1. UNSWORTH TRANSPORT INTERNATIONAL (PHILS.

),
INC., vs. COURT OF APPEALS & PIONEER INSURANCE
G.R. No. 166250 July 26, 2010

Facts:

Purchasing Corp. delivered to UTI a shipment of 27 drums of various raw materials for
pharmaceutical manufacturing on Aug. 31, 1992. UTI issued a Bill of Lading covering
the said shipment. The shipment was insured with private respondent Pioneer
Insurance and Surety Corp. Xin favor of Unilab against all risk of P1,779,664.77.

The shipment arrived at the port of Manila on Sept. 30, 1992 and on Oct. 6, 1992,
petitioner received the shipment in its warehouse. On Oct. 9, 1992, Oceanica Cargo
Marine Surveyors Corp. (OCMSC) conducted a stripping survey of the shipment
located in the petitioner’s warehouse. The results shows that everything is in good
order condition and properly sealed except on the 1-steel drum STC Vitamin B
Complex Extract which has a cut/hole on side, with approximate spilling of 1%.

On Oct. 15, 1992, arrastre Jardine Davies issued a gate pass which stated the “22
drums” raw materials were noted to be complete and in good order. The shipment
arrived at the Unilab’s warehouse and was immediately surveyed by an independent
surveyor, J.G Bernas Adjusters & Surveyors. The result shows that; (1) 1-p/bag torn on
side contents partly spilled, (2) 1-s/drum #7 punctured and retaped on bottom side
lacking and (3) 5-drims shortship/short delivery. The same independent surveyor
conducted final inspection surveys which yielded the same results.

Unilab filed a formal claim for the damage against the private respondent and UTI. UTI
denied liability on the basis of the gate pass issued by Jardine that the goods were
complete and in good condition. Private Repondent paid the claim and by virtue of the
Loss and Subrogation Receipt, filed a complaint for damages against APL, UTI and
petitioner with the RTC.

RTC rendered a decision in favor of private respondent. On appeal, the CA affirned the
decision of the RTC.

Issue:

1. Whether or not petitioner UTI is a common carrier

2. Whether or not private respondent sufficiently established the alleged damage to its
cargo

Held: UTI is a common carrier.

Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers to a firm
holding itself out to the general public (other than as a pipeline, rail, motor, or water
carrier) to provide transportation of property for

compensation and, in the ordinary course of its business, (1) to assemble and
consolidate, or to provide for assembling and consolidating, shipments, and to perform
or provide for break-bulk and distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the place of receipt to the place of
destination; and (3) to use for any part of the transportation a carrier subject to the
federal law pertaining to common carriers.

A freight forwarders liability is limited to damages arising from its own negligence,
including negligence in choosing the carrier; however, where the forwarder contracts to
deliver goods to their destination instead of merely arranging for their transportation, it
becomes liable as a common carrier for loss or damage to goods. A freight forwarder
assumes the responsibility of a carrier, which actually executes the transport, even
though the forwarder does not carry the merchandise itself.

It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant thereto,
petitioner undertook to transport, ship, and deliver the 27 drums of raw materials for
pharmaceutical manufacturing to the consignee.

A bill of lading is a written acknowledgement of the receipt of goods and an agreement

to transport and to deliver them at a specified place to a person named or on his or her
order. It 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.

Undoubtedly, UTI is liable as a common carrier. 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. That is, unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid responsibility for any loss or
damage, therefore, they have the burden of proving that they observed such diligence.
[27] 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, loss, or destruction of the goods happened, the transporter shall be held
responsible.

Held:

No

It is to be noted that the Civil Code does not limit the liability of the common carrier to
a fixed amount per package. In all matters not regulated by the Civil Code, the rights
and obligations of common carriers are governed by the Code of Commerce and
special laws.

Section 4(5) of the COGSA provides: (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 declared by the shipper before shipment and 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.

In the present case, the shipper did not declare a higher valuation of the goods to be
shipped. Petitioners liability should be limited to $500 per steel drum. In this case, as
there was only one drum lost, private respondent is entitled to receive only $500 as
damages for the loss.

2. Ace Navigation Co., Inc. v. FGU Insurance Corporation

G.R. No. 171591, June 25, 2012

FACTS:

CARDIA shipped on board M/V PAKARTI cements to be discharged at Manila Port and
delivered to HEINDRICH. The shipment was ensured by FGU and PIONEER. The ship
was owned by PAKARTI, chartered to SHINWA. SHINWA chartered to SKY, agent of
KEE YEH. KEE YEH chartered to REGENCY.

Upon inspection of HEINDRICH and petitioner ACENAV, agent of CARDIA, it was found
that out of the 165,200 bags of cement, 43,905 bags were in bad order and condition.

HEINDRICH filed for damages against CARDIA and REGENCY.

In their answer with counterclaim and cross-claim, PAKARTI and SHINWA alleged that
the suits against them cannot prosper because they were not named as parties in the
bill of lading.

ACENAV claimed that, not being privy to the bill of lading, it was not a real party-in-
interest from whom the respondents can demand compensation.

SKY denied having acted as agent of the charterer, KEE YEH, which chartered the
vessel from SHINWA, which originally chartered the vessel from PAKARTI. SKY also
averred that it cannot be sued as an agent without impleading its alleged principal, KEE
YEH.

