability by virtue of the limited
liability rule.
Yet, petitioner now claims that the CAs conclusion was grounded on
mere speculations and conjectures. It alleges that it was impossible
for the logs to have shifted, because they had fitted exactly in the
hold from the port to the starboard side.
WHEREFORE, the Petition is DENIED, and the assailed Decision

and Resolution AFFIRMED. Costs against petitioner.
After carefully studying the records, we are inclined to believe that

the logs did indeed shift, and that they had been improperly loaded.
SO ORDERED.
According to the boatswains testimony, the logs were piled properly,

and the entire shipment was lashed to the vessel by cable wire.[33]
The ship captain testified that out of the 376 pieces of round logs,
around 360 had been loaded in the lower hold of the vessel and 16 on
deck. The logs stored in the lower hold were not secured by cable
wire, because they fitted exactly from floor to ceiling. However,
while they were placed side by side, there were unavoidable
clearances between them owing to their round shape. Those loaded
on deck were lashed together several times across by cable wire,
which had a diameter of 60 millimeters, and were secured from
starboard to port.[34]
[G.R. No. 137775. March 31, 2005]
FGU Insurance Corp. v. CA

FGU INSURANCE CORPORATION, petitioner, vs. THE COURT
OF APPEALS, SAN MIGUEL CORPORATION, and ESTATE OF
ANG GUI, represented by LUCIO, JULIAN, and JAIME, all
surnamed ANG, and CO TO, respondents.
[G.R. No. 140704. March 31, 2005]
ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and
JAIME, all surnamed ANG, and CO TO, petitioners, vs. THE
HONORABLE COURT OF APPEALS, SAN MIGUEL CORP., and
FGU INSURANCE CORP., respondents.
DECISION
CHICO-NAZARIO, J.:
It is obvious, as a matter of common sense, that the manner of

stowage in the lower hold was not sufficient to secure the logs in the
event the ship should roll in heavy weather. Notably, they were of
different lengths ranging from 3.7 to 12.7 meters.[35] Being clearly
prone to shifting, the round logs should not have been stowed with
nothing to hold them securely in place. Each pile of logs should have
been lashed together by cable wire, and the wire fastened to the side
of the hold. Considering the strong force of the wind and the roll of
the waves, the loose arrangement of the logs did not rule out the
possibility of their shifting. By force of gravity, those on top of the
pile would naturally roll towards the bottom of the ship.
Before Us are two separate Petitions for review assailing the

Decision[1] of the Court of Appeals in CA-G.R. CV No. 49624
entitled, San Miguel Corporation, Plaintiff-Appellee versus Estate of
Ang Gui, represented by Lucio, Julian and Jaime, all surnamed Ang,
and Co To, Defendants-Appellants, ThirdParty Plaintiffs versus
FGU Insurance Corporation, Third-Party Defendant-Appellant,
which affirmed in toto the decision[2] of the Regional Trial Court of
Cebu City, Branch 22. The dispositive portion of the Court of
Appeals decision reads:
The adjusters Report, which was heavily relied upon by petitioner to

strengthen its claim that the logs had not shifted, stated that the logs
were still properly lashed by steel chains on deck. Parenthetically,
this statement referred only to those loaded on deck and did not
mention anything about the condition of those placed in the lower
hold. Thus, the finding of the surveyor that the logs were still intact
clearly pertained only to those lashed on deck.
WHEREFORE, for all the foregoing, judgment is hereby rendered as

follows:
1)
Ordering defendants to pay plaintiff the
sum of P1,346,197.00 and an interest of 6% per annum to be
reckoned from the filing of this case on October 2, 1990;
The evidence indicated that strong southwest monsoons were

common occurrences during the month of July. Thus, the officers
and crew of M/V Central Bohol should have reasonably anticipated
heavy rains, strong winds and rough seas. They should then have
taken extra precaution in stowing the logs in the hold, in consonance
with their duty of observing extraordinary diligence in safeguarding
the goods. But the carrier took a calculated risk in improperly
2)
Ordering defendants to pay plaintiff the
sum of P25,000.00 for attorneys fees and an additional sum of
P10,000.00 as litigation expenses;
3)
With cost against defendants.
For the Third-Party Complaint:
64
Choco Notes
Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20).
The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten
Centavos (P47.10), hence, SMCs claim against ANCO amounted to
One Million Three Hundred Forty-Six Thousand One Hundred
Ninety-Seven Pesos (P1,346,197.00).
1)
Ordering third-party defendant FGU Insurance Company to pay
and reimburse defendants the amount of P632,700.00.[3]
The Facts
Evidence shows that Anco Enterprises Company (ANCO), a
partnership between Ang Gui and Co To, was engaged in the shipping
business. It owned the M/T ANCO tugboat and the D/B Lucio barge
which were operated as common carriers. Since the D/B Lucio had
no engine of its own, it could not maneuver by itself and had to be
towed by a tugboat for it to move from one place to another.
As a consequence of the incident, SMC filed a complaint for Breach

of Contract of Carriage and Damages against ANCO for the amount
of One Million Three Hundred Forty-Six Thousand One Hundred
Ninety-Seven Pesos (P1,346,197.00) plus interest, litigation expenses
and Twenty-Five Percent (25%) of the total claim as attorneys fees.
Upon Ang Guis death, ANCO, as a partnership, was dissolved hence,
on 26 January 1993, SMC filed a second amended complaint which
was admitted by the Court impleading the surviving partner, Co To
and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all
surnamed Ang. The substituted defendants adopted the original
answer with counterclaim of ANCO since the substantial allegations
of the original complaint and the amended complaint are practically
the same.
On 23 September 1979, San Miguel Corporation (SMC) shipped

from Mandaue City, Cebu, on board the D/B Lucio, for towage by
M/T ANCO, the following cargoes:
Bill of Lading No.
Shipment
Destination
1
25,000 cases Pale Pilsen
Estancia, Iloilo
350 cases Cerveza Negra Estancia, Iloilo
ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra
mentioned in the complaint were indeed loaded on the vessel
belonging to ANCO. It claimed however that it had an agreement
with SMC that ANCO would not be liable for any losses or damages
resulting to the cargoes by reason of fortuitous event. Since the cases
of beer Pale Pilsen and Cerveza Negra were lost by reason of a storm,
a fortuitous event which battered and sunk the vessel in which they
were loaded, they should not be held liable. ANCO further asserted
that there was an agreement between them and SMC to insure the
cargoes in order to recover indemnity in case of loss. Pursuant to that
agreement, the cargoes to the extent of Twenty Thousand (20,000)
cases was insured with FGU Insurance Corporation (FGU) for the
total amount of Eight Hundred Fifty-Eight Thousand Five Hundred
Pesos (P858,500.00) per Marine Insurance Policy No. 29591.
2
15,000 cases Pale Pilsen
San Jose, Antique
200 cases Cerveza Negra San Jose, Antique
The consignee for the cargoes covered by Bill of Lading No. 1 was
SMCs Beer Marketing Division (BMD)-Estancia Beer Sales Office,
Estancia, Iloilo, while the consignee for the cargoes covered by Bill
of Lading No. 2 was SMCs BMD-San Jose Beer Sales Office, San
Jose, Antique.
The D/B Lucio was towed by the M/T ANCO all the way from
Mandaue City to San Jose, Antique. The vessels arrived at San Jose,
Antique, at about one oclock in the afternoon of 30 September 1979.
The tugboat M/T ANCO left the barge immediately after reaching
San Jose, Antique.
Subsequently, ANCO, with leave of court, filed a Third-Party

Complaint against FGU, alleging that before the vessel of ANCO left
for San Jose, Antique with the cargoes owned by SMC, the cargoes,
to the extent of Twenty Thousand (20,000) cases, were insured with
FGU for a total amount of Eight Hundred Fifty-Eight Thousand Five
Hundred Pesos (P858,500.00) under Marine Insurance Policy No.
29591. ANCO further alleged that on or about 02 October 1979, by
reason of very strong winds and heavy waves brought about by a
passing typhoon, the vessel run aground near the vicinity of San Jose,
Antique, as a result of which, the vessel was totally wrecked and its
cargoes owned by SMC were lost and/or destroyed. According to
ANCO, the loss of said cargoes occurred as a result of risks insured
against in the insurance policy and during the existence and lifetime
of said insurance policy. ANCO went on to assert that in the remote
possibility that the court will order ANCO to pay SMCs claim, the
third-party defendant corporation should be held liable to indemnify
or reimburse ANCO whatever amounts, or damages, it may be
required to pay to SMC.
When the barge and tugboat arrived at San Jose, Antique, in the
afternoon of 30 September 1979, the clouds over the area were dark
and the waves were already big. The arrastre workers unloading the
cargoes of SMC on board the D/B Lucio began to complain about
their difficulty in unloading the cargoes. SMCs District Sales
Supervisor, Fernando Macabuag, requested ANCOs representative to
transfer the barge to a safer place because the vessel might not be
able to withstand the big waves.
ANCOs representative did not heed the request because he was
confident that the barge could withstand the waves.
This,
notwithstanding the fact that at that time, only the M/T ANCO was
left at the wharf of San Jose, Antique, as all other vessels already left
the wharf to seek shelter. With the waves growing bigger and bigger,
only Ten Thousand Seven Hundred Ninety (10,790) cases of beer
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 barges rope
attached to the wharf was cut off by the big waves. At around
midnight, the barge run aground and was broken and the cargoes of
beer in the barge were swept away.
In its answer to the Third-Party complaint, third-party defendant FGU

admitted the existence of the Insurance Policy under Marine Cover
Note No. 29591 but maintained that the alleged loss of the cargoes
covered by the said insurance policy cannot be attributed directly or
indirectly to any of the risks insured against in the said insurance
policy. According to FGU, it is only liable under the policy to Thirdparty Plaintiff ANCO and/or Plaintiff SMC in case of any of the
following:
As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine

Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five
Hundred Fifty (550) cases of Cerveza Negra. The value per case of
65
Choco Notes
a)
total loss of the entire shipment;
b)
c)
loss of any case as a result of the sinking of the vessel; or

loss as a result of the vessel being on fire.
decision in Civil Case No. R-19341, as affirmed by the Court of

Appeals and the Supreme Court, as res judicata.
Ruling of the Court
First, we shall endeavor to dispose of the common issue raised by
both petitioners in their respective petitions for review, that is,
whether or not the doctrine of res judicata applies in the instant case.
Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and

Plaintiff SMC failed to exercise ordinary diligence or the diligence of
a good father of the family in the care and supervision of the cargoes
insured to prevent its loss and/or destruction.
It is ANCOs contention that the decision in Civil Case No. R-19341,

[5] which was decided in its favor, constitutes res judicata with
respect to the issues raised in the case at bar.
Third-Party defendant FGU prayed for the dismissal of the ThirdParty Complaint and asked for actual, moral, and exemplary damages
and attorneys fees.[1]
The contention is without merit. There can be no res judicata as

between Civil Case No. R-19341 and the case at bar. In order for res
judicata to be made applicable in a case, the following essential
requisites must be present: 1) the former judgment must be final; 2)
the former judgment must have been rendered by a court having
jurisdiction over the subject matter and the parties; 3) the former
judgment must be a judgment or order on the merits; and 4) there
must be between the first and second action identity of parties,
identity of subject matter, and identity of causes of action.[6]
The trial court found that while the cargoes were indeed lost due to
fortuitous event, there was failure on ANCOs part, through their
representatives, to observe the degree of diligence required that
would exonerate them from liability. The trial court thus held the
Estate of Ang Gui and Co To liable to SMC for the amount of the lost
shipment. With respect to the Third-Party complaint, the court a quo
found FGU liable to bear Fifty-Three Percent (53%) of the amount of
the lost cargoes. According to the trial court:
There is no question that the first three elements of res judicata as

enumerated above are indeed satisfied by the decision in Civil Case
No. R-19341. However, the doctrine is still inapplicable due to the
absence of the last essential requisite of identity of parties, subject
matter and causes of action.
. . . Evidence is to the effect that the D/B Lucio, on which the cargo
insured, run-aground and was broken and the beer cargoes on the said
barge were swept away. It is the sense of this Court that the risk
insured against was the cause of the loss.
. . .
The parties in Civil Case No. R-19341 were ANCO as plaintiff and
FGU as defendant while in the instant case, SMC is the plaintiff and
the Estate of Ang Gui represented by Lucio, Julian and Jaime, all
surnamed Ang and Co To as defendants, with the latter merely
impleading FGU as third-party defendant.
Since the total cargo was 40,550 cases which had a total amount of
P1,833,905.00 and the amount of the policy was only for
P858,500.00, defendants as assured, therefore, were considered coinsurers of third-party defendant FGU Insurance Corporation to the
extent of 975,405.00 value of the cargo. Consequently, inasmuch as
there was partial loss of only P1,346,197.00, the assured shall bear
53% of the loss[4] [Emphasis ours]
The subject matter of Civil Case No. R-19341 was the insurance
contract entered into by ANCO, the owner of the vessel, with FGU
covering the vessel D/B Lucio, while in the instant case, the subject
matter of litigation is the loss of the cargoes of SMC, as shipper,
loaded in the D/B Lucio and the resulting failure of ANCO to deliver
to SMCs consignees the lost cargo.
Otherwise stated, the
controversy in the first case involved the rights and liabilities of the
shipowner vis--vis that of the insurer, while the present case
involves the rights and liabilities of the shipper vis--vis that of the
shipowner. Specifically, Civil Case No. R-19341 was an action for
Specific Performance and Damages based on FGU Marine Hull
Insurance Policy No. VMF-MH-13519 covering the vessel D/B
Lucio, while the instant case is an action for Breach of Contract of
Carriage and Damages filed by SMC against ANCO based on Bill of
Lading No. 1 and No. 2, with defendant ANCO seeking
reimbursement from FGU under Insurance Policy No. MA-58486,
should the former be held liable to pay SMC.
The appellate court affirmed in toto the decision of the lower court
and denied the motion for reconsideration and the supplemental
motion for reconsideration.
Hence, the petitions.
The Issues
In G.R. No. 137775, the grounds for review raised by petitioner FGU
can be summarized into two: 1) Whether or not respondent Court of
Appeals committed grave abuse of discretion in holding FGU liable
under the insurance contract considering the circumstances
surrounding the loss of the cargoes; and 2) Whether or not the Court
of Appeals committed an error of law in holding that the doctrine of
res judicata applies in the instant case.
Moreover, the subject matter of the third-party complaint against

FGU in this case is different from that in Civil Case No. R-19341. In
the latter, ANCO was suing FGU for the insurance contract over the
vessel while in the former, the third-party complaint arose from the
insurance contract covering the cargoes on board the D/B Lucio.
In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail

the decision of the appellate court based on the following
assignments of error: 1) The Court of Appeals committed grave abuse
of discretion in affirming the findings of the lower court that the
negligence of the crewmembers of the D/B Lucio was the proximate
cause of the loss of the cargoes; and 2) The respondent court acted
with grave abuse of discretion when it ruled that the appeal was
without merit despite the fact that said court had accepted the
The doctrine of res judicata precludes the re-litigation of a particular

fact or issue already passed upon by a court of competent jurisdiction
in a former judgment, in another action between the same parties
based on a different claim or cause of action. The judgment in the
66
Choco Notes
prior action operates as estoppel only as to those matters in issue or
points controverted, upon the determination of which the finding or
judgment was rendered.[7] If a particular point or question is in issue
in the second action, and the judgment will depend on the
determination of that particular point or question, a former judgment
between the same parties or their privies will be final and conclusive
in the second if that same point or question was in issue and
adjudicated in the first suit.[8]
Second, it is borne out in the testimony of the witnesses on record

that the barge D/B Lucio had no engine of its own and could not
maneuver by itself. Yet, the patron of ANCOs tugboat M/T ANCO
left it to fend for itself notwithstanding the fact that as the two vessels
arrived at the port of San Jose, Antique, signs of the impending storm
were already manifest. As stated by the lower court, witness Mr.
Anastacio Manilag testified that the captain or patron of the tugboat
M/T ANCO left the barge D/B Lucio immediately after it reached
San Jose, Antique, despite the fact that there were already big waves
and the area was already dark. This is corroborated by defendants
own witness, Mr. Fernando Macabueg.[13]
Since the case at bar arose from the same incident as that involved in
Civil Case No. R-19341, only findings with respect to matters passed
upon by the court in the former judgment are conclusive in the
disposition of the instant case. A careful perusal of the decision in
Civil Case No. R-19341 will reveal that the pivotal issues resolved by
the lower court, as affirmed by both the Court of Appeals and the
Supreme Court, can be summarized into three legal conclusions: 1)
that the D/B Lucio before and during the voyage was seaworthy; 2)
that there was proper notice of loss made by ANCO within the
reglementary period; and 3) that the vessel D/B Lucio was a
constructive total loss.
The trial court continued:

At that precise moment, since it is the duty of the defendant to
exercise and observe extraordinary diligence in the vigilance over the
cargo of the plaintiff, the patron or captain of M/T ANCO,
representing the defendant could have placed D/B Lucio in a very
safe location before they left knowing or sensing at that time the
coming of a typhoon. The presence of big waves and dark clouds
could have warned the patron or captain of M/T ANCO to insure the
safety of D/B Lucio including its cargo. D/B Lucio being a barge,
without its engine, as the patron or captain of M/T ANCO knew,
could not possibly maneuver by itself. Had the patron or captain of
M/T ANCO, the representative of the defendants observed
extraordinary diligence in placing the D/B Lucio in a safe place, the
loss to the cargo of the plaintiff could not have occurred. In short,
therefore, defendants through their representatives, failed to observe
the degree of diligence required of them under the provision of Art.
1733 of the Civil Code of the Philippines.[14]
Said decision, however, did not pass upon the issues raised in the
instant case. Absent therein was any discussion regarding the
liability of ANCO for the loss of the cargoes. Neither did the lower
court pass upon the issue of the alleged negligence of the
crewmembers of the D/B Lucio being the cause of the loss of the
cargoes owned by SMC.
Therefore, based on the foregoing discussion, we are reversing the
findings of the Court of Appeals that there is res judicata.
Anent ANCOs first assignment of error, i.e., the appellate court
committed error in concluding that the negligence of ANCOs
representatives was the proximate cause of the loss, said issue is a
question of fact assailing the lower courts appreciation of evidence
on the negligence or lack thereof of the crewmembers of the D/B
Lucio. As a rule, findings of fact of lower courts, particularly when
affirmed by the appellate court, are deemed final and conclusive. The
Supreme Court cannot review such findings on appeal, especially
when they are borne out by the records or are based on substantial
evidence.[9] As held in the case of Donato v. Court of Appeals,[10] in
this jurisdiction, it is a fundamental and settled rule that findings of
fact by the trial court are entitled to great weight on appeal and
should not be disturbed unless for strong and cogent reasons because
the trial court is in a better position to examine real evidence, as well
as to observe the demeanor of the witnesses while testifying in the
case.[11]
Petitioners Estate of Ang Gui and Co To, in their Memorandum,

asserted that the contention of respondents SMC and FGU that the
crewmembers of D/B Lucio should have left port at the onset of the
typhoon is like advising the fish to jump from the frying pan into the
fire and an advice that borders on madness.[15]
The argument does not persuade. The records show that the D/B
Lucio was the only vessel left at San Jose, Antique, during the time in
question. The other vessels were transferred and temporarily moved
to Malandong, 5 kilometers from wharf where the barge remained.
[16] Clearly, the transferred vessels were definitely safer in
Malandong than at the port of San Jose, Antique, at that particular
time, a fact which petitioners failed to dispute
ANCOs arguments boil down to the claim that the loss of the
cargoes was caused by the typhoon Sisang, a fortuitous event (caso
fortuito), and there was no fault or negligence on their part. In fact,
ANCO claims that their crewmembers exercised due diligence to
prevent or minimize the loss of the cargoes but their efforts proved no
match to the forces unleashed by the typhoon which, in petitioners
own words was, by any yardstick, a natural calamity, a fortuitous
event, an act of God, the consequences of which petitioners could not
be held liable for.[17]
It is not the function of this Court to analyze or weigh evidence all

over again, unless there is a showing that the findings of the lower
court are totally devoid of support or are glaringly erroneous as to
constitute palpable error or grave abuse of discretion.[12]
A careful study of the records shows no cogent reason to fault the
findings of the lower court, as sustained by the appellate court, that
ANCOs representatives failed to exercise the extraordinary degree of
diligence required by the law to exculpate them from liability for the
loss of the cargoes.
The Civil Code provides:

Art. 1733. Common carriers, from the nature of their business and
for reasons of public policy are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of
each case.
First, ANCO admitted that they failed to deliver to the designated

consignee the Twenty Nine Thousand Two Hundred Ten (29,210)
cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza
Negra.
67
Choco Notes
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.
Such extraordinary diligence in vigilance over the goods is further

expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .
Art. 1734. Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to any of the
We now come to the issue of whether or not FGU can be held liable
under the insurance policy to reimburse ANCO for the loss of the
cargoes despite the findings of the respondent court that such loss
was occasioned by the blatant negligence of the latters employees.
(1) Flood, storm, earthquake, lightning, or other natural disaster or

calamity;
One of the purposes for taking out insurance is to protect the insured
against the consequences of his own negligence and that of his
agents. Thus, it is a basic rule in insurance that the carelessness and
negligence of the insured or his agents constitute no defense on the
part of the insurer.[23] This rule however presupposes that the loss
has occurred due to causes which could not have been prevented by
the insured, despite the exercise of due diligence.
. . .
Art. 1739. In order that the common carrier may be exempted from
due diligence to prevent or minimize loss before, during and after the
occurrence of flood, storm, or other natural disaster in order that the
common carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods . . . (Emphasis supplied)
The question now is whether there is a certain degree of negligence

on the part of the insured or his agents that will deprive him the right
to recover under the insurance contract. We say there is. However,
to what extent such negligence must go in order to exonerate the
insurer from liability must be evaluated in light of the circumstances
surrounding each case. When evidence show that the insureds
negligence or recklessness is so gross as to be sufficient to constitute
a willful act, the insurer must be exonerated.
Caso fortuito or force majeure (which in law are identical insofar as

they exempt an obligor from liability)[18] by definition, are
extraordinary events not foreseeable or avoidable, events that could
not be foreseen, or which though foreseen, were inevitable. It is
therefore not enough that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one impossible to
foresee or to avoid.[19]
In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,
[24] the United States Supreme Court held that:
In this case, the calamity which caused the loss of the cargoes was
not unforeseen nor was it unavoidable. In fact, the other vessels in
the port of San Jose, Antique, managed to transfer to another place, a
circumstance which prompted 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 no longer
had any means to do so as the tugboat M/T ANCO had already
departed, leaving the barge to its own devices. The captain of the
tugboat should have had the foresight not to leave the barge alone
considering the pending storm.
The ordinary negligence of the insured and his agents has long been
held as a part of the risk which the insurer takes upon himself, and
the existence of which, where it is the proximate cause of the loss,
does not absolve the insurer from liability. But willful exposure,
gross negligence, negligence amounting to misconduct, etc., have
often been held to release the insurer from such liability.[25]
[Emphasis ours]
...
In the case of Williams v. New England Insurance Co., 3 Cliff. 244,
Fed. Cas. No. 17,731, the owners of an insured vessel attempted to
put her across the bar at Hatteras Inlet. She struck on the bar and was
wrecked. The master knew that the depth of water on the bar was
such as to make the attempted passage dangerous. Judge Clifford
held that, under the circumstances, the loss was not within the
protection of the policy, saying:
While the loss of the cargoes was admittedly caused by the typhoon
Sisang, a natural disaster, ANCO could not escape liability to
respondent SMC. The records clearly show the failure of petitioners
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 only cause of the loss.
[20] There must have been no contributory negligence on the part of
the common carrier. As held in the case of Limpangco Sons v.
Yangco Steamship Co.:[21]
. . . To be exempt from liability because of an act of God, the tug
must be free from any previous negligence or misconduct by which
that loss or damage may have been occasioned. For, although the
immediate or proximate cause of the loss in any given instance may
have been what is termed an act of God, yet, if the tug unnecessarily
exposed the two to such accident by any culpable act or omission of
its own, it is not excused.[22]
Authorities to prove that persons insured cannot recover for a loss

occasioned by their own wrongful acts are hardly necessary, as the
proposition involves an elementary principle of universal application.
Losses may be recovered by the insured, though remotely occasioned
by the negligence or misconduct of the master or crew, if proximately
caused by the perils insured against, because such mistakes and
negligence are incident to navigation and constitute a part of the
perils which those who engage in such adventures are obliged to
incur; but it was never supposed that the insured could recover
indemnity for a loss occasioned by his own wrongful act or by that of
any agent for whose conduct he was responsible.[26] [Emphasis ours]
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 of the tugboat, and again in failing to heed the
From the above-mentioned decision, the United States Supreme

Court has made a distinction between ordinary negligence and gross
negligence or negligence amounting to misconduct and its effect on
the insureds right to recover under the insurance contract. According
68
Choco Notes
to the Court, while mistake and negligence of the master or crew are
incident to navigation and constitute a part of the perils that the
insurer is obliged to incur, such negligence or recklessness must not
be of such gross character as to amount to misconduct or wrongful
acts; otherwise, such negligence shall release the insurer from
liability under the insurance contract.
Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily

liable for the loss of 37 hot rolled steel sheets in coil that were
washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from
the port of Ilyichevsk, Russia on board M/V Alexander Saveliev (a
vessel of Russian registry and owned by Black Sea) 545 hot rolled
steel sheets in coil weighing 6,992,450 metric tons.
In the case at bar, both the trial court and the appellate court had
concluded from the evidence that the crewmembers of both the D/B
Lucio and the M/T ANCO were blatantly negligent. To wit:
The cargoes, which were to be discharged at the port of Manila in

favor of the consignee, Little Giant Steel Pipe Corporation (Little
Giant),[4] were insured against all risks with Industrial Insurance
Company Ltd. (Industrial Insurance) under Marine Policy No. M-913747-TIS.[5]
There was blatant negligence on the part of the employees of

defendants-appellants when the patron (operator) of the tug boat
immediately left the barge at the San Jose, Antique wharf despite the
looming bad weather. Negligence was likewise exhibited by the
defendants-appellants representative who did not heed Macabuags
request that the barge be moved to a more secure place. The prudent
thing to do, as was done by the other sea vessels at San Jose, Antique
during the time in question, was to transfer the vessel to a safer
wharf. The negligence of the defendants-appellants is proved by the
fact that on 01 October 1979, the only simple vessel left at the wharf
in San Jose was the D/B Lucio.[27] [Emphasis ours]
The vessel arrived at the port of Manila on October 24, 1991 and the
Philippine Ports Authority (PPA) assigned it a place of berth at the
outside breakwater at the Manila South Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure
the requisite clearances, to receive the cargoes from the shipside, and
to deliver them to its (the consignees) warehouse at Cainta, Rizal,[7]
in turn engaged the services of TVI to send a barge and tugboat at
shipside.
As stated earlier, this Court does not find any reason to deviate from
the conclusion drawn by the lower court, as sustained by the Court of
Appeals, that ANCOs representatives had failed to exercise
extraordinary diligence required of common carriers in the shipment
of SMCs cargoes. Such blatant negligence being the proximate
cause of the loss of the cargoes amounting to One Million Three
Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos
(P1,346,197.00)
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani

towed the barge Erika V to shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning
the barge alongside the vessel, left and returned to the port terminal.
[9] At 9:00 p.m., arrastre operator Ocean Terminal Services Inc.
commenced to unload 37 of the 545 coils from the vessel unto the
barge.
This Court, taking into account the circumstances present in the

instant case, concludes that the blatant negligence of ANCOs
employees is of such gross character that it amounts to a wrongful act
which must exonerate FGU from liability under the insurance
contract.
By 12:30 a.m. of October 27, 1991 during which the weather

condition had become inclement due to an approaching storm, the
unloading unto the barge of the 37 coils was accomplished.[10] No
tugboat pulled the barge back to the pier, however.
WHEREFORE, premises considered, the Decision of the Court of

Appeals dated 24 February 1999 is hereby AFFIRMED with
MODIFICATION dismissing the third-party complaint.
At around 5:30 a.m. of October 27, 1991, due to strong waves,[11]

the crew of the barge abandoned it and transferred to the vessel. The
barge pitched and rolled with the waves and eventually capsized,
washing the 37 coils into the sea.[12] At 7:00 a.m., a tugboat finally
arrived to pull the already empty and damaged barge back to the pier.
[13]
SO ORDERED.
Schmitz
Venture
Transport
v.
Transport
Earnest efforts on the part of both the consignee Little Giant and
Industrial Insurance to recover the lost cargoes proved futile.[14]
[G.R. No. 150255. April 22, 2005]

SCHMITZ TRANSPORT & BROKERAGE CORPORATION,
petitioner, vs. TRANSPORT VENTURE, INC., INDUSTRIAL
INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING
AND DODWELL now INCHCAPE SHIPPING SERVICES,
respondents.
DECISION
CARPIO-MORALES, J.:
Little Giant thus filed a formal claim against Industrial Insurance

which paid it the amount of P5,246,113.11. Little Giant thereupon
executed a subrogation receipt[15] in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport,
TVI, and Black Sea through its representative Inchcape (the
defendants) before the RTC of Manila, for the recovery of the amount
it paid to Little Giant plus adjustment fees, attorneys fees, and
litigation expenses.[16]
On petition for review is the June 27, 2001 Decision[1] of the Court
of Appeals, as well as its Resolution[2] dated September 28, 2001
denying the motion for reconsideration, which affirmed that of
Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case
No. 92-63132[3] holding petitioner Schmitz Transport Brokerage
Corporation (Schmitz Transport), together with Black Sea Shipping
Corporation (Black Sea), represented by its ship agent Inchcape
Industrial Insurance faulted the defendants for undertaking the

unloading of the cargoes while typhoon signal No. 1 was raised in
Metro Manila.[17]
69
Choco Notes
By Decision of November 24, 1997, Branch 21 of the RTC held all
the defendants negligent for unloading the cargoes outside of the
breakwater notwithstanding the storm signal.[18] The dispositive
portion of the decision reads:
For its part, TVI maintained that it acted as a passive party as it

merely received the cargoes and transferred them unto the barge upon
the instruction of petitioner.[31]
In issue then are:
WHEREFORE, premises considered, the Court renders judgment in

favor of the plaintiff, ordering the defendants to pay plaintiff jointly
and severally the sum of P5,246,113.11 with interest from the date
the complaint was filed until fully satisfied, as well as the sum of
P5,000.00 representing the adjustment fee plus the sum of 20% of the
amount recoverable from the defendants as attorneys fees plus the
costs of suit. The counterclaims and cross claims of defendants are
hereby DISMISSED for lack of [m]erit.[19]
(1) Whether the loss of the cargoes was due to a fortuitous event,
independent of any act of negligence on the part of petitioner Black
Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach
to Black Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code
absolves any party from any and all liability arising therefrom:
To the trial courts decision, the defendants Schmitz Transport and

TVI filed a joint motion for reconsideration assailing the finding that
they are common carriers and the award of excessive attorneys fees
of more than P1,000,000. And they argued that they were not
motivated by gross or evident bad faith and that the incident was
caused by a fortuitous event. [20]
ART. 1174. Except in cases expressly specified by the law, or when

it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which
though foreseen, were inevitable.
By resolution of February 4, 1998, the trial court denied the motion

for reconsideration. [21]
In order, to be considered a fortuitous event, however, (1) the cause

of the unforeseen and unexpected occurrence, or the failure of the
debtor to comply with his obligation, must be independent of human
will; (2) it must be impossible to foresee the event which constitute
the caso fortuito, or if it can be foreseen it must be impossible to
avoid; (3) the occurrence must be such as to render it impossible for
the debtor to fulfill his obligation in any manner; and (4) the obligor
must be free from any participation in the aggravation of the injury
resulting to the creditor.[32]
All the defendants appealed to the Court of Appeals which, by

decision of June 27, 2001, affirmed in toto the decision of the trial
court, [22] it finding that all the defendants were common carriers
Black Sea and TVI for engaging in the transport of goods and cargoes
over the seas as a regular business and not as an isolated transaction,
[23] and Schmitz Transport for entering into a contract with Little
Giant to transport the cargoes from ship to port for a fee.[24]
In holding all the defendants solidarily liable, the appellate court
ruled that each one was essential such that without each others
contributory negligence the incident would not have happened and so
much so that the person principally liable cannot be distinguished
with sufficient accuracy.[25]
[T]he principle embodied in the act of God doctrine strictly requires

that the act must be occasioned solely by the violence of nature.
Human intervention is to be excluded from creating or entering into
the cause of the mischief. When the effect is found to be in part the
result of the participation of man, whether due to his active
intervention or neglect or failure to act, the whole occurrence is then
humanized and removed from the rules applicable to the acts of God.
[33]
In discrediting the defense of fortuitous event, the appellate court

held that although defendants obviously had nothing to do with the
force of nature, they however had control of where to anchor the
vessel, where discharge will take place and even when the
discharging will commence.[26]
The appellate court, in affirming the finding of the trial court that
human intervention in the form of contributory negligence by all the
defendants resulted to the loss of the cargoes,[34] held that unloading
outside the breakwater, instead of inside the breakwater, while a
storm signal was up constitutes negligence.[35] It thus concluded that
the proximate cause of the loss was Black Seas negligence in
deciding to unload the cargoes at an unsafe place and while a typhoon
was approaching.[36]
The defendants respective motions for reconsideration having been

denied by Resolution[27] of September 28, 2001, Schmitz Transport
(hereinafter referred to as petitioner) filed the present petition against
TVI, Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it
was acting for its principal, consignee Little Giant, hence, the
transportation contract was by and between Little Giant and TVI.[28]
From a review of the records of the case, there is no indication that

there was greater risk in loading the cargoes outside the breakwater.
As the defendants proffered, the weather on October 26, 1991
remained normal with moderate sea condition such that port
operations continued and proceeded normally.[37]
By Resolution of January 23, 2002, herein respondents Industrial

Insurance, Black Sea, and TVI were required to file their respective
Comments.[29]
The weather data report,[38] furnished and verified by the Chief of

the Climate Data Section of PAG-ASA and marked as a common
exhibit of the parties, states that while typhoon signal No. 1 was
hoisted over Metro Manila on October 23-31, 1991, the sea condition
at the port of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991
was moderate. It cannot, therefore, be said that the defendants were
By its Comment, Black Sea argued that the cargoes were received by
the consignee through petitioner in good order, hence, it cannot be
faulted, it having had no control and supervision thereover.[30]
70
Choco Notes
negligent in not unloading the cargoes upon the barge on October 26,
1991 inside the breakwater.
A: We handled the unloading of the cargo[es] from vessel to lighter

and then the delivery of [the] cargo[es] from lighter to BASECO then
to the truck and to the warehouse, Sir.
That no tugboat towed back the barge to the pier after the cargoes
were completely loaded by 12:30 in the morning[39] is, however, a
material fact which the appellate court failed to properly consider and
appreciate[40] the proximate cause of the loss of the cargoes. Had
the barge been towed back promptly to the pier, the deteriorating sea
conditions notwithstanding, the loss could have been avoided. But
the barge was left floating in open sea until big waves set in at 5:30
a.m., causing it to sink along with the cargoes.[41] The loss thus falls
outside the act of God doctrine.
Q: Now, in connection with this work which you are doing, Mr.
Witness, you are supposed to perform, what equipment do (sic) you
require or did you use in order to effect this unloading, transfer and
delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this
unloading [from] vessel to lighter, and on this we hired or we subcontracted with [T]ransport Ventures, Inc. which [was] in-charged
(sic) of the barges. Also, in BASECO compound we are leasing
cranes to have the cargo unloaded from the barge to trucks, [and] then
we used trucks to deliver [the cargoes] to the consignees warehouse,
Sir.
The proximate cause of the loss having been determined, who among
the parties is/are responsible therefor?
Contrary to petitioners insistence, this Court, as did the appellate
court, finds that petitioner is a common carrier. For it undertook to
transport the cargoes from the shipside of M/V Alexander Saveliev
to the consignees warehouse at Cainta, Rizal. As the appellate court
put it, as long as a person or corporation holds [itself] to the public
for the purpose of transporting goods as [a] business, [it] is already
considered a common carrier regardless if [it] owns the vehicle to be
used or has to hire one.[42] That petitioner is a common carrier, the
testimony of its own Vice-President and General Manager Noel Aro
that part of the services it offers to its clients as a brokerage firm
includes the transportation of cargoes reflects so.
Q: And whose trucks do you use from BASECO compound to the

consignees warehouse?
A: We utilized of (sic) our own trucks and we have some other
contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court
why is it you have to contract for the barges of Transport Ventures
Incorporated in this particular operation?
Atty. Jubay: Will you please tell us what [are you] functions x x x as
Executive Vice-President and General Manager of said Company?
A: Firstly, we dont own any barges. That is why we hired the

services of another firm whom we know [al]ready for quite
sometime, which is Transport Ventures, Inc. (Emphasis supplied)[43]
Mr. Aro: Well, I oversee the entire operation of the brokerage and
transport business of the company. I also handle the various division
heads of the company for operation matters, and all other related
functions that the President may assign to me from time to time, Sir.
It is settled that under a given set of facts, a customs broker may be

regarded as a common carrier. Thus, this Court, in A.F. Sanchez
Brokerage, Inc. v. The Honorable Court of Appeals,[44] held:
Q: Now, in connection [with] your duties and functions as you

mentioned, will you please tell the Honorable Court if you came to
know the company by the name Little Giant Steel Pipe Corporation?
The appellate court did not err in finding petitioner, a customs broker,
to be also a common carrier, as defined under Article 1732 of the
Civil Code, to wit,
A: Yes, Sir. Actually, we are the brokerage firm of that Company.

Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Q: And since when have you been the brokerage firm of that
company, if you can recall?
A: Since 1990, Sir.
xxx
Q: Now, you said that you are the brokerage firm of this Company.
What work or duty did you perform in behalf of this company?
Article 1732 does not distinguish between one whose principal

business activity is the carrying of goods and one who does such
carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose
principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.[45]
A: We handled the releases (sic) of their cargo[es] from the Bureau of

Customs. We [are] also in-charged of the delivery of the goods to
their warehouses. We also handled the clearances of their shipment at
the Bureau of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant
Steel Pipe Corporation with regards to this shipment? What work did
you do with this shipment?
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court

held that as the transportation of goods is an integral part of a
customs broker, the customs broker is also a common carrier. For to
declare otherwise would be to deprive those with whom [it]
contracts the protection which the law affords them notwithstanding
71
Choco Notes
the fact that the obligation to carry goods for [its] customers, is part
and parcel of petitioners business.[47]
As for petitioner, for it to be relieved of liability, it should, following

Article 1739[53] of the Civil Code, prove that it exercised due
diligence to prevent or minimize the loss, before, during and after the
occurrence of the storm in order that it may be exempted from
liability for the loss of the goods.
As for petitioners argument that being the agent of Little Giant, any
negligence it committed was deemed the negligence of its principal,
it does not persuade.
While petitioner sent checkers[54] and a supervisor[55] on board the

vessel to counter-check the operations of TVI, it failed to take all
available and reasonable precautions to avoid the loss. After noting
that TVI failed to arrange for the prompt towage of the barge despite
the deteriorating sea conditions, it should have summoned the same
or another tugboat to extend help, but it did not.
True, petitioner was the broker-agent of Little Giant in securing the

release of the cargoes. In effecting the transportation of the cargoes
from the shipside and into Little Giants warehouse, however,
petitioner was discharging its own personal obligation under a contact
of carriage.
Petitioner, which did not have any barge or tugboat, engaged the
services of TVI as handler[48] to provide the barge and the tugboat.
In their Service Contract,[49] while Little Giant was named as the
consignee, petitioner did not disclose that it was acting on
commission and was chartering the vessel for Little Giant.[50] Little
Giant did not thus automatically become a party to the Service
Contract and was not, therefore, bound by the terms and conditions
therein.
This Court holds then that petitioner and TVI are solidarily liable[56]
for the loss of the cargoes. The following pronouncement of the
Supreme Court is instructive:
The foundation of LRTAs liability is the contract of carriage and its
obligation to indemnify the victim arises from the breach of that
contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment
to ensure the safety of passengers, a carrier may choose to hire its
own employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of
carriage.
Not being a party to the service contract, Little Giant cannot directly
sue TVI based thereon but it can maintain a cause of action for
negligence.[51]
In the case of TVI, while it acted as a private carrier for which it was
under no duty to observe extraordinary diligence, it was still required
to observe ordinary diligence to ensure the proper and careful
handling, care and discharge of the carried goods.
Should Prudent be made likewise liable? If at all, that liability could

only be for tort under the provisions of Article 2176 and related
provisions, in conjunction with Article 2180 of the Civil Code. x x x
[O]ne might ask further, how then must the liability of the common
carrier, on one hand, and an independent contractor, on the other
hand, be described? It would be solidary. A contractual obligation
can be breached by tort and when the same act or omission causes the
injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194 of the Civil Code can well apply. In fine, a
liability for tort may arise even under a contract, where tort is that
which breaches the contract. Stated differently, when an act which
constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between
the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.[57]
Thus, Articles 1170 and 1173 of the Civil Code provide:

ART. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the
provisions of articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good father
of a family shall be required.
As for Black Sea, its duty as a common carrier extended only from
the time the goods were surrendered or unconditionally placed in its
possession and received for transportation until they were delivered
actually or constructively to consignee Little Giant.[58]
Was the reasonable care and caution which an ordinarily prudent

person would have used in the same situation exercised by TVI?[52]
Parties to a contract of carriage may, however, agree upon a

definition of delivery that extends the services rendered by the
carrier. In the case at bar, Bill of Lading No. 2 covering the shipment
provides that delivery be made to the port of discharge or so near
thereto as she may safely get, always afloat.[59] The delivery of the
goods to the consignee was not from pier to pier but from the
shipside of M/V Alexander Saveliev and into barges, for which
reason the consignee contracted the services of petitioner. Since
Black Sea had constructively delivered the cargoes to Little Giant,
through petitioner, it had discharged its duty.[60]
This Court holds not.

