Belgian Overseas Chartering and Shipping NV and Jardine Davies Transport o The inspection report shows that steel
n report shows that steel sheets were exposed and rusty.
Services Inc vs. Philippine First Insurance Co. Inc.; G.R. No. 143133; 5 June 2002
FACTS:
1. CMC shipped steel coils from Germany to Manila consigned to Philippine steel.
2. The vessel arrived in Manila. An inspection report was prepared by both parties
representatives that the steel bands had broken, the metal envelopes were rest-
stained and the contents were exposed and rusty.
3. The cargo was unloaded. Jardine issued a Bad Order Tally Sheet stating that 4
coils were damaged and unfit for the intended purpose. Philippine Steel
declared it as a total loss.
4. The insurance company indemnified Philippine Steel. So, it filed a complaint for
recovery against the carrier.
5. Belgian and Jardine argue that:
o Loss was due to: (a) pre-shipment damage, due to the nature of the goods;
or (b) insufficiency of packing; or (c) the act of the shipper of the goods;
o Their liability should be limited to $500/package as indicated in the bill
of lading and COGSA (carriage of goods by sea.)
o They exercised due diligence and foresight required by law.
6. RTC dismissed the complaint for failure to prove claims. Counterclaim denied
because the suit was not intended for harassment.
7. CA reversed.
o The carriers failed to overcome the presumption of negligence.
o Pre-shipment damage was not the proximate cause for the deterioration.
o The package limitation under COGSA is inapplicable because a higher
valuation of the cargo was indicated in the letter of credit.
8. Hence, the present petition for review.
ISSUE: Can the carriers be held liable for the loss?
RATIO:
Petitioners failed to rebut the prima facie presumption of negligence.
Common carriers are bound to observe extraordinary diligence. Their
responsibility lasts from the time the goods are unconditionally placed in their
possession for transportation until they are delivered to the consignee. That is
so because the public merely adheres to the contract of transportation.
GR: Common carriers are presumed to be at fault for the loss of goods they
transported. They must prove the exercise of extraordinary diligence.
There is no showing that petitioners tried to lessen the loss:
o As stated in the bill of lading, petitioners received the shipment in good
order and condition although it was noted that the metal envelopes were
rust-stained.
o A bad order survey is made where there is apparent or presumed loss.
o A certificate of analysis stated that coils in bad order were wet with fresh
water.
o In a letter to Philippine Steel, petitioners admitted they were aware of the
condition of the 4 coils.
Article 1734(4) (act of the shipper) is inapplicable. The damage is not due to the
defect of packing noted on the bill of lading. Further, once the carrier accepts
goods notwithstanding its apparent condition, it can still be held liable.
Notice of loss:
COGSA provides that notice of loss should be filed w/in 3 days from delivery.
The COGSA provision will not bar the claim where the goods were subjected to
a join inspection at the time of receipt.
There may still be recovery if filed within one year as provided by COGSA.
Liability is limited only to $500/package and not on the price in the letter of credit
A bill of lading is both a receipt and a contract. Acceptance by a party with full
knowledge of its contents gives rise to a presumption that it is binding.
The law allows a stipulation therein limiting the liability for loss provided that:
(1) the contract is reasonable and just and (2) it was fairly and freely agreed
upon by the parties
COGSA is suppletory to the CC. It has a provision limiting the carriers liability in
the absence of a shippers declaration of a higher value in the bill of lading.
There is no stipulation in the bill of lading limiting the carriers liability:
o The insertion in the letter of credit cannot be a basis of liability. It is a
separate arrangement. A bank is not expected to go beyond the docs
presented to it by the seller nor is the carrier expected to go beyond the
representation of a shipper in a bill of lading. A discrepancy would not
negate obligation arising in a contract of transportation.
o The notation in the bill of lading that indicated the amount from the
letter of credit is not a value declaration as required by the bill.
o The notation was mode only for the convenience of the shipper and the
bank in processing the letter of credit.
Each of those units as disclosed in the shipping documents constitutes the
package referred to in the liability limitation of COGSA. NOT the container
wherein they are shipped.
COGSA sec 4(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 the shipment and inserted in bill of lading. This declaration if
embodied in the bill of lading shall be prima facie evidence, but shall not be
conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be
fixed; Provided, That such maximum shall not be less than the figure above
named. In no event shall the carrier be liable for more than the amount of damage
actually sustained.
Neither the carrier nor the ship shall be responsible in any event for loss or damage
to or in connection with the transportation of the goods if the nature or value thereof
has been knowingly and fraudulently misstated by the shipper in the bill of lading.