SKY manifested that it will no longer pursue its petition and wait for the resolution filed
by PAKARTI and SHINWA. Likewise, PAKARTI and SHINWA moved for the withdrawal
of their petitions. Only the petition of ACENAV remained.

ISSUE:

WON ACENAV liable.

RULING:

NO.

A bill of lading is defined as “an instrument in writing, signed by a carrier or his agent,
describing the freight so as to identify it, stating the name of the consignor, the terms
of the contract for carriage, and agreeing or directing that the freight to be delivered to
the order or assigns of a specified person at a specified place.” It operates both as a
receipt and as a contract. 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 rates or charges, and
stipulates the rights and obligations assumed by the parties. As such, it shall only be
binding upon the parties who make them, their assigns and heirs.

In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the
carrier PAKARTI; and (c) the consignee HEINDRICH. However, by virtue of their
relationship with PAKARTI under separate charter arrangements, SHINWA, KEE YEH
and its agent SKY likewise became parties to the bill of lading. In the same vein,
ACENAV, as admitted agent of CARDIA, also became a party to the said contract of
carriage.

Article 586 of the Code of Commerce provides:

“ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the
captain and for the obligations contracted by the latter to repair, equip, and provision
the vessel, provided the creditor proves that the amount claimed was invested therein.

By ship agent is understood the person entrusted with the provisioning of a vessel, or
who represents her in the port in which she may be found.”

Corollarily, Article 1897 of the same Code provides that an agent is not personally liable
to the party with whom he contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice of his powers.

Both exceptions do not obtain in this case. Records are bereft of any showing that
ACENAV exceeded its authority in the discharge of its duties as a mere agent of
CARDIA. Neither was it alleged, much less proved, that ACENAV’s limited obligation as
agent of the shipper, CARDIA, was not known to HEINDRICH.

Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability
attributed upon it by the CA on the basis of its finding that the damage sustained by
the cargo was due to improper packing cannot be borne by ACENAV. As mere agent,
ACENAV cannot be made responsible or held accountable for the damage supposedly
caused by its principal.

3. Ong Yiu v. Court of Appeals

G.R. No. L-40597, 29 June 1979, 91 SCRA 223

FACTS:

On august 26, 1967, Ong Yiu was a fare paying passenger of respondent PAL from
Mactan, Cebu to Butuan City wherein he was scheduled to attend a trial. As a
passenger, he checked in one piece of luggae, blue maleta for which he was issued a
claim ticket. Upon arrival at Butuan City, petitioner claimed his luggage but it could not
be found. PAL Butuan sent a message to PAL Cebu which in turn sent a message to
PAL Manila that same afternoon. PAL Manila advised PAL Cebu that the luggage has
been over carried to Manila and that it would be forwarded to PAL Cebu that same day.
PAL Cebu then advised PAL Butuan that the luggage will be forwarded the following
day, on scheduled morning flight. This message was not received by PAL Butuan as all
the personnel had already gone for the day. Meanwhile, Ong Yiu was worried about the
missing luggage because it contained vital documents needed for the trial the next day
so he wired PAL Cebu demanding delivery of his luggage before noon that next day or
he would hold PAL liable for damages based on gross negligence. Early morning,
petitioner went to the Butuan Airport to inquire about the luggage but did not wait for
the arrival of the morning flight at 10:00am. which carried his luggage. A certain
Dagorro, a driver of a colorum car, who also used to drive the petitioner volunteered to
take the luggage to the petitioner. He revelaed that the documents were lost. Ong Yiu
demanded from PAL Cebu actual and compensatory damages as an incident of breach
of contract of carriage.

ISSUES:

1. Whether or not PAL is guilty of only simple negligence and not gross negligence?

2. Whether the doctrine of limited liability doctrine applies in the instant case?

HELD:

1. PAL had not acted in bad faith. It exercised due diligence in looking for petitioner’s
luggage which had been miscarried. Had petitioner waited or caused someone to wait
at the airport for the arrival of the morning flight which carried his luggage, he would
have been able to retrieve his luggage sooner. In the absence of a wrongful act or
omission or fraud, the petitioner is not entitled to moral damages. Neither is he entitled
to exemplary damages absent any proof that the defendant acted in a wanton,
fraudulent, reckless manner.

2. The limited liability applies in this case. On the presumed negligence of PAL, its
liability for the loss however, is limited on the stipulation written on the back of the
plane ticket which is P100 per baggage. The petitioner not having declared a greater
value and not having called the attention of PAL on its true value and paid the tariff
therefore. The stipulation is printed in reasonably and fairly big letters and is easily
readable. Moreso, petitioner had been a frequent passenger of PAL from Cebu to
Butuan City and back and he being a lawyer and a businessman, must be fully aware
of these conditions.

4. MOF Company v. Shin Yang

Facts:

Halla shipped to Manila secondhand cars and other articles on board the vessel
Hanjin Busan.

The bill of lading was prepared by the carrier Hanjin where Shin Yang was named as
the consignee and indicated that payment was on a "Freight Collect" basis (meaning
the consignee/receiver of the goods would be the one to pay for the freight and other
charges).

When the shipment arrived in Manila MOF, Hanjin’s exclusive general agent in the
Philippines, demanded the payment from Shin Yang.