TVIs failure to promptly provide a tugboat did not only increase the
risk that might have been reasonably anticipated during the shipside
operation, but was the proximate cause of the loss. A man of
ordinary prudence would not leave a heavily loaded barge floating for
a considerable number of hours, at such a precarious time, and in the
open sea, knowing that the barge does not have any power of its own
and is totally defenseless from the ravages of the sea. That it was
nighttime and, therefore, the members of the crew of a tugboat would
be charging overtime pay did not excuse TVI from calling for one
such tugboat.
In fine, no liability may thus attach to Black Sea.

Respecting the award of attorneys fees in an amount over
P1,000,000.00 to Industrial Insurance, for lack of factual and legal
72
Choco Notes
basis, this Court sets it aside. While Industrial Insurance was
compelled to litigate its rights, such fact by itself does not justify the
award of attorneys fees under Article 2208 of the Civil Code. For no
sufficient showing of bad faith would be reflected in a partys
persistence in a case other than an erroneous conviction of the
righteousness of his cause.[61] To award attorneys fees to a party
just because the judgment is rendered in its favor would be
tantamount to imposing a premium on ones right to litigate or seek
judicial redress of legitimate grievances.[62]
of their business and for reasons of public policy. Consequently, the

law presumes that common carriers are at fault or negligent for any
loss or damage to the goods that they transport. In the present case,
the evidence submitted by petitioner to overcome this presumption
was sorely insufficient.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of
Court, assailing the October 9, 2002 Decision[2] and the December
29, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR CV
No. 66028. The challenged Decision disposed as follows:
On the award of adjustment fees: The adjustment fees and expense of

divers were incurred by Industrial Insurance in its voluntary but
unsuccessful efforts to locate and retrieve the lost cargo. They do not
constitute actual damages.[63]
WHEREFORE, the appeal is GRANTED. The December 7, 1999

decision of the Regional Trial Court of Manila, Branch 42 in Civil
Case No. 92-63159 is hereby REVERSED and SET ASIDE.
[Petitioner] is ordered to pay the [herein respondent] the value of the
lost cargo in the amount of P565,000.00. Costs against the [herein
petitioner].[4]
As for the court a quos award of interest on the amount claimed, the
same calls for modification following the ruling in Eastern Shipping
Lines, Inc. v. Court of Appeals[64] that when the demand cannot be
reasonably established at the time the demand is made, the interest
shall begin to run not from the time the claim is made judicially or
extrajudicially but from the date the judgment of the court is made (at
which the time the quantification of damages may be deemed to have
been reasonably ascertained).[65]
The assailed Resolution denied reconsideration.
WHEREFORE, judgment is hereby rendered ordering petitioner

Schmitz Transport & Brokerage Corporation, and Transport Venture
Incorporation jointly and severally liable for the amount of
P5,246,113.11 with the MODIFICATION that interest at SIX
PERCENT per annum of the amount due should be computed from
the promulgation on November 24, 1997 of the decision of the trial
court.
The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer
Industries, Inc., for the shipment of 900 metric tons of silica sand
valued at P565,000.[5] Consigned to Vulcan Industrial and Mining
Corporation, the cargo was to be transported from Palawan to Manila.
On October 25, 1991, the silica sand was placed on board Judy VII, a
barge leased by Lea Mer.[6] During the voyage, the vessel sank,
resulting in the loss of the cargo.[7]

SO ORDERED.
Lea Mer Industries v. Malayan

LEA MER INDUSTRIES, INC.,
Petitioner,
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the
lost cargo.[8] To recover the amount paid and in the exercise of its
right of subrogation, Malayan demanded reimbursement from Lea
Mer, which refused to comply. Consequently, Malayan instituted a
Complaint with the Regional Trial Court (RTC) of Manila on
September 4, 1992, for the collection of P565,000 representing the
amount that respondent had paid Vulcan.[9]
On October 7, 1999, the trial court dismissed the Complaint, upon
finding that the cause of the loss was a fortuitous event.[10] The
RTC noted that the vessel had sunk because of the bad weather
condition brought about by Typhoon Trining. The court ruled that
petitioner had no advance knowledge of the incoming typhoon, and
that the vessel had been cleared by the Philippine Coast Guard to
travel from Palawan to Manila.[11]
G.R. No. 161745

Present
- versus -
Panganiban, J.,
Chairman,
Sandoval-Gutierrez,
Corona,
Carpio Morales, and

Garcia, JJ
Promulgated:
MALAYAN INSURANCE CO., INC.,*
Respondent.
September 30, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
Reversing the trial court, the CA held that the vessel was not
seaworthy when it sailed for Manila. Thus, the loss of the cargo was
occasioned by petitioners fault, not by a fortuitous event.[12]
PANGANIBAN, J.:
Hence, this recourse.[13]

C
ommon carriers are bound to observe extraordinary diligence in their
vigilance over the goods entrusted to them, as required by the nature
The Issues
Petitioner states the issues in this wise:
73
Choco Notes
vessel must completely and exclusively relinquish possession,
command and navigation thereof to the charterer; anything short of
such a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.[20]
A.
Whether or not the survey report of the cargo surveyor, Jesus
Cortez, who had not been presented as a witness of the said report
during the trial of this case before the lower court can be admitted in
evidence to prove the alleged facts cited in the said report.
B.
Whether or not the respondent, Court of Appeals, had validly
or legally reversed the finding of fact of the Regional Trial Court
which clearly and unequivocally held that the loss of the cargo
subject of this case was caused by fortuitous event for which herein
petitioner could not be held liable.
The distinction is significant, because a demise or bareboat charter

indicates a business undertaking that is private in character. [21]
Consequently, the rights and obligations of the parties to a contract of
private carriage are governed principally by their stipulations, not by
the law on common carriers.[22]
C.
Whether or not the respondent, Court of Appeals, had
committed serious error and grave abuse of discretion in disregarding
the testimony of the witness from the MARINA, Engr. Jacinto Lazo y
Villegal, to the effect that the vessel Judy VII was seaworthy at the
time of incident and further in disregarding the testimony of the PAGASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that
typhoon Trining did not hit Metro Manila or Palawan.[14]
The Contract in the present case was one of affreightment, as shown

by the fact that it was petitioners crew that manned the tugboat M/V
Ayalit and controlled the barge Judy VII.[23] Necessarily, petitioner
was a common carrier, and the pertinent law governs the present
factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence
in their vigilance over the goods and the safety of the passengers they
transport, as required by the nature of their business and for reasons
of public policy.[24] Extraordinary diligence requires rendering
service with the greatest skill and foresight to avoid damage and
destruction to the goods entrusted for carriage and delivery.[25]
In the main, the issues are as follows: (1) whether petitioner is

liable for the loss of the cargo, and (2) whether the survey report of
Jesus Cortez is admissible in evidence.
The Courts Ruling
Common carriers are presumed to have been at fault or to have acted

negligently for loss or damage to the goods that they have
transported.[26] This presumption can be rebutted only by proof that
they observed extraordinary diligence, or that the loss or damage was
occasioned by any of the following causes:[27]
The Petition has no merit.

First Issue:
Liability for Loss of Cargo
Question of Fact

calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
containers;
(5) Order or act of competent public authority.[28]
The resolution of the present case hinges on whether the loss of

the cargo was due to a fortuitous event. This issue involves primarily
a question of fact, notwithstanding petitioners claim that it pertains
only to a question of law. As a general rule, questions of fact may not
be raised in a petition for review.[15] The present case serves as an
exception to this rule, because the factual findings of the appellate
and the trial courts vary.[16] This Court meticulously reviewed the
records, but found no reason to reverse the CA.
Rule on Fortuitous Events
Rule on Common Carriers
Article 1174 of the Civil Code provides that no person shall be

responsible for a fortuitous event which could not be foreseen, or
which, though foreseen, was inevitable. Thus, if the loss or damage
was due to such an event, a common carrier is exempted from
liability.
Jurisprudence defines the elements of a fortuitous event as follows:
(a) the cause of the unforeseen and unexpected occurrence, or the
failure of the debtors to comply with their obligations, must have
been independent of human will; (b) the event that constituted the
caso fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any
participation in the aggravation of the resulting injury to the creditor.
[29]
Common carriers are persons, corporations, firms or

passengers or goods, or both -- by land, water, or air -- when this
service is offered to the public for compensation.[17] Petitioner is
clearly a common carrier, because it offers to the public its business
of transporting goods through its vessels.[18]
Thus, the Court corrects the trial courts finding that petitioner
became a private carrier when Vulcan chartered it.[19] Charter
parties are classified as contracts of demise (or bareboat) and
affreightment, which are distinguished as follows:
Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated.
The charterer mans the vessel with his own people and becomes, in
effect, the owner pro hac vice, subject to liability to others for
damages caused by negligence. To create a demise, the owner of a
To excuse the common carrier fully of any liability, the fortuitous

event must have been the proximate and only cause of the loss.[30]
74
Choco Notes
Moreover, it should have exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the
fortuitous event.[31]
have caused or aggravated the sinking.[39] Because the presumption

of negligence or fault applied to petitioner, it was incumbent upon it
to show that there were no holes; or, if there were, that they did not
aggravate the sinking.
Loss in the Instant Case

Petitioner offered no evidence to rebut the existence of the holes. Its
witness, Domingo A. Luna, testified that the barge was in tip-top or
excellent condition,[40] but that he had not personally inspected it
when it left Palawan.[41]
There is no controversy regarding the loss of the cargo in the

present case. As the common carrier, petitioner bore the burden of
proving that it had exercised extraordinary diligence to avoid the loss,
or that the loss had been occasioned by a fortuitous event -- an
exempting circumstance.
The submission of the Philippine Coast Guards Certificate of

Inspection of Judy VII, dated July 31, 1991, did not conclusively
prove that the barge was seaworthy.[42] The regularity of the
issuance of the Certificate is disputably presumed.[43] It could be
contradicted by competent evidence, which respondent offered.
Moreover, this evidence did not necessarily take into account the
actual condition of
the vessel at the time of the commencement of the voyage.[44]
It was precisely this circumstance that petitioner cited to escape

liability. Lea Mer claimed that the loss of the cargo was due to the
bad weather condition brought about by Typhoon Trining.[32]
Evidence was presented to show that petitioner had not been
informed of the incoming typhoon, and that the Philippine Coast
Guard had given it clearance to begin the voyage.[33] On October
25, 1991, the date on which the voyage commenced and the barge
sank, Typhoon Trining was allegedly far from Palawan, where the
storm warning was only Signal No. 1.[34]
The evidence presented by petitioner in support of its defense of
fortuitous event was sorely insufficient. As required by the pertinent
law, it was not enough for the common carrier to show that there was
an unforeseen or unexpected occurrence. It had to show that it was
free from any fault -- a fact it miserably failed to prove.
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report[45] prepared by Jesus

Cortez, the cargo surveyor, should not have been admitted in
evidence. The Court partly agrees. Because he did not testify during
the trial,[46] then the Report that he had prepared was hearsay and
therefore inadmissible for the purpose of proving the truth of its
contents.
First, petitioner presented no evidence that it had attempted to

minimize or prevent the loss before, during or after the alleged
fortuitous event.[35] Its witness, Joey A. Draper, testified that he
could no longer remember whether anything had been done to
minimize loss when water started entering the barge.[36] This fact
was confirmed during his cross-examination, as shown by the
following brief exchange:
The Survey Report Not the Sole Evidence

The facts reveal that Cortezs Survey Report was used in the
testimonies of respondents witnesses -- Charlie M. Soriano; and
Federico S. Manlapig, a cargo marine surveyor and the vice-president
of Toplis and Harding Company.[47] Soriano testified that the
Survey Report had been used in preparing the final Adjustment
Report conducted by their company.[48] The final Report showed
that the barge was not seaworthy because of the existence of the
holes. Manlapig testified that he had prepared that Report after
taking into account the findings of the surveyor, as well as the
pictures and the sketches of the place where the sinking occurred.[49]
Evidently, the existence of the holes was proved by the testimonies of
the witnesses, not merely by Cortez Survey Report.
Atty. Baldovino, Jr.:

Other than be[a]ching the barge Judy VII, were there other
precautionary measure[s] exercised by you and the crew of Judy VII
so as to prevent the los[s] or sinking of barge Judy VII?
xxx
xxx
xxx
Atty. Baldovino, Jr.:

Your Honor, what I am asking [relates to the] action taken by the
officers and crew of tugboat Ayalit and barge Judy VII
x x x to
prevent the sinking of barge Judy VII?
xxx
xxx
xxx
Rule on Independently
Relevant Statement
Court:
Mr. witness, did the captain of that tugboat give any instruction on
how to save the barge Judy VII?
That witnesses must be examined and presented during the

trial,[50] and that their testimonies must be confined to personal
knowledge is required by the rules on evidence, from which we
quote:
Joey Draper:
I can no longer remember sir, because that happened [a] long
time ago.[37]
Section 36. Testimony generally confined to personal knowledge;

hearsay excluded. A witness can testify only to those facts which he
knows of his personal knowledge; that is, which are derived from his
own perception, except as otherwise provided in these rules.[51]
Second, the alleged fortuitous event was not the sole and proximate
cause of the loss. There is a preponderance of evidence that the barge
was not seaworthy when it sailed for Manila.[38] Respondent was
able to prove that, in the hull of the barge, there were holes that might
75
Choco Notes
On this basis, the trial court correctly refused to admit Jesus
Cortezs Affidavit, which respondent had offered as evidence.[52]
Well-settled is the rule that, unless the affiant is presented as a
witness, an affidavit is considered hearsay.[53]
(CAA) sometime in 1964 for the construction of the airport in

Cagayan de Oro City Misamis Oriental.
Being a Manila based contractor, Vicente E. Concepcion had to
ship his construction equipment to Cagayan de Oro City. Having
shipped some of his equipment through petitioner and having settled
the balance of P2,628.77 with respect to said shipment, Concepcion
negotiated anew with petitioner, thru its collector, Pacifico
Fernandez, on August 28, 1964 for the shipment to Cagayan de Oro
City of one (1) unit payloader, four (4) units 6x6 Reo trucks and two
(2) pieces of water tanks. He was issued Bill of Lading 113 on the
same date upon delivery of the equipment at the Manila North
Harbor. 2
An exception to the foregoing rule is that on independently relevant

statements. A report made by a person is admissible if it is intended
to prove the tenor, not the truth, of the statements.[54] Independent
of the truth or the falsity of the statement given in the report, the fact
that it has been made is relevant. Here, the hearsay rule does not
apply.[55]
In the instant case, the challenged Survey Report prepared by
Cortez was admitted only as part of the testimonies of respondents
witnesses. The referral to Cortezs Report was in relation to
Manlapigs final Adjustment Report. Evidently, it was the existence
of the Survey Report that was testified to. The admissibility of that
Report as part of the testimonies of the witnesses was correctly ruled
upon by the trial court.
These equipment were loaded aboard the MV Cebu in its Voyage No.
316, which left Manila on August 30, 1964 and arrived at Cagayan de
Oro City in the afternoon of September 1, 1964. The Reo trucks and
water tanks were safely unloaded within a few hours after arrival, but
while the payloader was about two (2) meters above the pier in the
course of unloading, the swivel pin of the heel block of the port block
of Hatch No. 2 gave way, causing the payloader to fall. 3 The
payloader was damaged and was thereafter taken to petitioner's
compound in Cagayan de Oro City.
At any rate, even without the Survey Report, petitioner has

already failed to overcome the presumption of fault that applies to
common carriers.
On September 7, 1964, Consolidated Construction, thru Vicente E.

Concepcion, wrote Compaia Maritima to demand a replacement of
the payloader which it was considering as a complete loss because of
the extent of damage. 4 Consolidated Construction likewise notified
petitioner of its claim for damages. Unable to elicit response, the
demand was repeated in a letter dated October 2, 1964. 5
WHEREFORE, the Petition is DENIED and the assailed Decision

and Resolution are AFFIRMED. Costs against petitioner.
SO ORDERED.
Act of Shipper 1734[3];1741
Meanwhile, petitioner shipped the payloader to Manila where it was

weighed at the San Miguel Corporation. Finding that the payloader
weighed 7.5 tons and not 2.5 tons as declared in the B-111 of Lading,
petitioner denied the claim for damages of Consolidated Construction
in its letter dated October 7, 1964, contending that had Vicente E.
Concepcion declared the actual weight of the payloader, damage to
their ship as well as to his payloader could have been prevented. 6
Compania Maritima v. CA
G.R. No. L-31379 August 29, 1988
COMPAIA MARITIMA, petitioner,
vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
To replace the damaged payloader, Consolidated Construction in the

meantime bought a new one at P45,000.00 from Bormaheco Inc. on
December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed
an action for damages against petitioner with the then Court of First
Instance of Manila, Branch VII, docketed as Civil Case No. 61551,
seeking to recover damages in the amount of P41,225.00 allegedly
suffered for the period of 97 days that he was not able to employ a
payloader in the construction job at the rate of P450.00 a day;
P34,000.00 representing the cost of the damaged payloader; Pl 1,
000. 00 representing the difference between the cost of the damaged
payloader and that of the new payloader; P20,000.00 representing the
losses suffered by him due to the diversion of funds to enable him to
buy a new payloader; P10,000.00 as attorney's fees; P5,000.00 as
exemplary damages; and cost of the suit. 7
Rafael Dinglasan for petitioner.