 Shin Yang refused to pay the freight and other charges. Shin Yang is saying that it
is not the ultimate consignee but merely the consolidator/forwarder.

Shin Yang contends that the fact that its name was mentioned as the consignee of
the cargoes did not make it automatically liable for the freightage because it never
benefited from the shipment.

It never claimed or accepted the goods, it was not the shipper’s agent, it was not
aware of its designation as consignee and the original bill of lading was never endorsed
to it.

Issue:

Whether a consignee, who is not a signatory to the bill of lading, is bound by the
stipulations thereof? - Yes

Whether Shin Yang, who was not an agent of the shipper and who did not make any
demand for the fulfillment of the stipulations of the bill of lading drawn in its favor, is
liable to pay the corresponding freight and handling charges? - No

Held:

While it is true that a bill of lading serves two (2) functions: first, it is a receipt for the
goods shipped; second, it is a contract by which three parties,

namely, the shipper, the carrier and the consignee who undertake specific
responsibilities and assume stipulated obligations.

The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier
without the intervention of the consignee. However, the latter can be bound by the
stipulations of the bill of lading when a) there is a relation of agency between the
shipper or consignor and the consignee or b) when the consignee demands fulfillment
of the stipulation of the bill of lading which was drawn up in its favor.

5. Saludo, Jr. v. CA
207 SCRA 498

FACTS:

The mother of the petitioners died in Chicago, Illinois. Pomierski Funeral Home of
Chicago made the necessary preparations and arrangements for the shipment of the
remains to the Philippines. Pomierski brought the remains to Continental Mortuary Air
Services (CMAS) at the Chicago Airport which made the necessary arrangements.
CMAS booked the shipment with PAL. PAL Airway Bill was issued wherein the
requested routing was from Chicago to San Francisco on board Trans World Airline
(TWA) and from San Francisco to Manila on board PAL. Salvacion, one of the
petitioners, upon arrival at San Francisco, went to the TWA to inquire about her
mother’s remains. But she was told they did not know anything about it. She then
called Pomierski that her mother’s remains were not at the West Coast terminal.
Pomierski immediately called CMAS which informed that the remains were on a plane
to Mexico City, that there were two bodies at the terminal, and somehow they were
switched. Petitioners filed a complaint against TWA and PAL for the erroneous
shipment and delay of the cargo. Petitioners alleged that private respondents received
the casketed remains of the deceased on October 26, 1976, as evidenced by the
issuance of PAL Airway Bill and from said date, private respondents were charged with
the responsibility to exercise extraordinary diligence so much so that the alleged
switching of the caskets on October 27, the latter must be liable. PAL contended that it
was October 28 when they received the physical delivery of the body, thus, it is not
liable for the switching which happened the day before.

ISSUE:

1) Is the Airway Bill a bill of lading?

2) Was there delivery of the cargo upon mere issuance of the Airway Bill?

HELD:

1. YES. A bill of lading is a written acknowledgement of the receipt of the goods and
an agreement to transport and deliver them at a specified place to a person named
or on his order. It may be called a shipping receipt, forwarder’s receipt and receipt
for transportation. Designation is immaterial. It was held that freight tickets for bus
companies as well as receipts for cargo transported by all forms of transportation,
whether by sea or land, fall within the definition. Under the Tariff and Customs
Code, a bill of lading includes airway bills of lading.

2. NO. While delivery of the goods to the carrier normally precedes the issuance of
the bill, or delivery of the goods and issuance of the bill are regarded in commercial
practice as simultaneous acts, there is nothing to prevent an inverse order of
events. It is a general rule to the parties to a contract of carriage of goods where a
bill of lading is issued, that the recital being in essence a receipt alone, is not
conclusive but may be explained, varied, or contradicted by parol or other
evidence. For instance, when no goods have been delivered for shipment, no
recitals in the bill can estop the carrier from showing the true facts. It only raises a
rebuttable presumption that the goods were delivered for shipment but the fact
must always outweigh the recital. Here, the explanation of private respondents that
the Airway Bill was issued, not as evidence of receipt of delivery but merely as a
confirmation of the book made sufficiently overcomes the presumption relied on by
petitioners that the remains of their mother were delivered to and received by
private respondents on October 26. The Court is convinced that private respondent
received the physical delivery of the body only on October 28 as evidenced by the
Interline Freight Transfer Manifest of the American Airline Freight System. It was
 from that date that private respondents became responsible for the agreed cargo
under their undertakings in PAL Airway Bill. Consequently, for the switching of
caskets prior thereto which was not caused by them, private respondents cannot
be held liable.

6. MAERSK LINE vs. CA

G.R. No. 94761, May 17, 1993

FACTS:

Petitioner Maersk Line is engaged in the transportation of goods by sea, doing

business in the Philippines through its general agent, Compania de Tabacos de
Filipinas, while private respondent Efren Castillo is the proprietor of Ethegal
Laboratories, a firm engaged in the manufacture of pharmaceutical products.

On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of Puerto Rico 600,000 empty
gelatin capsules for the manufacture of his pharmaceutical products. The capsules
were placed in 6 drums of 100,000 capsules each valued at US$1,668.71. Shipper Eli
Lilly,Inc. advised Castillo through a Memorandum of Shipment that the products were
already shipped on board MV “Anders Maerskline” for shipment to the Philippines via
Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of
arrival to be April 3, 1977.

However, for unknown reasons, said cargoes of capsules were mis-shipped and
diverted to Richmond, Virginia, USA and then transported back to Oakland, California,
USA and with the goods finally arriving in the Philippines on June 10, 1977 or after two
(2) months from the date specified in the memorandum. Consignee Castillo refused to
take delivery of the goods on account of its failure to arrive on time, and filed an action
for rescission of contract with damages against Maersk Line and Eli Lilly alleging gross
negligence and undue delay.

Denying that it committed breach of contract, petitioner alleged in its answer that the
subject shipment was transported in accordance with the provisions of the NCC
covering bill of lading and that its liability under the law on transportation of good
attaches only in case of loss, destruction or deterioration of the goods as provided for
in Article 1734 of Civil Code. For its part, Eli Lilly in its cross claim argued that the delay
was due solely to the negligence of Maersk Line.

The Trial Court dismissed the complaint against Eli Lilly and the latter withdrew cross
claim but TC still held Maersk liable and CA affirmed with modifications.

ISSUES:

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

2. W/N Castillo is entitled to damages resulting from delay in the delivery of the
shipment? Yes.

RULING:

The complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and
petitioner as carrier. Petitioner Maersk Line being an original party defendant upon
whom the delayed shipment is imputed cannot claim that the dismissal of the
complaint against Eli Liily inured to its benefit.

It is not disputed that the aforequoted provision at the back of the bill of lading, in fine
print, is a contract of adhesion. Generally, contracts of adhesion are considered void
since almost all the provisions of these types of contracts are prepared and drafted
only by one party, usually the carrier. The only participation left of the other party in
such a contract is the affixing of his signature thereto, hence the term "Adhesion".

Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited.
One who adheres to the contract is in reality free to reject it in its entirety; if he adheres,
he gives his consent (Magellan Manufacturing Marketing Corporation v. Court of
Appeals, et al., 201 SCRA 102 [1991]).

In Magellan, (supra), we ruled: “It is a long standing jurisprudential rule that a bill of
lading operates both as a receipt and as contract to transport and deliver the same a
therein stipulated. As a contract, it names the parties, which includes the consignee,
fixes the route, destination, and freight rates or charges, and stipulates the rights and
obligations assumed by the parties. Being a contract, it is the law between the parties
who are bound by its terms and conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. A bill of lading usually becomes
effective upon its delivery to and acceptance by the shipper. It is presumed that the
stipulations of the bill were, in the absence of fraud, concealment or improper conduct,
known to the shipper, and he is generally bound by his acceptance whether he reads
the bill or not.

However, the aforequoted ruling applies only if such contracts will not create an absurd
situation as in the case at bar. The questioned provision in the subject bill of lading has
the effect of practically leaving the date of arrival of the subject shipment on the sole
determination and will of the carrier.

Petitioner contends as well that it cannot be held liable because there was no special
contract under which the carrier undertook to deliver the shipment on or before a
specific date and that the Bill of Lading provides that “The Carrier does not undertake
that the Goods shall arrive at port of discharge or the place of delivery at any particular
time...”.

While it is true that common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless such
common carriers previously assume the obligation to deliver at a given date or time,
delivery of shipment or cargo should at least be made within a reasonable time.

While there was no special contract entered into by the parties indicating the date of
arrival of the subject shipment, petitioner nevertheless, was very well aware of the
specific date when the goods were expected to arrive as indicated in the bill of lading
itself. In this regard, there arises no need to execute another contract for the purpose
as it would be a mere superfluity. In the case before us, we find that a delay in the
delivery of the goods spanning a period of two months and seven days falls was
beyond the realm of reasonableness.

This Court held Maersk Line liable for delay in the delivery of goods. An examination of
the subject bill of lading that the subject shipment was estimated to arrive in Manila on
April 3, 1977. While there was no special contract entered into by the parties indicating
the date of arrival, petitioner nevertheless, was very well aware of the specific date
when the goods expected to arrives as indicated in the bill lading.

There was delay in the delivery of the goods, spanning a period of 2 months and 7
days falls way beyond the realm of reasonableness. Petitioner never even bothered to
explain the cause for delay of more than 2 months in the delivery of the goods.
Therefore, Maersk Line is liable for breach of contract carriage amounting to bad faith.

7. JOSE MENDOZA vs. PHILIPPINE AIRLINES, INC.,

Emergency Recit: Mendoza contracted with LVN Pictures for him to exhibit “Himala ng Birhen” in his
theater during the town fiesta. The can of film was loaded on a PAL plane. However, the same was not
unloaded upon arrival at the airport. Mendoza was not able to exhibit the film on time, causing him
unrealized profits. He filed a case against PAL but the trial court dismissed his complaint. The SC held
that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not
vested with the right of prompt delivery, unless such common carriers previously assume the obligation.
In this case, Mendoza did not inform PAL of the special circumstances surrounding the film delivery.

Facts:

1. Mendoza was the owner of the Cita Theater in Naga City, Camarines Sur, where he
used to exhibit movie pictures booked from movie producers or film owners in
Manila.

2. The Naga fiesta was usually attended by many people, mostly from the Bicol
region, especially since the Patron Saint Virgin of Peña Francia was believed by
many to be miraculous.

3. Mendoza, taking advantage of these circumstances, decided to exhibit a film which

would fit the occasion and have a special attraction and significance to the people
attending said fiesta.