Benjamin J. Molina for private respondent.
FERNAN, C.J.:
Petitioner Compaia Maritima seeks to set aside through this petition
for review on certiorari the decision 1 of the Court of Appeals dated
December 5, 1965, adjudging petitioner liable to private respondent
Vicente E. Concepcion for damages in the amount of P24,652.97
with legal interest from the date said decision shall have become
final, for petitioner's failure to deliver safely private respondent's
payloader, and for costs of suit. The payloader was declared
abandoned in favor of petitioner.
After trial, the then Court of First Instance of Manila, Branch VII,
dismissed on April 24, 1968 the complaint with costs against therein
plaintiff, herein private respondent Vicente E. Concepcion, stating
that the proximate cause of the fall of the payloader was Vicente E.
Concepcion's act or omission in having misrepresented the weight of
the payloader as 2.5 tons instead of its true weight of 7.5 tons, which
underdeclaration was intended to defraud Compaia Maritima of the
payment of the freight charges and which likewise led the Chief
The facts of the case are as follows:

Private respondent Vicente E. Concepcion, a civil engineer doing
business under the name and style of Consolidated Construction with
office address at Room 412, Don Santiago Bldg., Taft Avenue,
Manila, had a contract with the Civil Aeronautics Administration
76
Choco Notes
Officer of the vessel to use the heel block of hatch No. 2 in unloading
the payloader. 8
deterioration or destruction of the goods occurred, the common

carrier must be held responsible. 10 Otherwise stated, it is incumbent
upon the common carrier to prove that the loss, deterioration or
destruction was due to accident or some other circumstances
inconsistent with its liability.
From the adverse decision against him, Vicente E. Concepcion

appealed to the Court of Appeals which, on December 5, 1965
rendered a decision, the dispositive portion of which reads:
In the instant case, We are not persuaded by the proferred explanation

of petitioner alleged to be the proximate cause of the fall of the
payloader while it was being unloaded at the Cagayan de Oro City
pier. Petitioner seems to have overlooked the extraordinary diligence
required of common carriers in the vigilance over the goods
transported by them by virtue of the nature of their business, which is
impressed with a special public duty.
IN VIEW WHEREOF, judgment must have to be as it is hereby

reversed; defendant is condemned to pay unto plaintiff the sum in
damages of P24,652.07 with legal interest from the date the present
decision shall have become final; the payloader is declared
abandoned to defendant; costs against the latter. 9
Hence, the instant petition.
Thus, Article 1733 of the Civil Code provides:

The principal issue in the instant case is whether or not the act of
private respondent Vicente E. Concepcion in furnishing petitioner
Compaia Maritima with an inaccurate weight of 2.5 tons instead of
the payloader's actual weight of 7.5 tons was the proximate and only
cause of the damage on the Oliver Payloader OC-12 when it fell
while being unloaded by petitioner's crew, as would absolutely
exempt petitioner from liability for damages under paragraph 3 of
Article 1734 of the Civil Code, which provides:
Art. 1733.
Common carriers, from the nature of their
business and for reason of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in Articles 1734, 1735 and 1745, Nos. 5, 6 and 7, ...
Art. 1734.
Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to
any of the following causes only:
xxx
xxx
(3)
Act or omission of the shipper or owner of the goods.
The extraordinary diligence in the vigilance over the goods tendered

for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for safe carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight
and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due
care in the handling and stowage including such methods as their
nature requires." 11 Under Article 1736 of the Civil Code, the
responsibility to observe extraordinary diligence commences and
lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has the right to receive them without
prejudice to the provisions of Article 1738.
xxx
Petitioner claims absolute exemption under this provision upon the

reasoning that private respondent's act of furnishing it with an
inaccurate weight of the payloader constitutes misrepresentation
within the meaning of "act or omission of the shipper or owner of the
goods" under the above- quoted article. It likewise faults the
respondent Court of Appeals for reversing the decision of the trial
court notwithstanding that said appellate court also found that by
representing the weight of the payloader to be only 2.5 tons, private
respondent had led petitioner's officer to believe that the same was
within the 5 tons capacity of the heel block of Hatch No. 2. Petitioner
would thus insist that the proximate and only cause of the damage to
the payloader was private respondent's alleged misrepresentation of
the weight of the machinery in question; hence, any resultant damage
to it must be borne by private respondent Vicente E. Concepcion.
Where, as in the instant case, petitioner, upon the testimonies of its

own crew, failed to take the necessary and adequate precautions for
avoiding damage to, or destruction of, the payloader entrusted to it
for safe carriage and delivery to Cagayan de Oro City, it cannot be
reasonably concluded that the damage caused to the payloader was
due to the alleged misrepresentation of private respondent
Concepcion as to the correct and accurate weight of the payloader. As
found by the respondent Court of Appeals, the fact is that petitioner
used a 5-ton capacity lifting apparatus to lift and unload a visibly
heavy cargo like a payloader. Private respondent has, likewise,
sufficiently established the laxity and carelessness of petitioner's crew
in their methods of ascertaining the weight of heavy cargoes offered
for shipment before loading and unloading them, as is customary
among careful persons.
The general rule under Articles 1735 and 1752 of the Civil Code is
that common carriers are presumed to have been at fault or to have
acted negligently in case the goods transported by them are lost,
destroyed or had deteriorated. To overcome the presumption of
liability for the loss, destruction or deterioration of the goods under
Article 1735, the common carriers must prove that they observed
extraordinary diligence as required in Article 1733 of the Civil Code.
The responsibility of observing extraordinary diligence in the
vigilance over the goods is further expressed in Article 1734 of the
same Code, the article invoked by petitioner to avoid liability for
damages.
It must be noted that the weight submitted by private respondent

Concepcion appearing at the left-hand portion of Exhibit 8 12 as an
addendum to the original enumeration of equipment to be shipped
was entered into the bill of lading by petitioner, thru Pacifico
Fernandez, a company collector, without seeing the equipment to be
shipped. 13 Mr. Mariano Gupana, assistant traffic manager of
petitioner, confirmed in his testimony that the company never
Corollary is the rule that mere proof of delivery of the goods in good
order to a common carrier, and of their arrival at the place of
destination in bad order, makes out prima facie case against the
common carrier, so that if no explanation is given as to how the loss,
77
Choco Notes
checked the information entered in the bill of lading. 14 Worse, the
weight of the payloader as entered in the bill of lading was assumed
to be correct by Mr. Felix Pisang, Chief Officer of MV Cebu. 15
payloader, which at the time the instant case arose, was valued at
P34,000. 00, thereby reducing the recoverable amount at 80% or 4/5
of P34,000.00 or the sum of P27,200.00. Considering that the freight
charges for the entire cargoes shipped by private respondent
amounting to P2,318.40 remained unpaid.. the same would be
deducted from the P27,000.00 plus an additional deduction of
P228.63 representing the freight charges for the undeclared weight of
5 tons (difference between 7.5 and 2.5 tons) leaving, therefore, a final
recoverable amount of damages of P24,652.97 due to private
respondent Concepcion.
The weights stated in a bill of lading are prima facie evidence of the
amount received and the fact that the weighing was done by another
will not relieve the common carrier where it accepted such weight
and entered it on the bill of lading. 16 Besides, common carriers can
protect themselves against mistakes in the bill of lading as to weight
by exercising diligence before issuing the same. 17
While petitioner has proven that private respondent Concepcion did
furnish it with an inaccurate weight of the payloader, petitioner is
nonetheless liable, for the damage caused to the machinery could
have been avoided by the exercise of reasonable skill and attention on
its part in overseeing the unloading of such a heavy equipment. And
circumstances clearly show that the fall of the payloader could have
been avoided by petitioner's crew. Evidence on record sufficiently
show that the crew of petitioner had been negligent in the
performance of its obligation by reason of their having failed to take
the necessary precaution under the circumstances which usage has
established among careful persons, more particularly its Chief
Officer, Mr. Felix Pisang, who is tasked with the over-all supervision
of loading and unloading heavy cargoes and upon whom rests the
burden of deciding as to what particular winch the unloading of the
payloader should be undertaken. 18 While it was his duty to
determine the weight of heavy cargoes before accepting them. Mr.
Felix Pisang took the bill of lading on its face value and presumed the
same to be correct by merely "seeing" it. 19 Acknowledging that
there was a "jumbo" in the MV Cebu which has the capacity of lifting
20 to 25 ton cargoes, Mr. Felix Pisang chose not to use it, because
according to him, since the ordinary boom has a capacity of 5 tons
while the payloader was only 2.5 tons, he did not bother to use the
"jumbo" anymore. 20
Notwithstanding the favorable judgment in his favor, private

respondent assailed the Court of Appeals' decision insofar as it
limited the damages due him to only P24,652.97 and the cost of the
suit. Invoking the provisions on damages under the Civil Code, more
particularly Articles 2200 and 2208, private respondent further seeks
additional damages allegedly because the construction project was
delayed and that in spite of his demands, petitioner failed to take any
steps to settle his valid, just and demandable claim for damages.
We find private respondent's submission erroneous. It is well- settled
that an appellee, who is not an appellant, may assign errors in his
brief where his purpose is to maintain the judgment on other grounds,
but he may not do so if his purpose is to have the judgment modified
or reversed, for, in such case, he must appeal. 22 Since private
respondent did not appeal from the judgment insofar as it limited the
award of damages due him, the reduction of 20% or 1/5 of the value
of the payloader stands.
WHEREFORE, in view of the foregoing, the petition is DENIED.
The decision of the Court of Appeals is hereby AFFIRMED in all
respects with costs against petitioner. In view of the length of time
this case has been pending, this decision is immediately executory.
Gutierrez, Jr., Feliciano, Bidin and Cortes JJ., concur.
In that sense, therefore, private respondent's act of furnishing

petitioner with an inaccurate weight of the payloader upon being
asked by petitioner's collector, cannot be used by said petitioner as an
excuse to avoid liability for the damage caused, as the same could
have been avoided had petitioner utilized the "jumbo" lifting
apparatus which has a capacity of lifting 20 to 25 tons of heavy
cargoes. It is a fact known to the Chief Officer of MV Cebu that the
payloader was loaded aboard the MV Cebu at the Manila North
Harbor on August 28, 1964 by means of a terminal crane. 21 Even if
petitioner chose not to take the necessary precaution to avoid damage
by checking the correct weight of the payloader, extraordinary care
and diligence compel the use of the "jumbo" lifting apparatus as the
most prudent course for petitioner.
Tabacalera v. North Front

[G.R. No. 119197. May 16, 1997]
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE
& ASSURANCE, INC., and NEW ZEALAND INSURANCE CO.,
LTD., petitioners, vs. NORTH FRONT SHIPPING SERVICES, INC.,
and COURT OF APPEALS, respondents.
DECISION
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee &
Assurance, Inc., and New Zealand Insurance Co., Ltd., in this petition
for review on certiorari, assail the 22 December 1994 decision of the
Court of Appeals and its Resolution of 16 February 1995 which
affirmed the 1 June 1993 decision of the Regional Trial Court
dismissing their complaint for damages against North Front Shipping
Services, Inc.
While the act of private respondent in furnishing petitioner with an

inaccurate weight of the payloader cannot successfully be used as an
excuse by petitioner to avoid liability to the damage thus caused, said
act constitutes a contributory circumstance to the damage caused on
the payloader, which mitigates the liability for damages of petitioner
in accordance with Article 1741 of the Civil Code, to wit:
On 2 August 1990, 20,234 sacks of corn grains valued at

P3,500,640.00 were shipped on board North Front 777, a vessel
owned by North Front Shipping Services, Inc. The cargo was
consigned to Republic Flour Mills Corporation in Manila under Bill
of Lading No. 001[1] and insured with the herein mentioned
insurance companies. The vessel was inspected prior to actual
loading by representatives of the shipper and was found fit to carry
the merchandise. The cargo was covered with tarpaulins and wooden
Art. 1741.
If the shipper or owner merely contributed to the
loss, destruction or deterioration of the goods, the proximate cause
thereof being the negligence of the common carrier, the latter shall be
liable in damages, which however, shall be equitably reduced.
We find equitable the conclusion of the Court of Appeals reducing the
recoverable amount of damages by 20% or 1/5 of the value of the
78
Choco Notes
boards. The hatches were sealed and could only be opened by
representatives of Republic Flour Mills Corporation.
On the other hand, the Court of Appeals ruled that as a common

carrier required to observe a higher degree of diligence North Front
777 satisfactorily complied with all the requirements hence was
issued a Permit to Sail after proper inspection. Consequently, the
complaint was dismissed and the motion for reconsideration rejected.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived
Manila on 16 August 1990. Republic Flour Mills Corporation was
advised of its arrival but it did not immediately commence the
unloading operations. There were days when unloading had to be
stopped due to variable weather conditions and sometimes for no
apparent reason at all. When the cargo was eventually unloaded there
was a shortage of 26.333 metric tons. The remaining merchandise
was already moldy, rancid and deteriorating.
The unloading
operations were completed on 5 September 1990 or twenty (20) days
after the arrival of the barge at the wharf of Republic Flour Mills
Corporation in Pasig City.
The charter-party agreement between North Front Shipping Services,

Inc., and Republic Flour Mills Corporation did not in any way
convert the common carrier into a private carrier. We have already
resolved this issue with finality in Planters Products, Inc. v. Court of
Appeals[2] thus A 'charter-party' is defined as a contract by which an entire ship, or
some principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment by which the owner
of a ship or other vessel lets the whole or a part of her to a merchant
or other person for the conveyance of goods, on a particular voyage,
in consideration of the payment of freight x x x x Contract of
affreightment may either be time charter, wherein the vessel is leased
to the charterer for a fixed period of time, or voyage charter, wherein
the ship is leased for a single voyage. In both cases, the charter-party
provides for the hire of the vessel only, either for a determinate
period of time or for a single or consecutive voyage, the ship owner
to supply the ship's store, pay for the wages of the master of the crew,
and defray the expenses for the maintenance of the ship.
Precision Analytical Services, Inc., was hired to examine the corn

grains and determine the cause of deterioration. A Certificate of
Analysis was issued indicating that the corn grains had 18.56%
moisture content and the wetting was due to contact with salt water.
The mold growth was only incipient and not sufficient to make the
corn grains toxic and unfit for consumption. In fact the mold growth
could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and
formally demanded from North Front Shipping Services, Inc.,
payment for the damages suffered by it. The demands however were
unheeded. The insurance companies were perforce obliged to pay
Republic Flour Mills Corporation P2,189,433.40.
Upon the other hand, the term 'common or public carrier' is defined in
Art. 1732 of the Civil Code. The definition extends to carriers either
by land, air or water which hold themselves out as ready to engage in
carrying goods or transporting passengers or both for compensation
as a public employment and not as a casual occupation x x x x
By virtue of the payment made by the insurance companies they were

subrogated to the rights of Republic Flour Mills Corporation. Thusly,
they lodged a complaint for damages against North Front Shipping
Services, Inc., claiming that the loss was exclusively attributable to
the fault and negligence of the carrier. The Marine Cargo Adjusters
hired by the insurance companies conducted a survey and found
cracks in the bodega of the barge and heavy concentration of molds
on the tarpaulins and wooden boards. They did not notice any seals
in the hatches. The tarpaulins were not brand new as there were
patches on them, contrary to the claim of North Front Shipping
Services, Inc., thus making it possible for water to seep in. They also
discovered that the bulkhead of the barge was rusty.
It is therefore imperative that a public carrier shall remain as such,

notwithstanding the charter of the whole or portion of a vessel by one
or more persons, provided the charter is limited to the ship only, as in
the case of a time-charter or voyage-charter (underscoring supplied).
North Front Shipping Services, Inc., is a corporation engaged in the
business of transporting cargo and offers its services indiscriminately
to the public. It is without doubt a common carrier. As such it is
required to observe extraordinary diligence in its vigilance over the
goods it transports.[3]. When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or to have
acted negligently.[4] North Front Shipping Services, Inc., therefore
has the burden of proving that it observed extraordinary diligence in
order to avoid responsibility for the lost cargo.
North Front Shipping Services, Inc., averred in refutation that it could

not be made culpable for the loss and deterioration of the cargo as it
was never negligent. Captain Solomon Villanueva, master of the
vessel, reiterated that the barge was inspected prior to the actual
loading and was found adequate and seaworthy. In addition, they
were issued a permit to sail by the Coast Guard. The tarpaulins were
doubled and brand new and the hatches were properly sealed. They
did not encounter big waves hence it was not possible for water to
seep in. He further averred that the corn grains were farm wet and
not properly dried when loaded.
North Front Shipping Services, Inc., proved that the vessel was
inspected prior to actual loading by representatives of the shipper and
was found fit to take a load of corn grains. They were also issued
Permit to Sail by the Coast Guard. The master of the vessel
testified that the corn grains were farm wet when loaded. However,
this testimony was disproved by the clean bill of lading issued by
North Front Shipping Services, Inc., which did not contain a notation
that the corn grains were wet and improperly dried. Having been in
the service since 1968, the master of the vessel would have known at
the outset that corn grains that were farm wet and not properly dried
would eventually deteriorate when stored in sealed and hot
compartments as in hatches of a ship. Equipped with this knowledge,
the master of the vessel and his crew should have undertaken
precautionary measures to avoid or lessen the cargo's possible
deterioration as they were presumed knowledgeable about the nature
of such cargo. But none of such measures was taken.
The court below dismissed the complaint and ruled that the contract
entered into between North Front Shipping Services, Inc., and
Republic Flour Mills Corporation was a charter-party agreement. As
such, only ordinary diligence in the care of goods was required of
North Front Shipping Services, Inc. The inspection of the barge by
the shipper and the representatives of the shipping company before
actual loading, coupled with the Permit to Sail issued by the Coast
Guard, sufficed to meet the degree of diligence required of the carrier.
79
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testified to by the chemist who analyzed the corn samples, the mold
growth was only at its incipient stage and could still be arrested by
drying. The corn grains were not yet toxic or unfit for consumption.
For its contributory negligence, Republic Flour Mills Corporation
should share at least 40% of the loss.[7]
In Compania Maritima v. Court of Appeals[5] we ruled x x x x Mere proof of delivery of the goods in good order to a
common carrier, and of their arrival at the place of destination in bad
order, makes out prima facie case against the common carrier, so that
if no explanation is given as to how the loss, deterioration or
destruction of the goods occurred, the common carrier must be held
responsible. Otherwise stated, it is incumbent upon the common
carrier to prove that the loss, deterioration or destruction was due to
accident or some other circumstances inconsistent with its liability x
xxx
WHEREFORE, the Decision of the Court of Appeals of 22 December

1994 and its Resolution of 16 February 1995 are REVERSED and
SET ASIDE. Respondent North Front Shipping Services, Inc., is
ordered to pay petitioners Tabacalera Insurance Co., Prudential
Guarantee & Assurance, Inc., and New Zealand Insurance Co. Ltd.,
P1,313,660.00 which is 60% of the amount paid by the insurance
companies to Republic Flour Mills Corporation, plus interest at the
rate of 12% per annum from the time this judgment becomes final
until full payment.

goods entrusted to it for safe carriage and delivery. It requires
and 'to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their
nature requires' (underscoring supplied).
SO ORDERED.
Character of Goods
1734[4];1742
Government v. Ynchausti,
September 29, 1919
In fine, we find that the carrier failed to observe the required

extraordinary diligence in the vigilance over the goods placed in its
care. The proofs presented by North Front Shipping Services,
Inc., were insufficient to rebut the prima facie presumption of private
respondent's negligence, more so if we consider the evidence
adduced by petitioners.
G.R. No. 14191

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiffappellant,
vs.
YNCHAUSTI & COMPANY, defendant-appellee.
It is not denied by the insurance companies that the vessel was indeed
inspected before actual loading and that North Front 777 was issued a
Permit to Sail. They proved the fact of shipment and its consequent
loss or damage while in the actual possession of the carrier. Notably,
the carrier failed to volunteer any explanation why there was spoilage
and how it occurred. On the other hand, it was shown during the trial
that the vessel had rusty bulkheads and the wooden boards and
tarpaulins bore heavy concentration of molds. The tarpaulins used
were not new, contrary to the claim of North Front Shipping Services,
Inc., as there were already several patches on them, hence, making it
highly probable for water to enter.
Attorney-General Paredes for the appellant. Charles C. Cohn for the

appellee.
JOHNSON, J.:
The purpose of this action was to recover the sum of P200 as
damages to certain cargo of roofing tiles shipped by the plaintiff from
Manila to Iloilo on a vessel belonging to the defendant. The tiles were
delivered by the defendant to the consignee of the plaintiff at Iloilo.
Upon delivery it was found that some of the tiles had been damaged;
that the damage amounted to about P200. Upon a submission of that
question to the lower court a judgment was rendered against the
plaintiff in favor of the defendant, absolving the latter from all
liability under the complaint.
Laboratory analysis revealed that the corn grains were contaminated

with salt water. North Front Shipping Services, Inc., failed to rebut
all these arguments. It did not even endeavor to establish that the
loss, destruction or deterioration of the goods was due to the
following: (a) flood, storm, earthquake, lightning, or other natural
disaster or calamity; (b) act of the public enemy in war, whether
international or civil; (c) act or omission of the shipper or owner of
the goods; (d) the character of the goods or defects in the packing or
in the containers; (e) order or act of competent public authority.[6]
This is a closed list. If the cause of destruction, loss or deterioration
is other than the enumerated circumstances, then the carrier is rightly
liable therefor.
There seems to be no dispute about the facts, except whether or not

the tiles were broken by the negligence of the defendant. The
defendant denied that the tiles were broken by reason of its
negligence. The defendant proved, and the plaintiff did not attempt to
dispute, that the roofing tiles in question were of a brittle and fragile
nature; that they were delivered by the plaintiff to the defendant in
bundles of ten each, tied with bejuco [rattan], without any packing or
protective covering. The plaintiff did not even attempt to prove any
negligence on the part of the defendant. On the hand, the defendant
offered proof to show that there was no negligence on its part, by
showing that the tiles were loaded, stowed, and discharged by
handlabor, and not be mechanical devices which might have caused
the breakage in question.
However, we cannot attribute the destruction, loss or deterioration of

the cargo solely to the carrier. We find the consignee Republic Flour
Mills Corporation guilty of contributory negligence.
It was
seasonably notified of the arrival of the barge but did not
immediately start the unloading operations. No explanation was
proffered by the consignee as to why there was a delay of six (6)
days. Had the unloading been commenced immediately the loss
could have been completely avoided or at least minimized. As
It appears from the record that the tiles in question were received by
the defendant from the plaintiff, as representative on a Government
bill of lading known as "General Form No. 9-A," which was made
out and submitted by a representative of the Bureau of Supply to the
80
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defendant. (Exhibit A.) At the head of Exhibit A is found the
following:
of Customs but from the actual contract which the parties made in the
present case. Each bill of lading is a contract and the parties thereto
are bound by its terms.
You are hereby authorized to receive, carry, and deliver the following
described merchandise to treasurer of Iloilo at Iloilo in accordance
with the authorized and prescribed rates and classifications, and
according to the laws of common carriers in force on the date hereof,
settlement and payment of charges to be made by Bureau of Supply.
(Sgd.) T. R. SCHOON, Chief Division of Supplies, Bureau of Supply.
Findings as we do that the tiles in question were shipped at the

owner's risk, under the law in this jurisdiction, the carrier is only
liable where the evidence shows that he was guilty of some
negligence and that the damages claimed were the result of such
negligence. As was said above, the plaintiff offered no proof
whatever to show negligence on the part of the defendant.
On the said bill of lading we find the following, which was attempted
thereon by the defendant:
The plaintiff cites some American authorities to support its

contention that the carrier is an absolute insurer of merchandise
shipped and that the proof of breakage or damage to goods shipped in
the hands of the carrier makes out a prima facie case of negligence
against him, and that the burden of proof is thrown on him to show
due care and diligence.
The goods have been accepted for transportation subject to the

conditions prescribed by the Insular Collector of Customs in
Philippine Marine Regulations, page 16, under the heading "Bill of
Lading Conditions."
The lower court, in discussing the said bill of lading with the two
conditions found thereon, reached the conclusion that the plaintiff
was bound by the terms of the bill of lading as issued by the
defendant and not by the terms which the plaintiff attempted to
impose, - that is to say, that such merchandise was to be carried at
owner's risk only; that there was no presumption of negligence on the
part of the defendant from the fact that the tiles were broken when
received by the consignee; and that since the plaintiff did not prove
negligence on the part of the defendant, the former was not entitled to
recover damages from the latter. The lower court rendered judgment
absolving the defendant from all liability under the complaint.
The law upon that question in this jurisdiction is found in articles 361
and 362 of the Commercial Code. Article 361 provides:
ART. 361. Merchandise shall be transported at the risk and venture of
the shipper, if the contrary be not expressly stipulated.
Therefore, all damages and impairment, suffered by the goods in
transportation by reason of accident, force majeure, or by virtue of
the nature or defect of the articles, shall be for the account and risk of
the shipper.
The proof of these accidents is incumbent upon the carrier.
The important questions presented by the appeal are: (a) Where the
terms and conditions stamped by the defendant upon the
Government's bill of lading binding upon the plaintiff? (b) Was there
a presumption of negligence on the part of the defendant?
Article 362 provides:

ART. 362. The carrier, however, shall be liable for the losses and
damages arising from the causes mentioned in the foregoing article, if
it be proved against him that they occurred on account of his
negligence or because he did not take the precautions usually adopted
by careful persons, unless the shipper committed fraud in the bill of
lading stating that the goods were of a class or quality different from
what they really were. . . .
The record shows that ever since the Government began to use the
bill of lading, General Form No. 9-A, the shipowners had always
used the "stamp" in question; that in the present case the defendant
placed said stamp upon the bill of lading before the plaintiff shipped
the tiles in question; that having shipped the goods under the said bill
of lading, with the terms and conditions of the carriage stamped
thereon, the appellant must be deemed to have assented to the said
terms and conditions thereon stamped.
Under the provisions of article 361 the defendant, in order to free

itself from liability, was only obliged to prove that the damages
suffered by the goods were "by virtue of the nature or defect of the
articles." Under the provisions of article 362 the plaintiff, in order to
hold the defendant liable, was obliged to prove that the damages to
the goods by virtue of their nature, occurred on account of its
negligence or because the defendant did not take the precaution
usually adopted by careful persons.
The appellant contends also that it was not bound by the terms and
conditions inserted by the appellee, because (a) the reference made
by the appellee to the "Philippine Marine Regulations" prescribed by
the Collector of Customs was vague; that the appellee should have
expressed the conditions fully and clearly on the face of the bill of
lading; and (b) that the Insular Collector of Customs had no authority
to issue such regulations.
The defendant herein proved, and the plaintiff did not attempt to
dispute, that the tiles in question were of a brittle and fragile nature
and that they were delivered by the plaintiff to the defendant without
any packing or protective covering. The defendant also offered proof
to show that there was no negligence on its part, by showing that the
tiles were loaded, stowed, and discharged in a careful and diligent
manner.
As to the first contention, it seems that the appellant fully knew the
import and significance of the reference made in said regulations. The
appellant attempted to show that prior to the transaction in question
the Government notified the defendant and other shipowners that it
would not be bound by the "stamp" that was placed by the
shipowners on the Government's bill of lading.
In this jurisdiction there is no presumption of negligence on the part

of the carriers in case like the present. The plaintiff, not having
proved negligence on the part of the defendant, is not entitled to
recover damages.
With reference to the contention of the appellant that the Collector of

Customs had no authority to make such regulations, it may be said in
the present case that the binding effect of the conditions stamped on
the bill of lading did not proceed from the authority of the Collector
81
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For the foregoing reasons, the judgment of the lower court is hereby
affirmed, with costs. So ordered.
ART. 361. The merchandise shall be transported at the risk and

venture of the shipper, if the contrary has not been expressly
stipulated.
Southern Lines v. CA
G.R. No. L-16629
January 31, 1962
As a consequence, all the losses and deteriorations which the goods

may suffer during the transportation by reason of fortuitous event,
force majeure, or the inherent nature and defect of the goods, shall be
for the account and risk of the shipper.1wph1.t
SOUTHERN LINES, INC., petitioner,

vs.
COURT OF APPEALS and CITY OF ILOILO, respondents.
Proof of these accidents is incumbent upon the carrier.
Jose Ma. Lopez Vito, Jr. for petitioner.

The City Fiscal for respondents.
Article 362 of the same Code provides: .
DE LEON, J.:
ART. 362. Nevertheless, the carrier shall be liable for the losses
and damages resulting from the causes mentioned in the preceding
article if it is proved, as against him, that they arose through his
negligence or by reason of his having failed to take the precautions
which usage his establisbed among careful persons, unless the
shipper has committed fraud in the bill of lading, representing the
goods to be of a kind or quality different from what they really were.
This is a petition to review on certiorari the decision of the Court of

Appeals in CA-G.R. No. 15579-R affirming that of the Court of First
Instance of Iloilo which sentenced petitioner Southern Lines, Inc. to
pay respondent City of Iloilo the amount of P4,931.41.
Sometime in 1948, the City of Iloilo requisitioned for rice from the
National Rice and Corn Corporation (hereafter referred to as NARIC)
in Manila. On August 24 of the same year, NARIC, pursuant to the
order, shipped 1,726 sacks of rice consigned to the City of Iloilo on
board the SS "General Wright" belonging to the Southern Lines, Inc.
Each sack of rice weighed 75 kilos and the entire shipment as
indicated in the bill of lading had a total weight of 129,450 kilos.
According to the bill of lading, the cost of the shipment was
P63,115.50 itemized and computed as follows: .
If, notwithstanding the precautions referred to in this article, the

goods transported run the risk of being lost, on account of their nature
or by reason of unavoidable accident, there being no time for their
owners to dispose of them, the carrier may proceed to sell them,
placing them for this purpose at the disposal of the judicial authority
or of the officials designated by special provisions.
Under the provisions of Article 361, the defendant-carrier in order to
free itself from liability, was only obliged to prove that the damages
suffered by the goods were "by virtue of the nature or defect of the
articles." Under the provisions of Article 362, the plaintiff, in order to
hold the defendant liable, was obliged to prove that the damages to
the goods by virtue of their nature, occurred on account of its
negligence or because the defendant did not take the precaution
adopted by careful persons. (Government v. Ynchausti & Co., 40
Phil. 219, 223).
Unit Price per bag P36.25

P62,567.50
Handling at P0.13 per bag
224.38
Trucking at P2.50 per bag
323.62
T o t a l . . . . . .. . . . .
63,115.50
On September 3, 1948, the City of Iloilo received the shipment and
paid the amount of P63,115.50. However, it was noted that the foot of
the bill of lading that the City of Iloilo 'Received the above
mentioned merchandise apparently in same condition as when
shipped, save as noted below: actually received 1685 sacks with a
gross weight of 116,131 kilos upon actual weighing. Total shortage
ascertained 13,319 kilos." The shortage was equivalent to 41 sacks of
rice with a net weight of 13,319 kilos, the proportionate value of
which was P6,486.35.
Petitioner claims exemption from liability by contending that the

shortage in the shipment of rice was due to such factors as the
shrinkage, leakage or spillage of the rice on account of the bad
condition of the sacks at the time it received the same and the
negligence of the agents of respondent City of Iloilo in receiving the
shipment. The contention is untenable, for, if the fact of improper
packing is known to the carrier or his servants, or apparent upon
ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting
thereform. (9 Am Jur. 869.) Furthermore, according to the Court of
Appeals, "appellant (petitioner) itself frankly admitted that the strings
that tied the bags of rice were broken; some bags were with holes and
plenty of rice were spilled inside the hull of the boat, and that the
personnel of the boat collected no less than 26 sacks of rice which
they had distributed among themselves." This finding, which is
binding upon this Court, shows that the shortage resulted from the
negligence of petitioner.
On February 14, 1951 the City of Iloilo filed a complaint in the Court
of First Instance of Iloilo against NARIC and the Southern Lines, Inc.
for the recovery of the amount of P6,486.35 representing the value of
the shortage of the shipment of rice. After trial, the lower court
absolved NARIC from the complaint, but sentenced the Southern
Lines, Inc. to pay the amount of P4,931.41 which is the difference
between the sum of P6,486.35 and P1,554.94 representing the latter's
counterclaim for handling and freight.
The Southern Lines, Inc. appealed to the Court of Appeals which
affirmed the judgment of the trial court. Hence, this petition for
review.
Invoking the provisions of Article 366 of the Code of Commerce and

those of the bill of lading, petitioner further contends that respondent
is precluded from filing an action for damages on account of its
failure to present a claim within 24 hours from receipt of the
shipment. It also cites the cases of Government v. Ynchausti & Co.,
24 Phil. 315 and Triton Insurance Co. v. Jose, 33 Phil. 194, ruling to
The only question to be determined in this petition is whether or not

the defendant-carrier, the herein petitioner, is liable for the loss or
shortage of the rice shipped.
Article 361 of the Code of Commerce provides: .
82
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the effect that the requirement that the claim for damages must be
made within 24 hours from delivery is a condition precedent to the
accrual of the right of action to recover damages. These two cases
above-cited are not applicable to the case at bar. In the first cited
case, the plaintiff never presented any claim at all before filing the
action. In the second case, there was payment of the transportation
charges which precludes the presentation of any claim against the
carrier. (See Article 366, Code of Commerce.) It is significant to note
that in the American case of Hoye v. Pennsylvania Railroad Co., 13
Ann. Case. 414, it has been said: .
Petitioner Virgines Calvo is the owner of Transorient Container

Terminal Services, Inc. (TCTSI), a sole proprietorship customs
broker. At the time material to this case, petitioner entered into a
contract with San Miguel Corporation (SMC) for the transfer of 114
reels of semi-chemical fluting paper and 124 reels of kraft liner board
from the Port Area in Manila to SMCs warehouse at the Tabacalera
Compound, Romualdez St., Ermita, Manila. The cargo was insured
by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal
vans, arrived in Manila on board M/V Hayakawa Maru and, after
24 hours, were unloaded from the vessel to the custody of the arrastre
operator, Manila Port Services, Inc. From July 23 to July 25, 1990,
petitioner, pursuant to her contract with SMC, withdrew the cargo
from the arrastre operator and delivered it to SMCs warehouse in
Ermita, Manila. On July 25, 1990, the goods were inspected by
Marine Cargo Surveyors, who found that 15 reels of the semichemical fluting paper were wet/stained/torn and 3 reels of kraft
liner board were likewise torn. The damage was placed at
P93,112.00.
... "It has been held that a stipulation in the contract of shipment
requiring the owner of the goods to present a notice of his claim to
the carrier within a specified time after the goods have arrived at their
destination is in the nature of a condition precedent to the owner's
right to enforce a recovery, that he must show in the first instance that
be has complied with the condition, or that the circumstances were
such that to have complied with it would have required him to do an
unreasonable thing. The weight of authority, however, sustains the
view that such a stipulation is more in the nature of a limitation upon
the owner's right to recovery, and that the burden of proof is
accordingly on the carrier to show that the limitation was reasonable
and in proper form or within the time stated." (Hutchinson on Carrier,
3d ed., par. 44) Emphasis supplied.
SMC collected payment from respondent UCPB under its insurance

contract for the aforementioned amount. In turn, respondent, as
subrogee of SMC, brought suit against petitioner in the Regional
Trial Court, Branch 148, Makati City, which, on December 20, 1995,
rendered judgment finding petitioner liable to respondent for the
damage to the shipment.
In the case at bar, the record shows that petitioner failed to plead this
defense in its answer to respondent's complaint and, therefore, the
same is deemed waived (Section 10, Rule 9, Rules of Court), and
cannot be raised for the first time at the trial or on appeal. (Maxilom
v. Tabotabo, 9 Phil. 390.) Moreover, as the Court of Appeals has said:
.
The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage
while in the custody of defendants. Evidence such as the Warehouse
Entry Slip (Exh. E); the Damage Report (Exh. F) with entries
appearing therein, classified as TED and TSN, which the claims
processor, Ms. Agrifina De Luna, claimed to be tearrage at the end
and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh.
H - H-4-A) confirms the fact of the damaged condition of the
subject cargoes.
The surveyor[s] report (Exh. H-4-A) in
particular, which provides among others that:
... the records reveal that the appellee (respondent) filed the present
action, within a reasonable time after the short delivery in the
shipment of the rice was made. It should be recalled that the present
action is one for the refund of the amount paid in excess, and not for
damages or the recovery of the shortage; for admittedly the appellee
(respondent) had paid the entire value of the 1726 sacks of rice,
subject to subsequent adjustment, as to shortages or losses. The bill
of lading does not at all limit the time for filing an action for the
refund of money paid in excess.
WHEREFORE, the decision of the Court of Appeals is hereby
affirmed in all respects and the petition for certiorari denied.
. . . we opine that damages sustained by shipment is attributable to

improper handling in transit presumably whilst in the custody of the
broker . . . .
Calvo v. UCPB
[G.R. No. 148496. March 19, 2002]
is a finding which cannot be traversed and overturned.
VIRGINES CALVO doing business under the name and style

TRANSORIENT CONTAINER TERMINAL SERVICES, INC.,
petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly
Allied Guarantee Ins. Co., Inc.) respondent.
DECISION
MENDOZA, J.:
The evidence adduced by the defendants is not enough to sustain

[her] defense that [she is] are not liable. Defendant by reason of the
nature of [her] business should have devised ways and means in order
to prevent the damage to the cargoes which it is under obligation to
take custody of and to forthwith deliver to the consignee. Defendant
did not present any evidence on what precaution [she] performed to
prevent [the] said incident, hence the presumption is that the moment
the defendant accepts the cargo [she] shall perform such
extraordinary diligence because of the nature of the cargo.
This is a petition for review of the decision,[1] dated May 31, 2001,
of the Court of Appeals, affirming the decision[2] of the Regional
Trial Court, Makati City, Branch 148, which ordered petitioner to pay
respondent, as subrogee, the amount of P93,112.00 with legal
interest, representing the value of damaged cargo handled by
petitioner, 25% thereof as attorneys fees, and the cost of the suit.
. . . .
Generally speaking under Article 1735 of the Civil Code, if the goods
are proved to have been lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have acted
The facts are as follows:
83
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negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff,
therefore, is to prove merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the burden is shifted to the
carrier to prove that he has exercised the extraordinary diligence
required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case against
the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent upon
the carrier to prove that the loss was due to accident or some other
circumstances inconsistent with its liability. (cited in Commercial
Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
The contention has no merit. In De Guzman v. Court of Appeals,[7]

the Court dismissed a similar contention and held the party to be a
common carrier, thus
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
passengers or goods or both, by land, water, or air for compensation,
The above article makes no distinction between one whose
principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity . . .
Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the general public, i.e., the
general community or population, and one who offers services or
solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from
making such distinctions.
Defendant, being a customs brother, warehouseman and at the same

time a common carrier is supposed [to] exercise [the] extraordinary
diligence required by law, hence the extraordinary responsibility lasts
from the time the goods are unconditionally placed in the possession
of and received by the carrier for transportation until the same are
delivered actually or constructively by the carrier to the consignee or
to the person who has the right to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following
amounts
So understood, the concept of common carrier under Article 1732

may be seen to coincide neatly with the notion of public service,
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, public service includes:
1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence
this petition for review on certiorari.
x x x every person that now or hereafter may own, operate, manage,

or control in the Philippines, for hire or compensation, with general
or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad,
street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship line, pontines, ferries
and water craft, engaged in the transportation of passengers or freight
or both, shipyard, marine repair shop, wharf or dock, ice plant, icerefrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x x [8]
Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON THE
EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS
A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO THE
PUBLIC.[5]
There is greater reason for holding petitioner to be a common carrier

because the transportation of goods is an integral part of her business.
To uphold petitioners contention would be to deprive those with
whom she contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for her
customers, as already noted, is part and parcel of petitioners
business.
It will be convenient to deal with these contentions in the inverse

order, for if petitioner is not a common carrier, although both the trial
court and the Court of Appeals held otherwise, then she is indeed not
liable beyond what ordinary diligence in the vigilance over the goods
transported by her, would require.[6] Consequently, any damage to
the cargo she agrees to transport cannot be presumed to have been
due to her fault or negligence.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:

Petitioner contends that contrary to the findings of the trial court and
the Court of Appeals, she is not a common carrier but a private carrier
because, as a customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but only offers the
same to select parties with whom she may contract in the conduct of
her business.
Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each
case. . . .
84
Choco Notes
In Compania Maritima v. Court of Appeals,[9] the meaning of
extraordinary diligence in the vigilance over goods was explained
thus:
Shipment, provided with our protective supervision was noted

discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14
July 1990, containerized onto 30 x 20 secure metal vans, covered by
clean EIRs. Except for slight dents and paint scratches on side and
roof panels, these containers were deemed to have [been] received in
good condition.

goods entrusted to it for sale, carriage and delivery. It requires
and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due
nature requires.
. . . .
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20 cargo
containers was [withdrawn] by Transorient Container Services,
Inc. . . . without exception.
In the case at bar, petitioner denies liability for the damage to the
cargo. She claims that the spoilage or wettage took place while the
goods were in the custody of either the carrying vessel M/V
Hayakawa Maru, which transported the cargo to Manila, or the
arrastre operator, to whom the goods were unloaded and who
allegedly kept them in open air for nine days from July 14 to July 23,
1998 notwithstanding the fact that some of the containers were
deformed, cracked, or otherwise damaged, as noted in the Marine
Survey Report (Exh. H), to wit:
MAXU-2062880
TOLU-213674-3
of water soaked
MAXU-201406-0
As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was
discharged from the vessel to the arrastre, Marina Port Services Inc.,
in good order and condition as evidenced by clean Equipment
Interchange Reports (EIRs). Had there been any damage to the
shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendantappellant from the arrastre still in good order and condition as the
same were received by the former without exception, that is, without
any report of damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the defendant-appellant
would report it immediately to the consignee or make an exception
on the delivery receipt or note the same in the Warehouse Entry Slip
(WES). None of these took place. To put it simply, the defendantappellant received the shipment in good order and condition and
delivered the same to the consignee damaged. We can only conclude
that the damages to the cargo occurred while it was in the possession
of the defendant-appellant. Whenever the thing is lost (or damaged)
in the possession of the debtor (or obligor), it shall be presumed that
the loss (or damage) was due to his fault, unless there is proof to the
contrary. No proof was proffered to rebut this legal presumption and
the presumption of negligence attached to a common carrier in case
of loss or damage to the goods.[13]
rain gutter deformed/cracked
ICSU-363461-3
distorted/partly loose
PERU-204209-4
portion
[The cargo] was finally delivered to the consignees storage

warehouse located at Tabacalera Compound, Romualdez Street,
Ermita, Manila from July 23/25, 1990.[12]
ICSU-412105-0
partly detached loosened.[10]
left side rubber gasket on door

with pinholes on roof panel right
wood flooring we[t] and/or with signs
with dent/crack on roof panel
rubber gasket on left side/door panel
In addition, petitioner claims that Marine Cargo Surveyor Ernesto

Tolentino testified that he has no personal knowledge on whether the
container vans were first stored in petitioners warehouse prior to
their delivery to the consignee. She likewise claims that after
withdrawing the container vans from the arrastre operator, her driver,
Ricardo Nazarro, immediately delivered the cargo to SMCs
warehouse in Ermita, Manila, which is a mere thirty-minute drive
from the Port Area where the cargo came from. Thus, the damage to
the cargo could not have taken place while these were in her custody.
[11]
Anent petitioners insistence that the cargo could not have been
damaged while in her custody as she immediately delivered the
containers to SMCs compound, suffice it to say that to prove the
exercise of extraordinary diligence, petitioner must do more than
merely show the possibility that some other party could be
responsible for the damage. It must prove that it used all reasonable
means to ascertain the nature and characteristic of goods tendered for
[transport] and that [it] exercise[d] due care in the handling
[thereof]. Petitioner failed to do this.
Contrary to petitioners assertion, the Survey Report (Exh. H) of the

Marine Cargo Surveyors indicates that when the shipper transferred
the cargo in question to the arrastre operator, these were covered by
clean Equipment Interchange Report (EIR) and, when petitioners
employees withdrew the cargo from the arrastre operator, they did so
without exception or protest either with regard to the condition of
container vans or their contents. The Survey Report pertinently
reads
Nor is there basis to exempt petitioner from liability under Art.