4. A month before the holiday, he contracted with the LVN pictures, Inc., a movie
producer in Manila for him to show during the town fiesta the Tagalog film entitled
"Himala ng Birhen”

5. He made extensive preparations; he had two thousand posters printed and later
distributed not only in the City of Naga but also in the neighboring towns. He also
advertised in a weekly of general circulation in the province.

6. The advertisements state that the film would be shown in the Cita theater on the
eve and day of the fiesta itself.

7. LVN Pictures Inc. delivered to Philippine Airlines (PAL) a can containing the film
“Himala ng Birhen" consigned to the Cita Theater.

8. PAL issued its Air Way Bill No. 317133. This can of films was loaded on flight 113 of
the defendant, the plane arriving at the Air Port at Pili a little after four o'clock in the
afternoon of the same day.

9. However, the can of film was not unloaded at Pili Air Port and it was brought back
to Manila.

10. Mendozainquiredaboutthecanoffilmbutitcouldnotbefound.Whentheyfinallylocated it,

and delivered the same to Mendoza, it was too late. He had missed his opportunity
to realize a large profit since the fiesta-goers had already gone home.

11. Mendoza brought an action against the PAL. The court dismissed the complaint.

12. To avoid liability, PAL, showed the terms and conditions of paragraph 6 of the Way
Bill printed on the back thereof which paragraph reads as follows:

• The Carrier does not obligate itself to carry the Goods by any specified aircraft or on a specified
time. Said Carrier being hereby authorized to deviate from the route of the shipment without any
liability therefor.

13. The trial court found and held that although the defendant was not obligated to
load the film on any specified plane or on any particular day, once said can film was
loaded and shipped on one of its planes making trip to Camarines, then it assumed
the obligation to unload it at its point of destination and deliver it to the consignee,
and its unexplained failure to comply with this duty constituted negligence.

A. It however found that fraud was not involved and that the defendant was a debtor in good faith.

B. The trial court held that inasmuch as these damages suffered by Mendoza were not foreseen or
could not have been foreseen at the time that the defendant accepted the can of film for
shipment, for the reason that neither the shipper LVN Pictures Inc. nor the consignee Mendoza
had called its attention to the special circumstances attending the shipment and the showing of
the film during the town fiesta of Naga, plaintiff may not recover the damages sought.

14. Counsel for Mendoza insists that the articles of the Code of Commerce rather than
those of the Civil Code should have been applied in deciding this case for the
reason that the shipment of the can of film is an act of commerce;

a. that the contract of transportation in this case should be considered commercial

under Art. 349 of the Code of Commerce because it only involves merchandise or
an object of commerce but also the transportation company, PAL, was a common
carrier, that is to say, customarily engaged in transportation for the public,

b. and that although the contract of transportation was not by land or waterways as
defined in said Art. 349, nevertheless, air transportation being analogous to land
and water transportation, should be considered as included, especially in view of
the second paragraph of Art. 2 of the same Code which says that transactions
covered by the Code of Commerce and all others of analogous character shall be
deemed acts of commerce.

Issue:

Whether or not the trial court made an error in dismissing the complaint. NO.

Held:

• A contract of transportation by air may be regarded as commercial.

• The reason is that the transportation company (PAL) is a common carrier; besides,
air transportation is clearly similar or analogous to land and water transportation. The
obvious reason for its non-inclusion in the Code of Commerce was that at the time
of its promulgation, transportation by air on a commercial basis was not yet known.

• The test of whether one is a common carrier by air is whether he holds out that he
will carry for hire, so long as he has room, goods for everyone bringing goods to him
for carriage, not whether he is carrying as a public employment or whether he carries
to a fixed place.

• Under Art. 1107 of the Civil Code, a debtor in good faith like PAL, may be held liable
only for damages that were foreseen or might have been foreseen at the time the
contract of the transportation was entered into.

• The trial court correctly found that PAL could not have foreseen the damages that would be
suffered by Mendoza upon failure to deliver the can of film on the 17th of September, 1948 for
the reason that the plans of Mendoza to exhibit that film during the town fiesta and his
preparations, specially the announcement of said exhibition by posters and advertisement in
the newspaper, were not called to the PAL's attention.

• In order to impose on the defaulting party further liability than for damages naturally
and directly arising from a breach of contract, such unusual or extraordinary
damages must have been brought within the contemplation of the parties as the
probable result of a breach at the time of or prior to contracting. Generally, notice
then of any special circumstances which will show that the damages to be
anticipated from a breach would be enhanced has been held sufficient for this effect.

Thetrialcourtfoundandheldthatalthoughthedefendantwasnotobligatedtoloadthe film on
any specified plane or on any particular day, once said can film was loaded and
shipped on one of its planes making trip to Camarines, then it assumed the obligation
to unload it at its point of destination and deliver it to the consignee, and its
unexplained failure to comply with this duty constituted negligence.

which will show that the damages to be anticipated from a breach would be enhanced
has

been held sufficient for this effect.

Common carriers are not obligated by law to carry and to deliver merchandise, and
persons

are not vested with the right of prompt delivery, unless such common carriers
previously assume the obligation. Said rights and obligations are created by a specific
contract entered into by the parties.

In situations like the present where failure to exhibit films on a certain day would spell
substantial damages or considerable loss of profits, including waste of efforts on
preparations and expenses incurred in advertisements, exhibitors, for their security,
may either get hold of the films well ahead of the time of exhibition in order to make
allowance for any hitch in the delivery, or else enter into a special contract or make a
suitable arrangement with the common carrier for the prompt delivery of the films,
calling the attention of the carrier to the circumstances surrounding the case and the
approximate amount of damages to be suffered in case of delay.

8. Uy Chaco Sons vs. The Admiral Line

Doctrine: Where property in the hands of a common carrier is not delivered within a reasonable time after
it has reached its destination, the carrier, in the absence of any legal exemption and after demand has
been made and delivery refused, is liable for a conversion of the property.

A tender of the property, to be effectual, must have been made within the time in which the defendant
was entitled to deliver it and the plaintiff bound to receive it.

Facts:

1. Plaintiff Mariano Uy Chaco Sons & Co. alleges that upon arrival of the S. S.
Satsuma at the port of Manila, there were short-delivered one case of varnish and
paint remover and fifty bales of oakum, for the conversion of which, defendant is
liable.

2. Defendant Admiral Line argues that the merchandise had been delayed, had been
found, and delivery thereof had been tendered and rejected.

3. It appears that the interval which elapsed between the date when the merchandise
should have been delivered and the presentation of the complaint was
approximately 11 months. The delay which ensued between the date when the
merchandise should have been delivered and the date when it was finally tendered
was close to 2 years and 4 months. The time which passed between the date when
the merchandise should have been delivered and the date when the defense of
tender was set up, was over 3 years.

Issue:Whether or not defendant is guilty of conversion?

Held:

Yes. As a general rule, mere delay in the delivery of goods by a common carrier, no
matter how long continued, is not a conversion thereof, but is only a breach of the
contract of carriage. Therefore, where a carrier fails to deliver goods within a
reasonable time, although he thereby makes himself liable for the damages incurred by
reason of the delay, the consignee cannot refuse to accept the goods from him and
recover their value but is compelled to receive them.

However, a demand and a refusal to deliver is sometimes essential to show a

conversion. Even after demand, if the goods are tendered before a suit is brought, the
consignee cannot refuse to receive the goods and sue for conversion, his sole remedy
being an action for damages resulting from the delay.

Though the carrier may delay ever so long, the owner cannot charge him with a
conversion, or for the value of the goods, if they are safely kept, unless they have been
demanded of the carrier and their delivery refused.

Where property in the hands of a common carrier is not delivered within a reasonable
time after it has reached its destination, the carrier, in the absence of any legal
exemption and after demand has been made and delivery refused, is liable for a
conversion of the property. The consignee, under such circumstances, may elect to
waive all the title to the property and sue for conversion, and after he has done so, a
subsequent tender by the carrier will not be available for it as a defense.

A tender of the property, to be effectual, must have been made within the time in which
the defendant was entitled to deliver it and the plaintiff bound to receive it. In this case,
the tender made was not until long after the lapse of this period, and, not being
accepted, is no bar to plaintiff’s right to recover.

A delay of more than 2 years in making delivery was conclusively unreasonable. A

delay in pressing a defense predicated on tender, of more than 2 years counted from
the date when the complaint was filed, was likewise unreasonable. Defendant was
unable to turn the goods over to plaintiff at any time before the complaint was
presented, and in fact, could not do so until a long time thereafter. From the foregoing,
defendant was in effect guilty of conversion and must accordingly respond for the
value of the property at the time of conversion.

9. UCPB General Insurance Co., Inc. vs Aboitiz Shipping

Corp.
G.R. No. 168433, February 10, 2009

Facts:

On June 1991, 3 units of waste water treatment plant with accessories were purchased
by San Miguel Corp from Super Max Engineering. The goods came from Charleston,
USA and arrived in port of Manila on board MV Scandutch Star. From Manila it was
transported to Cebu on board of Aboitiz Supercon II. In Cebu, with clearance from the
Bureau of Customs, the goods were delivered and received by San Miguel at its plant
site. It was then discovered that the motor of the unit was damaged.

Pursuant to the insurance agreement, UCPB General Insurance paid San Miguel
P1,703,381.40 representing the value of the damaged unit. In turn, San Miguel
executed a subrogation form in favor of UCPB. Then, UCPB filed a complaint on Kuly
1992 as subrogee of San Miguel seeking to recover from Aboitiz. Aboitiz moved to
admit East Asiatic Co. as general agent of DAMCO Intermodal System. RTC held
Aboitiz, East Asiatic and DAMCO solidarily liable.

CA reversed the decision of the RTC and ruled that UCPBs right of action did not
accrue because UCPB failed to file a formal notice within 24 hours from the damaged.
In a memorandum, UCPB asserts that the claim requirement does not apply to cases
concerning damages to the merchandise had already been known to the carrier. UCPB
revealed that the damage to the cargo was found upon discharge from the foreign
carrier witnessed by the carrier’s representative who signed the request for bad order
survey and the turnover of bad order cargoes. This knowledge, UCPB argues,
dispenses with the need to give the carrier a formal notice of claim. Incidentally, the
carrier’s representative mentioned by UCPB as present at the time the merchandise
was unloaded was in fact a representative of respondent Eagle Express Lines (Eagle
Express). UCPB further claims that the issue of the applicability of Art. 366 of the Code
of Commerce was never raised before the trial court and should, therefore, not have
been considered by the CA.