1734(4), which provides
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
Details of Discharge:
. . . .
85
Choco Notes
containers.
The CA reversed the Decision of the Regional Trial Court (RTC) of

Makati City (Branch 134), which had disposed as follows:
. . . .
WHEREFORE, in view of the foregoing, judgment is hereby

rendered, dismissing the complaint, as well as defendants
counterclaim.[5]
For this provision to apply, the rule is that if the improper packing or,
in this case, the defect/s in the container, is/are known to the carrier
or his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for
damage resulting therefrom.[14] In this case, petitioner accepted the
cargo without exception despite the apparent defects in some of the
container vans. Hence, for failure of petitioner to prove that she
exercised extraordinary diligence in the carriage of goods in this case
or that she is exempt from liability, the presumption of negligence as
provided under Art. 1735[15] holds.
The Facts
The factual antecedents of the case are summarized by the Court of
Appeals in this wise:
On June 13, 1990, CMC Trading A.G. shipped on board the MN
Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold
Rolled Steel sheets for transportation to Manila consigned 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 the subject cargo. Four (4) coils were found to be in
bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in
their damaged state to be unfit for the intended purpose, the
consignee Philippine Steel Trading Corporation declared the same as
total loss.
WHEREFORE, the decision of the Court of Appeals, dated May 31,

2001, is AFFIRMED.
SO ORDERED.
Belgian Overseas v. PFIC
Despite receipt of a formal demand, defendants-appellees refused to

submit to the consignees claim. Consequently, plaintiff-appellant
paid the consignee five hundred six thousand eighty six & 50/100
pesos (P506,086.50), and was subrogated to the latters rights and
causes of action against defendants-appellees. Subsequently, plaintiffappellant instituted this complaint for recovery of the amount paid by
them, to the consignee as insured.
[G.R. No. 143133. June 5, 2002]

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and
JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners, vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondent.
DECISION
PANGANIBAN, J.:
Impugning the propriety of the suit against them, defendantsappellees imputed that the damage and/or loss was due to preshipment damage, to the inherent nature, vice or defect of the goods,
or to perils, danger and accidents of the sea, or to insufficiency of
packing thereof, or to the act or omission of the shipper of the goods
or their representatives. In addition thereto, defendants-appellees
argued that their liability, if there be any, should not exceed the
limitations of liability provided for in the bill of lading and other
pertinent laws. Finally, defendants-appellees averred that, in any
event, they exercised due diligence and foresight required by law to
prevent any damage/loss to said shipment.[6]
Proof of the delivery of goods in good order to a common carrier and

of their arrival in bad order at their destination constitutes prima facie
fault or negligence on the part of the carrier. If no adequate
explanation is given as to how the loss, the destruction or the
deterioration of the goods happened, the carrier shall be held liable
therefor.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of
Court, assailing the July 15, 1998 Decision[1] and the May 2, 2000
Resolution[2] of the Court of Appeals[3] (CA) in CA-GR CV No.
53571. The decretal portion of the Decision reads as follows:
Ruling of the Trial Court

The RTC dismissed the Complaint because respondent had failed to
prove its claims with the quantum of proof required by law.[7]
WHEREFORE, in the light of the foregoing disquisition, the

decision appealed from is hereby REVERSED and SET ASIDE.
Defendants-appellees are ORDERED to jointly and severally pay
plaintiffs-appellants the following:
It likewise debunked petitioners counterclaim, because respondents

suit was not manifestly frivolous or primarily intended to harass
them.[8]
1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and

32/100 (P451,027.32) as actual damages, representing the value of
the damaged cargo, plus interest at the legal rate from the time of
filing of the complaint on July 25, 1991, until fully paid;

In reversing the trial court, the CA ruled that petitioners were liable
for the loss or the damage of the goods shipped, because they had
failed to overcome the presumption of negligence imposed on
common carriers.
2) Attorneys fees amounting to 20% of the claim; and

3) Costs of suit.[4]
Reconsideration.
denied
petitioners
Motion
The CA further held as inadequately proven petitioners claim that the

loss or the deterioration of the goods was due to pre-shipment
damage.[9] It likewise opined that the notation metal envelopes rust
for
86
Choco Notes
stained and slightly dented placed on the Bill of Lading had not been
the proximate cause of the damage to the four (4) coils.[10]
are required to render service with the greatest skill and foresight and
to use all reason[a]ble means to ascertain the nature and
characteristics of the goods tendered for shipment, and to exercise
due care in the handling and stowage, including such methods as their
nature requires.[14] The extraordinary responsibility lasts from the
time the goods are unconditionally placed in the possession of and
received for transportation by the carrier until they are delivered,
actually or constructively, to the consignee or to the person who has a
right to receive them.[15]
As to the extent of petitioners liability, the CA held that the package

limitation under COGSA was not applicable, because the words L/C
No. 90/02447 indicated that a higher valuation of the cargo had been
declared by the shipper. The CA, however, affirmed the award of
attorneys fees.
This strict requirement is justified by the fact that, without a hand or a

voice in the preparation of such contract, the riding public enters into
a contract of transportation with common carriers.[16] Even if it
wants to, it cannot submit its own stipulations for their approval.[17]
Hence, it merely adheres to the agreement prepared by them.
Issues
In their Memorandum, petitioners raise the following issues for the
Courts consideration:
I
Owing to this high degree of diligence required of them, common

carriers, as a general rule, are presumed to have been at fault or
negligent if the goods they transported deteriorated or got lost or
destroyed.[18] That is, unless they prove that they exercised
extraordinary diligence in transporting the goods.[19] In order to
avoid responsibility for any loss or damage, therefore, they have the
burden of proving that they observed such diligence.[20]
Whether or not plaintiff by presenting only one witness who has

never seen the subject shipment and whose testimony is purely
hearsay is sufficient to pave the way for the applicability of Article
1735 of the Civil Code;
II
However, the presumption of fault or negligence will not arise[21] if

the loss is due to any of the following causes: (1) flood, storm,
earthquake, lightning, or other natural disaster or calamity; (2) an act
of the public enemy in war, whether international or civil; (3) an act
or omission of 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.[22] This is a closed list. If the
cause of destruction, loss or deterioration is other than the
enumerated circumstances, then the carrier is liable therefor.[23]
Whether or not the consignee/plaintiff filed the required notice of

loss within the time required by law;
III
Whether or not a notation in the bill of lading at the time of loading
is sufficient to show pre-shipment damage and to exempt herein
defendants from liability;
IV
Corollary to the foregoing, mere proof of delivery of the goods in

good order to a common carrier and of their arrival in bad order at
their destination constitutes a prima facie case of fault or negligence
against the carrier. If no adequate explanation is given as to how the
deterioration, the loss or the destruction of the goods happened, the
transporter shall be held responsible.[24]
Whether or not the PACKAGE LIMITATION of liability under

Section 4 (5) of COGSA is applicable to the case at bar.[12]
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence
of a common carrier
That petitioners failed to rebut the prima facie presumption of

negligence is revealed in the case at bar by a review of the records
and more so by the evidence adduced by respondent.[25]
2. Whether the notice of loss was timely filed

First, as stated in the Bill of Lading, petitioners received the subject
shipment in good order and condition in Hamburg, Germany.[26]
3. Whether the package limitation of liability is applicable

This Courts Ruling
Second, prior to the unloading of the cargo, an Inspection Report[27]

prepared and signed by representatives of both parties showed the
steel bands broken, the metal envelopes rust-stained and heavily
buckled, and the contents thereof exposed and rusty.

First Issue:
Proof of Negligence
Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine

Davies Transport Services, Inc., stated that the four coils were in bad
order and condition. Normally, a request for a bad order survey is
made in case there is an apparent or a presumed loss or damage.[29]
Petitioners contend that the presumption of fault imposed on common

carriers should not be applied on the basis of the lone testimony
offered by private respondent. The contention is untenable.
Fourth, the Certificate of Analysis[30] stated that, based on the

sample submitted and tested, the steel sheets found in bad order were
wet with fresh water.
Well-settled is the rule that common carriers, from the nature of their
extraordinary diligence and vigilance with respect to the safety of the
goods and the passengers they transport.[13] Thus, common carriers
87
Choco Notes
Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel
Coating Corporation and dated October 12, 1990 -- admitted that they
were aware of the condition of the four coils found in bad order and
condition.
Further, petitioners failed to prove that they observed the

extraordinary diligence and precaution which the law requires a
common carrier to know and to follow, to avoid damage to or
[35]
These facts were confirmed by Ruperto Esmerio, head checker of

BM Santos Checkers Agency. Pertinent portions of his testimony are
reproduce hereunder:
True, the words metal envelopes rust stained and slightly dented
were noted on the Bill of Lading; however, there is no showing that
petitioners exercised due diligence to forestall or lessen the loss.[36]
Having been in the service for several years, the master of the vessel
should have known at the outset that metal envelopes in the said state
would eventually deteriorate when not properly stored while in
transit.[37] Equipped with the proper knowledge of the nature of steel
sheets in coils and of the proper way of transporting them, the master
of the vessel and his crew should have undertaken precautionary
measures to avoid possible deterioration of the cargo. But none of
these measures was taken.[38] Having failed to discharge the burden
of proving that they have exercised the extraordinary diligence
required by law, petitioners cannot escape liability for the damage to
the four coils.[39]
Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will
you inform the Honorable Court with what company you are
connected?
A.
BM Santos Checkers Agency, sir.
Q. How is BM Santos Checkers Agency related or connected with

defendant Jardine Davies Transport Services?
A.
It is the company who contracts the checkers, sir.
Q. You mentioned that you are a Head Checker, will you inform
this Honorable Court your duties and responsibilities?
In their attempt to escape liability, petitioners further contend that

they are exempted from liability under Article 1734(4) of the Civil
Code. They cite the notation metal envelopes rust stained and
slightly dented printed on the Bill of Lading as evidence that the
character of the goods or defect in the packing or the containers was
the proximate cause of the damage. We are not convinced.
A. I am the representative of BM Santos on board the vessel, sir, to

supervise the discharge of cargoes.
xxx
xxx
xxx
Q.
On or about August 1, 1990, were you still connected or
employed with BM Santos as a Head Checker?
From the evidence on record, it cannot be reasonably concluded that

the damage to the four coils was due to the condition noted on the
Bill of Lading.[40] The aforecited exception refers to cases when
goods are lost or damaged while in transit as a result of the natural
decay of perishable goods or the fermentation or evaporation of
substances liable therefor, the necessary and natural wear of goods in
transport, defects in packages in which they are shipped, or the
natural propensities of animals.[41] None of these is present in the
instant case.
A. Yes, sir.
Q. And, on or about that date, do you recall having attended the
discharging and inspection of cold steel sheets in coil on board the
MV/AN ANGEL SKY?
A. Yes, sir, I was there.
xxx
xxx
xxx
Further, even if the fact of improper packing was known to the carrier
or its crew or was apparent upon ordinary observation, it is not
relieved of liability for loss or injury resulting therefrom, once it
accepts the goods notwithstanding such condition.[42] Thus,
petitioners have not successfully proven the application of any of the
aforecited exceptions in the present case.[43]
Q.
Based on your inspection since you were also present at that
time, will you inform this Honorable Court the condition or the
appearance of the bad order cargoes that were unloaded from the
MV/ANANGEL SKY?
ATTY. MACAMAY:
Second Issue:
Notice of Loss
Objection, Your Honor, I think the document itself reflects the

condition of the cold steel sheets and the best evidence is the
document itself, Your Honor that shows the condition of the steel
sheets.
Petitioners claim that pursuant to Section 3, paragraph 6 of the

Carriage of Goods by Sea Act[44] (COGSA), respondent should have
filed its Notice of Loss within three days from delivery. They assert
that the cargo was discharged on July 31, 1990, but that respondent
filed its Notice of Claim only on September 18, 1990.[45]
COURT:
Let the witness answer.
We are not persuaded. First, the above-cited provision of COGSA

provides that the notice of claim need not be given if the state of the
goods, at the time of their receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior to unloading the cargo,
an Inspection Report[46] as to the condition of the goods was
prepared and signed by representatives of both parties.[47]
A. The scrap of the cargoes is broken already and the rope is loosen
and the cargoes are dent on the sides.[32]
All these conclusively prove the fact of shipment in good order and
condition and the consequent damage to the four coils while in the
possession of petitioner,[33] who notably failed to explain why.[34]
88
Choco Notes
Second, as stated in the same provision, a failure to file a notice of
claim within three days will not bar recovery if it is nonetheless filed
within one year.[48] This one-year prescriptive period also applies to
the shipper, the consignee, the insurer of the goods or any legal
holder of the bill of lading.[49]
In the case before us, there was no stipulation in the Bill of

Lading[66] limiting the carriers liability. Neither did the shipper
declare a higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words L/C No. 90/02447
cannot be the basis for petitioners liability.
In Loadstar Shipping Co., Inc. v. Court of Appeals,[50] we ruled that

a claim is not barred by prescription as long as the one-year period
has not lapsed. Thus, in the words of the ponente, Chief Justice
Hilario G. Davide Jr.:
First, a notation in the Bill of Lading which indicated the amount of

the Letter of Credit obtained by the shipper for the importation of
steel sheets did not effect a declaration of the value of the goods as
required by the bill.[67] That notation was made only for the
convenience of the shipper and the bank processing the Letter of
Credit.[68]
Inasmuch as the neither the Civil Code nor the Code of Commerce
states a specific prescriptive period on the matter, the Carriage of
Goods by Sea Act (COGSA)--which provides for a one-year period
of limitation on claims for loss of, or damage to, cargoes sustained
during transit--may be applied suppletorily to the case at bar.
Second, in Keng Hua Paper Products v. Court of Appeals,[69] we

held that a bill of lading was separate from the Other Letter of Credit
arrangements. We ruled thus:
In the present case, the cargo was discharged on July 31, 1990, while
the Complaint[51] was filed by respondent on July 25, 1991, within
the one-year prescriptive period.
(T)he contract of carriage, as stipulated in the bill of lading in the

present case, must be treated independently of the contract of sale
between the seller and the buyer, and the contract of issuance of a
letter of credit between the amount of goods described in the
commercial invoice in the contract of sale and the amount allowed in
the letter of credit will not affect the validity and enforceability of the
contract of carriage as embodied in the bill of lading. As the bank
cannot be expected to look beyond the documents presented to it by
the seller pursuant to the letter of credit, neither can the carrier be
expected to go beyond the representations of the shipper in the bill of
lading and to verify their accuracy vis--vis the commercial invoice
and the letter of credit. Thus, the discrepancy between the amount of
goods indicated in the invoice and the amount in the bill of lading
cannot negate petitioners obligation to private respondent arising
from the contract of transportation.[70]
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondents claims,
petitioners contend that their liability should be limited to US$500
per package as provided in the Bill of Lading and by Section 4(5)[52]
of COGSA.[53]
On the other hand, respondent argues that Section 4(5) of COGSA is
inapplicable, because the value of the subject shipment was declared
by petitioners beforehand, as evidenced by the reference to and the
insertion of the Letter of Credit or L/C No. 90/02447 in the said
Bill of Lading.[54]
In the light of the foregoing, petitioners liability should be computed

based on US$500 per package and not on the per metric ton price
declared in the Letter of Credit.[71] In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court[72] we explained the meaning of
package:
A bill of lading serves two functions. First, it is a receipt for the

goods shipped.[55] Second, it is a contract by which three parties -namely, the shipper, the carrier, and the consignee -- undertake
specific responsibilities and assume stipulated obligations.[56] In a
nutshell, the acceptance of the bill of lading by the shipper and the
consignee, with full knowledge of its contents, gives rise to the
presumption that it constituted a perfected and binding contract.[57]
When what would ordinarily be considered packages are shipped in

a container supplied by the carrier and the number of such units is
container constitutes the package referred to in the liability
limitation provision of Carriage of Goods by Sea Act.
Further, a stipulation in the bill of lading limiting to a certain sum the

common carriers liability for loss or destruction of a cargo -- unless
the shipper or owner declares a greater value[58] -- is sanctioned by
law.[59] There are, however, two conditions to be satisfied: (1) the
contract is reasonable and just under the circumstances, and (2) it has
been fairly and freely agreed upon by the parties.[60] The rationale
for, this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.[61]
Considering, therefore, the ruling in Eastern Shipping Lines and the

fact that the Bill of Lading clearly disclosed the contents of the
containers, the number of units, as well as the nature of the steel
sheets, the four damaged coils should be considered as the shipping
unit subject to the US$500 limitation.
It is to be noted, however, that the Civil Code does not limit the
liability of the common carrier to a fixed amount per package.[62] In
all matters not regulated by the Civil Code, the right and the
obligations of common carriers shall be governed by the Code of
Commerce and special laws.[63] Thus, the COGSA, which is
suppletory to the provisions of the Civil Code, supplements the latter
by establishing a statutory provision limiting the carriers liability in
the absence of a shippers declaration of a higher value in the bill of
lading.[64] The provisions on limited liability are as much a part of
the bill of lading as though physically in it and as though placed there
by agreement of the parties.[65]
WHEREFORE, the Petition is partly granted and the assailed

Decision MODIFIED. Petitioners liability is reduced to US$2,000
plus interest at the legal rate of six percent from the time of the filing
of the Complaint on July 25, 1991 until the finality of this Decision,
and 12 percent thereafter until fully paid. No pronouncement as to
costs.
SO ORDERED.
Iron Bulk Shipping v. Remington

[G.R. No. 136960. December 8, 2003]
89
Choco Notes
IRON BULK SHIPPING PHILIPPINES, CO., LTD., petitioner, vs.
REMINGTON INDUSTRIAL SALES CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Results of tests indicated that a very slight trace of salt was present in
the sample as confirmed by the test of Sodium. The results however
does not necessarily indicate that the rusty condition of the material
was caused by seawater.
Before us is a petition for review on certiorari under Rule 45 of the

Rules of Court assailing the August 28, 1998 Decision[1] and the
December 24, 1998 Resolution of the Court of Appeals in CA-G.R.
CV No. 49725,[2] affirming in toto the decision of the Regional Trial
Court of Manila (Branch 9).
Tan-Gatue Adjustment Co., Inc., a claims adjustment firm hired by

defendant Pioneer, submitted a Report (Exh. 10-Pioneer) dated
February 20, 1992 to Pioneer which pertinently reads as follows:
All the above 3,971 sheets were heavily rusty at
sides/ends/edges/surfaces. Pieces of cotton were rubbed by us on
different rusty steel sheets and submitted to Precision Analytical
Services, Inc. to determine the cause of wetting. Result thereof as per
Laboratory Report No. 077-92 of this firm showed that: The sample
was wetted/contaminated by fresh water.
The factual background of the case is summarized by the appellate

court, thus:
Sometime in the latter part of 1991, plaintiff Remington Industrial
Sales Corporation (hereafter Remington for short) ordered from
defendant Wangs Company, Inc. (hereafter Wangs for short) 194
packages of hot rolled steel sheets, weighing 686.565 metric tons,
with a total value of $219,380.00, then equivalent to P6,469,759.17.
Wangs forwarded the order to its supplier, Burwill (Agencies) Ltd., in
Hongkong. On or about November 26, 1991, the 194 packages were
loaded on board the vessel MV Indian Reliance at the Port of
Gdynia, Poland, for transportation to the Philippines, under Bill of
Lading No. 27 (Exh. C).
The vessels owner/charterer is
represented in the Philippines by defendant Iron Bulk Shipping
Phils., Inc. (hereafter Iron Bulk for short).
After considering the foregoing test results and the other evidence on
record, the Court found no clear and sufficient proof showing that the
water which stayed in the cargo hold of the vessel and which
contaminated the merchandise was seawater. The Court, however, is
convinced that the subject goods were exposed to salt conditions as
evidenced by the presence of about 17% Sodium on the rust sample
tested by SGS.
As to the source of the water found in the cargo hold, there is also no
concrete and competent evidence on record establishing that such
water leaked from the pipe installed in Hatch No. 1 of M/V Indian
Reliance, as claimed by plaintiff. Indeed, the plaintiff based such
claim only from information it allegedly received from its supplier, as
stated in its letter to defendant Iron Bulk dated March 28, 1992 (Exh.
K-3). And no one took the witness stand to confirm or establish the
alleged leakage.
Remington had the cargo insured for P6,469,759.17 during the

voyage by Marine Insurance Policy No. 7741 issued by defendant
Pioneer Asia Insurance Corporation (hereafter Pioneer for short).
On or about January 3, 1992, the MV Indian Reliance arrived in the
Port of Manila, and the 194 packages of hot rolled steel sheets were
discharged from the vessel. The cargo was inspected twice by SGS
Far East Ltd. and found to be wet (with slight trace of salt) and rusty,
extending from 50% to 80% of each plate. Plaintiff filed formal
claims for loss amounting to P544,875.17 with Pioneer, Iron Bulk,
Manila Port Services, Inc. (MPS) and ESE Brokerage Corporation
(ESE). No one honored such claims.
Nevertheless, since Iron Bulks own evidence shows that there was
water inside the cargo hold of the vessel and that the goods stored
therein were wet and full of rust, without sufficient explanation on its
part as to when and how water found its way into the vessel holds,
the Court finds and so holds that Iron Bulk failed to exercise the
extraordinary diligence required by law in the handling and
transporting of the goods.
Thus, plaintiff filed an action for collection, plus attorneys fees,

against Wangs, Pioneer and Iron Bulk. . . .[3]
.....
and affirmed in toto the following findings of the trial court, on