Eagle Express, in its Memorandum dated February 7, 2007, asserts that it cannot be
held liable for the damage to the merchandise as it acted merely as a freight forwarders
agent in the transaction. It allegedly facilitated the transhipment of the cargo from
Manila to Cebu but represented the interest of the cargo owner, and not the carriers.

Aboitiz, on the other hand, points out, in its Memorandum dated March 29, 2007, that it
obviously cannot be held liable for the damage to the cargo which, by UCPBs
admission, was incurred not during transhipment to Cebu on board one of Aboitizs
vessels, but was already existent at the time of unloading in Manila. Aboitiz also argues
that Art. 366 of the Code of Commerce is applicable and serves as a condition
precedent to the accrual of UCPBs cause of action against it.

Issue:

Whether any of the remaining parties may still be held liable by UCPB.

Ruling:

UCPB obviously made a gross misrepresentation to the Court when it claimed that the
issue regarding the applicability of the Code of Commerce, particularly the 24-hour
formal claim rule, was not raised as an issue before the trial court. The appellate court,
therefore, correctly looked into the validity of the arguments raised by Eagle Express,
Aboitiz and Pimentel Customs on this point after the trial court had so ill-advisedly
centered its decision merely on the matter of extraordinary diligence.

Interestingly enough, UCPB itself has revealed that when the shipment was discharged
and opened at the ICTSI in Manila in the presence of an Eagle Express representative,
the cargo had already been found damaged. In fact, a request for bad order survey was
then made and a turnover survey of bad order cargoes was issued, pursuant to the
procedure in the discharge of bad order cargo. The shipment was then repacked and
transhipped from Manila to Cebu on board MV Aboitiz Supercon II. When the cargo
was finally received by SMC at its Mandaue City warehouse, it was found in bad order,
thereby confirming the damage already uncovered in Manila.

We have construed the 24-hour claim requirement as a condition precedent to the

accrual of a right of action against a carrier for loss of, or damage to, the goods. The
shipper or consignee must allege and prove the fulfilment of the condition. Otherwise,
no right of action against the carrier can accrue in favor of the former.

The shipment in this case was received by SMC on August 2, 1991. However, as found
by the Court of Appeals, the claims were dated October 30, 1991, more than three (3)
months from receipt of the shipment and, at that, even after the extent of the loss had
already been determined by SMCs surveyor. The claim was, therefore, clearly filed
beyond the 24-hour time frame prescribed by Art. 366 of the Code of Commerce.

Petition was denied. CA's decision was affirmed.

10. Southern Lines Inc. vs Ca

FACTS:

• -The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation
(NARIC).

• -NARIC shipped 1,726 sacks of rice consigned to the City of Iloilo on board of SS
General Wright belong to Southern Lines.

• -The City of Iloilo received the shipment and paid the amount stated in the bill of
lading (around Php 63K).

• -However, at the bottom of the bill of lading, it was noted that City of Iloilo received
the merchandise in the same condition as when shipped, except that it received only
1,685 sacks.

• -Upon actual weighing, it was discovered that the shortage was equal to 41 sacks of
rice.

• -Thus, the City of Iloilo filed a complaint against NARIC and Southern Lines for the
recovery of the value of the shortage of the shipment of rice (Php 6,486.35).

• -The lower court absolved NARIC but sentenced Southern Lines to pay the amount.

• -CA affirmed.

• -Hence, this petition for review.

• -Southern Lines claims exemption from liability by contending that the shortage in
the shipment of rice was due to such factors as shrinkage, leakage or spillage of the
rice on account of the bad condition of the sacks at the time it received the same
and negligence of the agents of City of Iloilo in receiving the shipment.

ISSUES:

-    Whether Southern Lines is liable for the loss or shortage of the rice shipped.YES

-    Whether the City of Iloilo 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 as stated in
the bill of lading.NO

HELD:

-      YES. The SC held that the contention of Southern Lines with respect to the
improper packing is untenable.Under Art. 361 of the Code of Commerce, the 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 Art. 362, the
plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to
the goods is by virtue of their nature, occurred on account of its negligence or because
the defendant did not take the precaution adopted by careful persons.It held that 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 therefrom.

-    NO. The SC noted that Southern Lines failed to plead this defense in its answer to
City of Iloilo’s complaint and, therefore, the same is deemed waived and cannot be
raised for the first time.The SC also cited the finding of the CA that City of Iloilo filed
the action within a reasonable time; that the action is one for the refund of the amount
paid in excess, and not for damages or the recovery of shortage; the bill of lading does
not at all limit the time for the filing of action for the refund of money paid in excess.

11. Ang vs. American Steamship Agencies

Facts:

Yau Yue Commercial Bank of Hongkong agreed to sell 140 packages of galvanized
steel durzinc sheets to Herminio Teves for $32,458.26. Said agreement was subject to
the following terms: the purchase price should be covered by a bank draft which
should be paid by Teves in exchange for the delivery to him of the bill of lading to be
deposited with honking and Shanghai Bank of Manila; that Teves would present said
bill of lading to carrier’s agent, American Steamship Agencies which would then issue
the “permit to deliver imported articles” to be presented to the Bureau of customs to
obtain the release of the articles.

Yau Yue shipped the articles aboard S.S. Tensai Maru owned by Nissho Shipping Co.,
of which the American Shipping is the agent in the Philippines.

When the Articles arrived in manila, Honkong Shanghai’s Bank notified Teves of the
arrival of the goods and requested for the payment of the demand draft. Teves,
however, failed to pay the demand draft. So, the bank returned the bill of lading and the
demand draft to Yau Yue which endorsed the bill of lading to Domingo Ang.

Despite his non-payment, Teves was able to obtain a bank guarantee in favor of the
American Steamship Agencies, the carrier’s agent. Thus, Teves succeeded in securing
a “ permit to deliver imported articles” from the carrier’s agent, which he presented to
the Bureau of Customs, that released the said articles to him.

Subsequently, Domingo Ang claimed the articles from American Steamship, by

presenting the indorsed bill of lading, but he was informed that it had delivered the
articles to Teves. Ang filed a complaint in the Court of First Instance of Manila against
American shipping agencies, for having wrongfully delivered the goods.

The American Steamship filed for a motion to dismiss, citing the carriage of Goods by
Sea Act, section 3 paragraph 4, which states: in any event, the carrier and the ship
shall be discharged from all liability in respect to loss or damage unless suit is brought
within one year, after delivery of goods or the date when the goods should have been
delivered.

Thus, the lower court dismissed the action, on the ground of prescription.

Issue:

Whether or not the Carriage of Goods by Sea Act Section 3, Paragraph 4, applies to
the case at bar?

Held:

The provision of the law speaks of “loss or damage”. But there was no damage
caused to the goods which were delivered intact to Herminio Teves.

As defined by the Civil Code and as applied to section 3, paragraph 4, of the Carriage
of Goods by sea Act, “loss” contemplates a situation where no delivery at all was made
by the shipper of the goods because the same had perished, gone out of commerce,
or disappeared that their existence is unknown or they cannot be recovered. It does
not include a situation where there was indeed delivery, but delivery to the wrong
person.

The applicable rule on prescription is that found in the Civil Code, either: ten years for
breach of contract or four years for quasi-delict. In either case, the plaintiff’s cause of
action has not yet prescribed. Thus, the case is remanded to the court a quo for further
proceedings.

12. DOMINGO ANG vs. AMERICAN STEAMSHIP AGENCIES

INC
G.R. No. L-22491

Facts:

Yau Yue Commercial Bank Ltd. of Hongkong, sell 140 packages of galvanized steel
durzinc sheetsto one Herminio G. Teves, shipped by Tokyo Boeki Ltd. of Tokyo, Japan.
with American SteamshipAgencies, Inc. as the agent in the Philippines, under a
shipping agreement. The bill of lading was indorsed to the order of and delivered to
Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a demand draft together
with the bill of lading against Herminio G. Teves, through the Hongkong & Shanghai
Bank. Upon arrival, Hongkong & Shanghai Bank notified Teves, the "notify party" under
the bill of lading, of the arrival of the goods and requested payment of the demand
draft representing the purchase price of the articles. Teves, however, did not pay the
demand draft, prompting the bank to make the corresponding protest. The bank
likewise returned the bill of lading and demand draft to Yau Yue which indorsed the
said bill of lading to Domingo Ang. Despite non-payment Teves was able to secure a
"Permit To Deliver Imported Articles" which he presented to the Bureau of Customs
which in turn released to him the articles covered by the bill of lading. Subsequently,
Domingo Ang claimed for the articles from American Steamship Agencies, Inc., by
presenting the indorsed bill of lading, but he was informed by the latter that it had
delivered the articles to Teves. A complaint was filed by Ang against American
Steamship for having allegedly wrongfully delivered and/or converted the goods
covered by the bill of lading. Defendant filed a motion to dismiss upon the ground that
plaintiff's cause of action has prescribed under the Carriage of Goods by Sea Act.
Lower court dismissed the case on the ground of prescription. Hence, an appeal was
filed to SC.

Issue:

Has plaintiff-appellant's cause of action prescribed under Section 3(6), paragraph 4 of

the Carriage of Goods by Sea Act? What is to be resolved — in order to determine the
applicability of the prescriptive period of one year to the case at bar — is whether or
not there was "loss" of the goods subject matter of the complaint.

Ruling:

From the allegations of the complaint, therefore, the goods cannot be deemed "lost".
They were delivered to Herminio G. Teves, so that there can only be either delivery, if
Teves really was entitled to receive them, or misdelivery, if he was not so entitled. It is
not for Us now to resolve whether or not delivery of the goods to Teves was proper,
that is, whether or not there was rightful delivery or misdelivery. There being no loss or
damage to the goods, the aforequoted provision of the Carriage of Good by Sea Act
stating that "In any event, the

carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the datewhen the
goods should have been delivered," does not apply. It follows that for suits predicated
not upon loss or damage but on alleged misdelivery (or conversion) of the goods, the
applicable rule on prescriptions that found in the Civil Code, namely, either ten years
for breach of a written contract or four years for quasi- delict. In either case, plaintiff's
cause of action has not vet prescribed, since his right of action would have accrued at
the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on
October30, 1963.Wherefore, the dismissal order appealed from is hereby reversed and
set aside and this case is remanded to the court a quo for further proceedings