February 1, 1995, to wit:
Iron Bulk did not even exercise due diligence because admittedly,
water was dripping from the cargoes at the time they were being
discharged from the vessel. Had Iron Bulk done so, it could have
discovered by ordinary inspection that the cargo holds and the
cargoes themselves were affected by water and it could have
provided some remedial measures to prevent or minimize the damage
to the cargoes. But it did not, showing its lack of care and diligence
over the goods.
The evidence on record shows that the direct and immediate cause of
the rusting of the goods imported by the plaintiff was the water found
inside the cargo hold of M/V Indian Reliance wherein those goods
were stored during the voyage, particularly the water found on the
surface of the merchandise and on the floor of the vessel hatch. And
even at the time the cargoes were being unloaded by crane at the Pier
of Manila, Iron Bulks witnesses noticed that water was dripping
from the cargoes. (TSN dated July 20, 1993, pp. 13-14; TSN dated
May 30, 1994, pp. 8-9, 14, 24-25; TSN dated June 3, 1994, pp. 3132; TSN dated July 14, 1994, pp. 10-11).
Besides, since the goods were undoubtedly damaged, and as Iron

Bulk failed to establish by any clear and convincing evidence any of
the exempting causes provided for in Article 1734 of the Civil Code,
it is presumed to have been at fault or to have acted negligently.
.....
SGS Far East Limited, an inspection agency hired by defendant

Wangs, issued Certificate of Inspection and Analysis No 6401/35071
stating the following findings:
WHEREFORE, the Court finding preponderance of evidence for the

plaintiff hereby renders judgment in favor of it and against all the
defendants herein as follows:
90
Choco Notes
contrary to the findings of the trial court; (9) the CA manifestly
overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion; (10) the findings of
the CA are beyond the issues of the case; and (11) such findings are
contrary to the admissions of both parties.[7] Petitioner failed to
demonstrate that its petition falls under any one of the above
exceptions, except as to damages which will be discussed forthwith.
1.
Ordering defendant Pioneer Asia Insurance Corporation to pay
plaintiff the following amounts:
a) P544,875.17 representing the loss allowance for the goods insured,
plus interest at the legal rate (6% p.a.) reckoned from the time of
filing of this case until full payment is made;
b) P50,000.00 for and as attorneys fees; and
Anent the first assigned error: That the Court of Appeals erred in
relying on the pro forma Bills of Lading to establish the condition of
the cargo upon landing.
c) the cost of suit.

2.
Ordering defendant Iron Bulk Shipping Co. Inc. immediately
upon payment by defendant Pioneer of the foregoing award to the
plaintiff, to reimburse defendant Pioneer the total amount it paid to
the plaintiff, in respect to its right of subrogation.
There is no merit to petitioners contention that the Bill of Lading

covering the subject cargo cannot be relied upon to indicate the
condition of the cargo upon loading. It is settled that a bill of lading
has a two-fold character. In Phoenix Assurance Co., Ltd. vs. United
States Lines, we held that:
3.
Denying the counterclaims of all the defendants and the crossclaim of defendant Wangs Company, Incorporated and Iron Bulk
Shipping Co., Inc. for lack of merit.
[A] bill of lading operates both as a receipt and as a contract. It is a

receipt for the goods shipped and a contract to transport and deliver
the same as therein stipulated. As a receipt, it recites the date and
place of shipment, describes the goods as to quantity, weight,
dimensions, identification marks and condition, quality and value. As
a contract, it names the contracting parties, which include the
consignee, fixes the route, destination, and freight rate or charges,
and stipulates the rights and obligations assumed by the parties.[8]
4.
Granting the cross-claim of defendant Pioneer Asia Insurance
Corporation against defendant Iron Bulk by virtue of its right of
subrogation.
5.
Dismissing the case against defendant Wangs Company, Inc.
SO ORDERED.[4]
We find no error in the findings of the appellate court that the

questioned bill of lading is a clean bill of lading, i.e., it does not
indicate any defect in the goods covered by it, as shown by the
notation, CLEAN ON BOARD[9] and Shipped at the Port of
Loading in apparent good condition on board the vessel for carriage
to Port of Discharge.[10]
Only Iron Bulk filed the present petition raising the following
Assignment of Errors:
FIRSTLY, the Court of Appeals erred in its insistent reliance on the
pro forma Bills of Lading to establish the condition of the cargo upon
loading;
Petitioner presented evidence to prove that, contrary to the recitals

contained in the subject bill of lading, the cargo therein described as
clean on board is actually wet and covered with rust. Indeed, having
the nature of a receipt, or an acknowledgement of the quantity and
condition of the goods delivered, the bill of lading, like any other
receipts, may be explained, varied or even contradicted.[11]
However, we agree with the Court of Appeals that far from
contradicting the recitals contained in the said bill, petitioners own
evidence shows that the cargo covered by the subject bill of lading,
although it was partially wet and covered with rust was, nevertheless,
found to be in a fair, usually accepted condition when it was
accepted for shipment.[12]
SECONDLY, the Court of Appeals erred in not exculpating petitioner

since the cargo was not contaminated during the time the same was in
possession of the vessel, as evidenced by the express finding of the
lower court that the contamination and rusting was chemically
established to have been caused by fresh water;
THRIDLY, the Court of Appeals erred in making a sweeping finding
that the petitioner as carrier failed to exercise the requisite diligence
under the law, which is contrary to what is demonstrated by the
evidence adduced; and
FINALLY, the Court of Appeals erred in affirming the amount of
damages adjudicated by the Court below, which is at best speculative
and not supported by damages.[5]
The fact that the issued bill of lading is pro forma is of no moment.
If the bill of lading is not truly reflective of the true condition of the
cargo at the time of loading to the effect that the said cargo was
indeed in a damaged state, the carrier could have refused to accept it,
or at the least, made a marginal note in the bill of lading indicating
the true condition of the merchandise. But it did not. On the
contrary, it accepted the subject cargo and even agreed to the issuance
of a clean bill of lading without taking any exceptions with respect to
the recitals contained therein. Since the carrier failed to annotate in
the bill of lading the alleged damaged condition of the cargo when it
was loaded, said carrier and the petitioner, as its representative, are
bound by the description appearing therein and they are now
estopped from denying the contents of the said bill.
The general rule is that only questions of law are entertained in

petitions for review by certiorari under Rule 45 of the Rules of Court.
The trial courts findings of fact, which the Court of Appeals
affirmed, are generally binding and conclusive upon this court.[6]
There are recognized exceptions to this rule, among which are: (1)
the conclusion is grounded on speculations, surmises or conjectures;
(2) the inference is manifestly mistaken, absurd or impossible; (3)
there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of facts are conflicting; (6)
there is no citation of specific evidence on which the factual findings
are based; (7) the finding of absence of facts is contradicted by the
presence of evidence on record; (8) the findings of the CA are
Petitioner presented in evidence the Mates Receipts[13] and a

Survey Report[14] to prove the damaged condition of the cargo.
91
Choco Notes
However, contrary to the asseveration of petitioner, the Mates
Receipts and the Survey Report which were both dated November 6,
1991, are unreliable evidence of the true condition of the shipment at
the time of loading since said receipts and report were issued twenty
days prior to loading and before the issuance of the clean bill of
lading covering the subject cargo on November 26, 1991. Moreover,
while the surveyor, commissioned by the carrier to inspect the subject
cargo, found the inspected steel goods to be contaminated with rust
he, nonetheless, estimated the merchandise to be in a fair and usually
accepted condition.
Except in the cases mentioned under Article 1734, if the goods are
lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required under the law.[18] The
Court of Appeals did not err in finding that no competent evidence
was presented to prove that the deterioration of the subject cargo was
brought about by any of the causes enumerated under the aforequoted
Article 1734 of the said Code. We likewise agree with appellate
courts finding that the carrier failed to present proof that it exercised
extraordinary diligence in its vigilance over the goods. The
presumption that the carrier was at fault or that it acted negligently
was not overcome by any countervailing evidence.
Anent the second and third assigned errors: That the Court of
Appeals erred in not finding that the contamination and rusting was
chemically to have been caused by fresh water; and that the appellate
court erred in finding that petitioner failed to exercise the requisite
diligence under the law.
Anent the last assigned error: That the Court of Appeals erred in
affirming the amount of damages awarded by the trial court.
We agree with the contention of the petitioner in its last assigned
error that the amount of damages adjudicated by the trial court and
affirmed by the appellate court is not in consonance with the evidence
presented by the parties. The judgments of both lower courts are
based on misapprehension of facts as we find no competent evidence
to prove the actual damages sustained by respondent.
Petitioners arguments in support of the assigned errors are not

plausible. Even granting, for the sake of argument, that the subject
cargo was already in a damaged condition at the time it was accepted
for transportation, the carrier is not relieved from its responsibility to
exercise due care in handling the merchandise and in employing the
necessary precautions to prevent the cargo from further deteriorating.
It is settled that the extraordinary diligence in the vigilance over the
goods tendered for shipment requires the common carrier to know
and to follow the required precaution for avoiding damage to, or
[15] It requires common carriers to render service with the greatest
skill and foresight and to use all reasonable means to ascertain the
nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such
methods as their nature requires.[16] Under Article 1742 of the Civil
Code, even if the loss, destruction, or deterioration of the goods
should be caused, among others, by the character of the goods, the
common carrier must exercise due diligence to forestall or lessen the
loss. This extraordinary responsibility lasts from the time the goods
are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who
has a right to receive them.[17] In the instant case, if the carrier
indeed found the steel sheets to have been covered by rust at the time
that it accepted the same for transportation, such finding should have
prompted it to apply additional safety measures to make sure that the
cargo is protected from corrosion. This, the carrier failed to do.
Based on the Packing List issued by Burwill (Agencies) Limited, the

supplier of the steel sheets, the cargo consigned to Remington
consisted of hot rolled steel sheets with lengths of eight feet and
twenty feet. The eight-foot length steel sheets contained in 142
packages had a weight of 491.54 metric tons while the twenty-foot
steel sheets which were contained in 52 packages weighed 194.25
metric tons.[19] The goods were valued at $320.00 per metric ton.
[20]
It is not disputed that at the time of inspection of the subject
merchandise conducted by SGS Far East Limited on January 21-24,
1992 and January 27-28, 1992, only 30% of said goods originally
consigned to Remington was available for examination at
Remingtons warehouse in Manila and that Remington had already
disposed of the remaining 70%. In the Certificate of Inspection
issued by SGS, dated February 18, 1992, it was reported that the
surface of the steel sheets with length of twenty feet were found to be
rusty extending from 60% to 80% per plate.[21] However, there
was no proof to show how many metric tons of twenty-foot and
eight-foot length steel sheets, respectively, comprise the remaining
30% of the cargo. No competent evidence was presented to prove the
weight of the remaining twenty-foot length steel sheets, on the basis
of which the amount of actual damages could have been ascertained.
Article 1734 of the Civil Code states that:

Common carriers are responsible for the loss, destruction or
deterioration of the goods, unless the same is due to any of the
Remington claims that 70% of the twenty-foot length steel sheets

were damaged. Remingtons general manager, Rowina Tan Saban,
testified that the 70% figure was based on the reports submitted by
SGS and Tan-Gatue and Remingtons independent survey to confirm
these reports.[22] Saban further testified that on the basis of these
reports, Remington came up with a summary of the amount of
damages sustained by the subject cargo, to wit:

calamity;
(2)
Act of the public enemy in war, whether international or civil;
(3)
(4)
The character of the goods or defects in the packing or in the
containers;
(5)
92
Plates 8 ft lengths
Quantity Damaged
Loss Allowance
Total Plates 8 ft lengths
491.540 MT
US$157,292.80
25%
13%
US$ 15,211.56
Plates 20 ft lengths
Quantity Damaged
Loss Allowance
194.025 MT
US$ 62,088.00
70%
35%
Choco Notes
Total Plates 20 ft lengths
P544,875.71
Art. 2224.
Temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered
when the court finds that some pecuniary loss has been suffered but
its amount cannot, from the nature of the case, be proved with
certainty.
with the following detailed computation:

Plates under 8 ft lengths 491.540 MT @
US $157,292.80
Multiply by 25% Qty. damaged
13% Loss allowance $ 5,112.02
$320./MT
$ 39,323.20
Art. 2225.
circumstances.
Plates under 20 ft. lengths 194.025 MT @ $320./MT

US
$ 62,088.00
Multiple 70% Qty. damaged
US
$ 43,461.60
35% Loss allowance
$ 15,211.56
Total claim US
US
Temperate damages must be reasonable under the
Thirty percent of the alleged cost of damages, i.e., P544, 875.17 or

P165,000.00 is reasonable enough for temperate damages.
We likewise agree with petitioners claim that it should not be held
liable for the payment of attorneys fees because it was always
willing to settle its liability by offering to pay 30% of Remingtons
claim and that it is only Remingtons unwarranted refusal to accept
such offer that led to the filing of the instant case. As found earlier,
there is no evidence that the 70% of the 20-foot length steel sheets
which had been disposed of had been damaged. Neither is there
competent evidence proving the actual extent of damage sustained by
the eight-foot length steel sheets. Petitioner was therefore justified in
refusing to satisfy the full amount of Remingtons claims.
$ 5,112.02
$15,211.56
$20,323.58 @ $26.81 = P544,875.17
and which the trial court based the actual damages awarded in favor
of Remington.
However, after a careful examination of the reports submitted by SGS
and Tan-Gatue, we find nothing in the said reports and computation
to justify the claim of Remington that 70% of the twenty-foot length
steel sheets were damaged. Neither does the alleged survey
conducted by Remington consisting only of photographs,[23] prove
the quantity of the damaged cargo.
WHEREFORE, the assailed Decision of the Court of Appeals dated

August 28, 1998 and the Resolution dated December 24, 1998, in
CA-G.R. CV No. 49725 are MODIFIED as follows: The award of
actual damages and attorneys fees are deleted. Respondent is
awarded temperate damages in the amount of P165,000.00. In all
other respects, the appealed decision and resolution are affirmed.
As to the eight-foot length steel sheets, SGS reported that they were
found oiled all over which makes it hard to determine the rust
condition on its surface.[24] On the other hand, the report issued by
Tan-Gatue did not specify the extent of damage done to the said
merchandise.[25] There is also no proof of the weight of the
remaining eight-foot length steel sheets. From the foregoing, it is
evident that the extent of actual damage to the subject cargo is
likewise not satisfactorily proven.
No pronouncement as to costs.
SO ORDERED.
AF Sanchez Brokerage v. CA
[G.R. No. 147079. December 21, 2004]
It is settled that actual or compensatory damages are not presumed

and should be proven before they are awarded. In Spouses
Quisumbing vs. Meralco[26], we held that
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON.

COURT OF APPEALS and FGU INSURANCE CORPORATION,
respondents.
DECISION
CARPIO MORALES, J.:
Actual damages are compensation for an injury that will put the
injured party in the position where it was before it was injured. They
pertain to such injuries or losses that are actually sustained and
susceptible of measurement. Except as provided by law or
stipulation, a party is entitled to an adequate compensation only for
such pecuniary loss as it has duly proven.
Before this Court on a petition for Certiorari is the appellate courts

Decision[1] of August 10, 2000 reversing and setting aside the
judgment of Branch 133, Regional Trial Court of Makati City, in
Civil Case No. 93-76B which dismissed the complaint of respondent
FGU Insurance Corporation (FGU Insurance) against petitioner A.F.
Sanchez Brokerage, Inc. (Sanchez Brokerage).
Hence, for failure of Remington to present sufficient evidence which

is susceptible of measurement, it is not entitled to actual damages.
Nonetheless, since it was established that the subject steel sheets
sustained damage by reason of the negligence of the carrier, albeit no
competent proof was presented to justify the award of actual
damages, we find that Remington is entitled to temperate damages in
accordance with Articles 2216, 2224 and 2225 of the Civil Code, to
wit:
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft

of KLM Royal Dutch Airlines at Dusseldorf, Germany oral
contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000
Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for
delivery to Manila in favor of the consignee, Wyeth-Suaco
Laboratories, Inc.[2] The Femenal tablets were placed in 124 cartons
and the Nordiol tablets were placed in 20 cartons which were packed
together in one (1) LD3 aluminum container, while the Trinordial
tablets were packed in two pallets, each of which contained 30
cartons.[3]
Art. 2216.
No proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages may be
adjudicated. The assessment of such damages, except liquidated ones,
is left to the discretion of the court, according to the circumstances of
each case.
93
Choco Notes
Wyeth-Suaco insured the shipment against all risks with FGU
Insurance which issued Marine Risk Note No. 4995 pursuant to
Marine Open Policy No. 138.[4]
which could account for the wetting of the 44 cartons of Femenal and
Nordiol tablets.[25]
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction
Report[26] confirming that 38 x 700 blister packs of Femenal tablets,
3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of
Nordiol tablets were heavily damaged with water and emitted foul
smell.
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino
International Airport (NAIA),[5] it was discharged without
exception[6] and delivered to the warehouse of the Philippine
Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.[7]
In order to secure the release of the cargoes from the PSI and the
Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez
Brokerage which had been its licensed broker since 1984.[8] As its
customs broker, Sanchez Brokerage calculates and pays the customs
duties, taxes and storage fees for the cargo and thereafter delivers it to
Wyeth-Suaco.[9]
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials

Rejection[27] of 38 cartons of Femenal and 3 cartons of Nordiol on
the ground that they were delivered to Hizon Laboratories with
heavy water damaged (sic) causing the cartons to sagged (sic)
emitting a foul order and easily attracted flies.[28]
Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from
Sanchez Brokerage the payment of P191,384.25 representing the
value of its loss arising from the damaged tablets.
On July 29, 1992, Mitzi Morales and Ernesto Mendoza,

representatives of Sanchez Brokerage, paid PSI storage fee
amounting to P8,572.35 a receipt for which, Official Receipt No.
016992,[10] was issued. On the receipt, another representative of
Sanchez Brokerage, M. Sison,[11] acknowledged that he received the
cargoes consisting of three pieces in good condition.[12]
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco

filed an insurance claim against FGU Insurance which paid WyethSuaco the amount of P181,431.49 in settlement of its claim under
Marine Risk Note Number 4995.
Wyeth-Suaco being a regular importer, the customs examiner did not

inspect the cargoes[13] which were thereupon stripped from the
aluminum containers[14] and loaded inside two transport vehicles
hired by Sanchez Brokerage.[15]
Wyeth-Suaco thus issued Subrogation Receipt[30] in favor of FGU

Insurance.
On demand by FGU Insurance for payment of the amount of
P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by letter[31]
of January 7, 1993, disclaimed liability for the damaged goods,
positing that the damage was due to improper and insufficient export
packaging; that when the sealed containers were opened outside the
PSI warehouse, it was discovered that some of the loose cartons were
wet,[32] prompting its (Sanchez Brokerages) representative Morales
to inform the Import-Export Assistant of Wyeth-Suaco, Ramir
Calicdan, about the condition of the cargoes but that the latter advised
to still deliver them to Hizon Laboratories where an adjuster would
assess the damage.[33]
Among those who witnessed the release of the cargoes from the PSI
warehouse were Ruben Alonso and Tony Akas,[16] employees of
Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and
cargo surveyor and insurance claim adjusters firm engaged by WyethSuaco on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to
Hizon Laboratories Inc. in Antipolo City for quality control check.
[17] The delivery receipt, bearing No. 07037 dated July 29, 1992,
indicated that the delivery consisted of one container with 144
cartons of Femenal and Nordiol and 1 pallet containing Trinordiol.
[18]
Hence, the filing by FGU Insurance of a complaint for damages

before the Regional Trial Court of Makati City against the Sanchez
Brokerage.
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco,

acknowledged the delivery of the cargoes by affixing his signature on
the delivery receipt.[19] Upon inspection, however, he, together with
Ruben Alonzo of Elite Surveyors, discovered that 44 cartons
containing Femenal and Nordiol tablets were in bad order.[20] He
thus placed a note above his signature on the delivery receipt stating
that 44 cartons of oral contraceptives were in bad order. The
remaining 160 cartons of oral contraceptives were accepted as
complete and in good order.
The trial court, by Decision[34] of July 29, 1996, dismissed the

complaint, holding that the Survey Report prepared by the Elite
Surveyors is bereft of any evidentiary support and a mere product of
pure guesswork.[35]
On appeal, the appellate court reversed the decision of the trial court,
it holding that the Sanchez Brokerage engaged not only in the
business of customs brokerage but also in the transportation and
delivery of the cargo of its clients, hence, a common carrier within
the context of Article 1732 of the New Civil Code.[36]
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a
survey report[21] dated July 31, 1992 stating that 41 cartons of
Femenal tablets and 3 cartons of Nordiol tablets were wetted (sic).
[22]
Noting that Wyeth-Suaco adduced evidence that the cargoes were

delivered to petitioner in good order and condition but were in a
damaged state when delivered to Wyeth-Suaco, the appellate court
held that Sanchez Brokerage is presumed negligent and upon it rested
the burden of proving that it exercised extraordinary negligence not
only in instances when negligence is directly proven but also in those
cases when the cause of the damage is not known or unknown.[37]
The Elite Surveyors later issued Certificate No. CS-07311538/92[23] attached to which was an Annexed Schedule whereon
it was indicated that prior to the loading of the cargoes to the brokers
trucks at the NAIA, they were inspected and found to be in apparent
good condition.[24] Also noted was that at the time of delivery to
the warehouse of Hizon Laboratories Inc., slight to heavy rains fell,
The appellate court thus disposed:
94
Choco Notes
What petitioner is ascribing is an error of judgment, not of
jurisdiction, which is properly the subject of an ordinary appeal.
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the

Appellant is GRANTED. The Decision of the Court a quo is
REVERSED. Another Decision is hereby rendered in favor of the
Appellant and against the Appellee as follows:
Where the issue or question involves or affects the wisdom or legal

soundness of the decision not the jurisdiction of the court to render
said decision the same is beyond the province of a petition for
certiorari.[41] The supervisory jurisdiction of this Court to issue a
cert writ cannot be exercised in order to review the judgment of lower
courts as to its intrinsic correctness, either upon the law or the facts of
the case.[42]
1.
The Appellee is hereby ordered to pay the Appellant the
principal amount of P181, 431.49, with interest thereupon at the rate
of 6% per annum, from the date of the Decision of the Court, until the
said amount is paid in full;
2.
The Appellee is hereby ordered to pay to the Appellant the
amount of P20,000.00 as and by way of attorneys fees; and
3.
Procedural technicalities aside, the petition still fails.

The appellate court did not err in finding petitioner, a customs broker,
to be also a common carrier, as defined under Article 1732 of the
Civil Code, to wit:
The counterclaims of the Appellee are DISMISSED.[38]
Sanchez Brokerages Motion for Reconsideration having been denied

by the appellate courts Resolution of December 8, 2000 which was
received by petitioner on January 5, 2001, it comes to this Court on
petition for certiorari filed on March 6, 2001.
Art. 1732. Common carriers are persons, corporations, firms or

passengers or goods or both, by land, water, or air, for compensation,
In the main, petitioner asserts that the appellate court committed

grave and reversible error tantamount to abuse of discretion when it
found petitioner a common carrier within the context of Article
1732 of the New Civil Code.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of

Sanchez Brokerage, himself testified that the services the firm offers
include the delivery of goods to the warehouse of the consignee or
importer.
Respondent FGU Insurance avers in its Comment that the proper

course of action which petitioner should have taken was to file a
petition for review on certiorari since the sole office of a writ of
certiorari is the correction of errors of jurisdiction including the
commission of grave abuse of discretion amounting to lack or excess
of jurisdiction and does not include correction of the appellate courts
evaluation of the evidence and factual findings thereon.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs
broker?
WITNESS:
On the merits, respondent FGU Insurance contends that petitioner, as

a common carrier, failed to overcome the presumption of negligence,
it being documented that petitioner withdrew from the warehouse of
PSI the subject shipment entirely in good order and condition.[39]
As customs broker, we calculate the taxes that has to be paid in

cargos, and those upon approval of the importer, we prepare the entry
together for processing and claims from customs and finally deliver
the goods to the warehouse of the importer.[43]
The petition fails.
Article 1732 does not distinguish between one whose principal

business activity is the carrying of goods and one who does such
carrying only as an ancillary activity.[44] The contention, therefore,
of petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs declaration
and proper shipping documents as required by law is bereft of merit.
It suffices that petitioner undertakes to deliver the goods for
pecuniary consideration.
Rule 45 is clear that decisions, final orders or resolutions of the Court

of Appeals in any case, i.e., regardless of the nature of the action or
proceedings involved, may be appealed to this Court by filing a
petition for review, which would be but a continuation of the
appellate process over the original case.[40]
The Resolution of the Court of Appeals dated December 8, 2000
denying the motion for reconsideration of its Decision of August 10,
2000 was received by petitioner on January 5, 2001. Since petitioner
failed to appeal within 15 days or on or before January 20, 2001, the
appellate courts decision had become final and executory. The filing
by petitioner of a petition for certiorari on March 6, 2001 cannot
serve as a substitute for the lost remedy of appeal.
In this light, petitioner as a common carrier is mandated to observe,

under Article 1733[45] of the Civil Code, extraordinary diligence in
the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary
diligence.[46]
In another vein, the rule is well settled that in a petition for certiorari,
the petitioner must prove not merely reversible error but also grave
abuse of discretion amounting to lack or excess of jurisdiction.
The concept of extra-ordinary diligence was explained in

Compania Maritima v. Court of Appeals:[47]
Petitioner alleges that the appellate court erred in reversing and

setting aside the decision of the trial court based on its finding that
petitioner is liable for the damage to the cargo as a common carrier.

goods entrusted to it for sale, carriage and delivery. It requires
95
Choco Notes
and to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due
nature requires.[48]
received the cargoes, a part of it was wet, damaged or in bad

condition.[60]
The 4-page weather data furnished by PAGASA[61] on request of
Sanchez Brokerage hardly impresses, no witness having identified it
and interpreted the technical terms thereof.
In the case at bar, it was established that petitioner received the

cargoes from the PSI warehouse in NAIA in good order and
condition;[49] and that upon delivery by petitioner to Hizon
Laboratories Inc., some of the cargoes were found to be in bad order,
as noted in the Delivery Receipt[50] issued by petitioner, and as
indicated in the Survey Report of Elite Surveyors[51] and the
Destruction Report of Hizon Laboratories, Inc.[52]
The possibility on the other hand that, as found by Hizon

Laboratories, Inc., the oral contraceptives were damaged by rainwater
while in transit to Antipolo City is more likely then. Sanchez himself
testified that in the past, there was a similar instance when the
shipment of Wyeth-Suaco was also found to be wet by rain.
ATTY. FLORES:
In an attempt to free itself from responsibility for the damage to the

goods, petitioner posits that they were damaged due to the fault or
negligence of the shipper for failing to properly pack them and to the
inherent characteristics of the goods[53]; and that it should not be
faulted for following the instructions of Calicdan of Wyeth-Suaco to
proceed with the delivery despite information conveyed to the latter
that some of the cartons, on examination outside the PSI warehouse,
were found to be wet.[54]
Q: Was there any instance that a shipment of this nature, oral

contraceptives, that arrived at the NAIA were damaged and claimed
by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted
(sic) but Wyeth-Suaco did not claim anything against us.
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts

a common carrier from liability if the loss or damage is due to the
character of the goods or defects in the packing or in the containers,
the rule is that if the improper packing is known to the carrier or his
employees or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the
resulting damage.[56]
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there
was a cartoon (sic) wetted (sic) up to the bottom are wet specially
during rainy season.[62]
If the claim of petitioner that some of the cartons were already

damaged upon delivery to it were true, then it should naturally have
received the cargo under protest or with reservations duly noted on
the receipt issued by PSI. But it made no such protest or reservation.
[57]
Since petitioner received all the cargoes in good order and condition
at the time they were turned over by the PSI warehouseman, and
upon their delivery to Hizon Laboratories, Inc. a portion thereof was
found to be in bad order, it was incumbent on petitioner to prove that
it exercised extraordinary diligence in the carriage of the goods. It
did not, however. Hence, its presumed negligence under Article 1735
of the Civil Code remains unrebutted.
Moreover, as observed by the appellate court, if indeed petitioners

employees only examined the cargoes outside the PSI warehouse and
found some to be wet, they would certainly have gone back to PSI,
showed to the warehouseman the damage, and demanded then and
there for Bad Order documents or a certification confirming the
damage.[58] Or, petitioner would have presented, as witness, the
employees of the PSI from whom Morales and Domingo took
delivery of the cargo to prove that, indeed, part of the cargoes was
already damaged when the container was allegedly opened outside
the warehouse.[59]
WHEREFORE, the August 10, 2000 Decision of the Court of

Appeals is hereby AFFIRMED.
SO ORDERED.
Order
of
Authority;1734[5]; 1743
Petitioner goes on to posit that contrary to the report of Elite

Surveyors, no rain fell that day. Instead, it asserts that some of the
cargoes were already wet on delivery by PSI outside the PSI
warehouse but such notwithstanding Calicdan directed Morales to
proceed with the delivery to Hizon Laboratories, Inc.
Competent
Ganzon v. CA
G.R. No. L-48757 May 30, 1988
While Calicdan testified that he received the purported telephone call

of Morales on July 29, 1992, he failed to specifically declare what
time he received the call. As to whether the call was made at the PSI
warehouse when the shipment was stripped from the airport
containers, or when the cargoes were already in transit to Antipolo, it
is not determinable. Aside from that phone call, petitioner admitted
that it had no documentary evidence to prove that at the time it
MAURO GANZON, petitioner,

vs.
COURT OF APPEALS and GELACIO E. TUMAMBING,
respondents.
Antonio B. Abinoja for petitioner.
96
Choco Notes
Quijano, Arroyo & Padilla Law Office for respondents.
II
SARMIENTO, J.:
THE APPELLATE COURT ERRED IN CONDEMNING THE

PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN
DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS
ORDERED BY THE LOCAL GOVERNMENT OFFICIAL
WITHOUT HIS PARTICIPATION.
The private respondent instituted in the Court of First Instance of

Manila 1 an action against the petitioner for damages based on culpa
contractual. The antecedent facts, as found by the respondent Court, 2
are undisputed:
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE
LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS EVENT
AND THE PETITIONER IS THEREFORE NOT LIABLE FOR
LOSSES AS A CONSEQUENCE THEREOF. 4
On November 28, 1956, Gelacio Tumambing contracted the services

of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles,
Bataan, to the port of Manila on board the lighter LCT "Batman"
(Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38).
Pursuant to that agreement, Mauro B. Ganzon sent his lighter
"Batman" to Mariveles where it docked in three feet of water (t.s.n.,
September 28, 1972, p. 31). On December 1, 1956, Gelacio
Tumambing delivered the scrap iron to defendant Filomeno Niza,
captain of the lighter, for loading which was actually begun on the
same date by the crew of the lighter under the captain's supervision.
When about half of the scrap iron was already loaded (t.s.n.,
December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles,
Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing.
The latter resisted the shakedown and after a heated argument
between them, Mayor Jose Advincula drew his gun and fired at
Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28,
1972, pp. 6-7).<re||an1w> The gunshot was not fatal but
Tumambing had to be taken to a hospital in Balanga, Bataan, for
treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).
The petitioner, in his first assignment of error, insists that the scrap
iron had not been unconditionally placed under his custody and
control to make him liable. However, he completely agrees with the
respondent Court's finding that on December 1, 1956, the private
respondent delivered the scraps to Captain Filomeno Niza for loading
in the lighter "Batman," That the petitioner, thru his employees,
actually received the scraps is freely admitted. Significantly, there is
not the slightest allegation or showing of any condition, qualification,
or restriction accompanying the delivery by the private respondentshipper of the scraps, or the receipt of the same by the petitioner. On
the contrary, soon after the scraps were delivered to, and received by
the petitioner-common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in
the possession and control of the common carrier, and upon their
receipt by the carrier for transportation, the contract of carriage was
deemed perfected. Consequently, the petitioner-carrier's extraordinary
responsibility for the loss, destruction or deterioration of the goods
commenced. Pursuant to Art. 1736, such extraordinary responsibility
would cease only upon the delivery, actual or constructive, by the
carrier to the consignee, or to the person who has a right to receive
them. 5 The fact that part of the shipment had not been loaded on
board the lighter did not impair the said contract of transportation as
the goods remained in the custody and control of the carrier, albeit
still unloaded.
After sometime, the loading of the scrap iron was resumed. But on
December 4, 1956, Acting Mayor Basilio Rub, accompanied by three
policemen, ordered captain Filomeno Niza and his crew to dump the
scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was
docked (t.s.n., September 28, 1972, p. 31). The rest was brought to
the compound of NASSCO (Record on Appeal, pp. 20-22). Later on
Acting Mayor Rub issued a receipt stating that the Municipality of
Mariveles had taken custody of the scrap iron (Stipulation of Facts,
Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
The petitioner has failed to show that the loss of the scraps was due to
any of the following causes enumerated in Article 1734 of the Civil
Code, namely:
On the basis of the above findings, the respondent Court rendered a

decision, the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set
aside and a new one entered ordering defendant-appellee Mauro
Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of
P5,895.00 as actual damages, the sum of P5,000.00 as exemplary
damages, and the amount of P2,000.00 as attorney's fees. Costs
against defendant-appellee Ganzon. 3
(1)
Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
In this petition for review on certiorari, the alleged errors in the

decision of the Court of Appeals are:
(2)
civil;
Act of the public enemy in war, whether international or
(3)
(4)
The character of the goods or defects in the packing or in
the containers;
(5)
THE COURT OF APPEALS FINDING THE HEREIN

PETITIONER GUILTY OF BREACH OF THE CONTRACT OF
TRANSPORTATION AND IN IMPOSING A LIABILITY
AGAINST HIM COMMENCING FROM THE TIME THE SCRAP
WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO
BASIS IN FACT AND IN LAW.
Hence, the petitioner is presumed to have been at fault or to have

acted negligently. 6 By reason of this presumption, the court is not
even required to make an express finding of fault or negligence
before it could hold the petitioner answerable for the breach of the
contract of carriage. Still, the petitioner could have been exempted
97
Choco Notes
from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody,
according to all the circumstances of the case, or that the loss was due
to an unforeseen event or to force majeure. As it was, there was
hardly any attempt on the part of the petitioner to prove that he
exercised such extraordinary diligence.
the intervention of the municipal officials was not In any case, of a

character that would render impossible the fulfillment by the carrier
of its obligation. The petitioner was not duty bound to obey the
illegal order to dump into the sea the scrap iron. Moreover, there is
absence of sufficient proof that the issuance of the same order was
attended with such force or intimidation as to completely overpower
the will of the petitioner's employees. The mere difficulty in the
fullfilment of the obligation is not considered force majeure. We
agree with the private respondent that the scraps could have been
properly unloaded at the shore or at the NASSCO compound, so that
after the dispute with the local officials concerned was settled, the
scraps could then be delivered in accordance with the contract of
carriage.
It is in the second and third assignments of error where the petitioner

maintains that he is exempt from any liability because the loss of the
scraps was due mainly to the intervention of the municipal officials
of Mariveles which constitutes a caso fortuito as defined in Article
1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the
petitioner's defense was that the loss of the scraps was due to an
"order or act of competent public authority," and this contention was
correctly passed upon by the Court of Appeals which ruled that:
There is no incompatibility between the Civil Code provisions on

common carriers and Articles 361 8 and 362 9 of the Code of
Commerce which were the basis for this Court's ruling in
Government of the Philippine Islands vs. Ynchausti & Co.10 and
which the petitioner invokes in tills petition. For Art. 1735 of the
Civil Code, conversely stated, means that the shipper will suffer the
losses and deterioration arising from the causes enumerated in Art.
1734; and in these instances, the burden of proving that damages
were caused by the fault or negligence of the carrier rests upon him.
However, the carrier must first establish that the loss or deterioration
was occasioned by one of the excepted causes or was due to an
unforeseen event or to force majeure. Be that as it may, insofar as Art.
362 appears to require of the carrier only ordinary diligence, the same
is .deemed to have been modified by Art. 1733 of the Civil Code.
... In the second place, before the appellee Ganzon could be absolved
from responsibility on the ground that he was ordered by competent
public authority to unload the scrap iron, it must be shown that
Acting Mayor Basilio Rub had the power to issue the disputed order,
or that it was lawful, or that it was issued under legal process of
authority. The appellee failed to establish this. Indeed, no authority or
power of the acting mayor to issue such an order was given in
evidence. Neither has it been shown that the cargo of scrap iron
belonged to the Municipality of Mariveles. What we have in the
record is the stipulation of the parties that the cargo of scrap iron was
accilmillated by the appellant through separate purchases here and
there from private individuals (Record on Appeal, pp. 38-39). The
fact remains that the order given by the acting mayor to dump the
scrap iron into the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The order of
the acting mayor did not constitute valid authority for appellee Mauro
Ganzon and his representatives to carry out.
Finding the award of actual and exemplary damages to be proper, the

same will not be disturbed by us. Besides, these were not sufficiently
controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the
Court of Appeals is hereby AFFIRMED. Costs against the petitioner.
Now the petitioner is changing his theory to caso fortuito. Such a

change of theory on appeal we cannot, however, allow. In any case,
This decision is IMMEDIATELY EXECUTORY.
98

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Transportation Law cases Common Carrier of Goods part 1

Common Carrier of Goods

Vigilance Over Goods Art. 1734 - 35.......................................1

THE YNCHAUSTI STEAMSHIP COMPANY, petitioner,

Vigilance Over Goods Art. 1734

Cohn & Fisher for petitioner.

Liability for Loss; Presumption

On July 23, 1918, the Government of the Philippine Islands, acting

We note that in this case, as in the case of Compaia General de

The mere proof of delivery of goods in good order to a carrier, and of

Petitioner thereupon protested against the threatened deduction, and

From this it is apparent that the mandamus prayed for cannot be

bill of lading issued by the defendant to plaintiff, it was agreed in

Therefore, I wish to file claim of damage to the meager maximum

March 27, 1929

AMANDO MIRASOL, plaintiff-appellant,

As a fourth special defense, defendant alleges that the damage, if any,

Vicente Hilado for plaintiff-appellant.

I. The lower court erred in holding that plaintiff's damage on account

Plaintiff prays for corresponding judgment, with legal interest from

There is no claim or pretense that the plaintiff signed the bill of

Among such authorities in the case of The Kengsington decided by

1. Restrictions of the liability of a steamship company for its own

Merchandise shall be transported at the risk and venture of the

2. The stipulation in a steamship passenger's ticket, which compels

The proof of these accidents is incumbent on the carrier.

3. An arbitrary limitation of 250 francs for the baggage of any

Defendant also cites and relies on the case of Government of the

Johnson, Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.

April 18, 1956

Defendant is a private stevedoring company engaged in transporting

STANDARD VACUUM OIL COMPANY, plaintiff-appellant,

ART. 361. The merchandise shall be transported at the risk and

Defendant, in its answer, pleaded that its failure to deliver the

The proof of these accidents is incumbent on the carrier.

Therefore, all damages and impairment suffered by the goods during

It therefore appears that whenever merchandise is transported on the

The facts as found by the trial court are: "that pursuant to an

(1) Generally, seaworthiness is that strength, durability and

While the breaking of the idler may be due to an accident, or to

At about 10:20 in the morning of June 8, 1979, a tractor operator,

Bengzon, Paras, C.J., Padilla, Montemayor, Reyes, A., Jugo,

Firemans Fund v. Metro Port

The value of the damage was estimated at P187,500.00 which amount

G.R. No. 83613

February 21, 1990

FIREMAN'S FUND INSURANCE CO., petitioner,

Cruz, Durian, Agabin, Atienza, Alday & Tuason for respondent.

This is a petition for review of the decision and resolution denying

Defendants are also ordered to pay, in solidum, the sum of

The facts are as follows:

All the defendants appealed to the Court of Appeals. Eventually,

The cargo which was covered by a clean bill of lading issued by

WHEREFORE, judgment is hereby rendered in favor of the plaintiff

GUTIERREZ, JR., J.:

On the appeal of the ARRASTRE, the Court of Appeals rendered a

WHEREFORE, foregoing premises considered, the decision of the