G.R. No. L-1963 April 30, 1906 ART. 618.
ART. 618. The captain shall be civilly liable to the agent and
BAER SENIOR & CO.'S SUCCESSORS, plaintiff-appellee,
vs.
LA COMPAÑIA MARITIMA, defendant-appellant.
Chicote, Miranda and Sierra, for appellant.
Pillsbury and Sutro, for appellee.
WILLARD, J.:
The plaintiff, being the owner of the launch Mascota, which was then
at Aparri, made a contract with the defendant about the 2d of February,
1903, by the terms of which the defendant agreed to tow the launch
from Aparri to Manila. In accordance with this agreement the launch
was delivered to the defendant at Aparri on the day named, and the
defendant's steamer Churruca left Aparri on that day with the launch
in tow. The steamer, with the launch in tow, arrived safely at Vigan.
Two or three hours after leaving Vigan the wind increased in violence,
with a rough sea. The speed of the streamer was decreased so that the
tow might travel more easily. About half-past 11 at night the lookout,
who was stationed in the stern of the steamer for the purpose of
watching the launch, reported to the officer of the deck that the launch
had disappeared. The steamer was stopped and search was made the
rest of the night for the launch, but without success, and in the morning
the steamer proceeded on her way to Manila. This action was brought
to recover the value of the launch. Judgment was rendered in the court
below in favor of plaintiff. The defendant moved for a new trial, which
was denied, and it has brought the case here by bill of exceptions.
The first question to be determined is as to the nature of the liability of
the defendant. Articles 1601 and 1602 of the Civil Code are as follows:
ART. 1601. Carriers of goods by land or by water shall be
subject with regard to the keeping and preservation of the
things intrusted to them, to the same obligations as determined
for in keepers 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.
ART. 1602. 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 majuere.
Article 618 of the Code of Commerce is in part as follows:
the latter to the third persons who may have made contracts
with the former —
1. For all the damages suffered by the vessel and its cargo by
reason of want skill or negligence on his part. If a misdemeanor
with the Penal Code.
Article 620 of the same code is in part as follows:
ART. 620. The captain shall not be liable for the damages
caused to the vessel or to the cargo by reason of force majuere;
but he shall always be so — no agreement to the contrary being
valid — for those arising through his own fault.
These articles treat of the liability of a carrier of goods, but we do not
think that the defendant was a carrier of goods in respect to this
launch. The reasons for so holding under the American law found in
the case of The J. P. McDonaldson (167 U. S., 599, 602, 603) are
equally cogent when applied to the Spanish law. The court there said:
While the tug is performing her contract of towing the barges
they may indeed be regarded as part of herself, in the sense that
her master is bound to use due care to provide for their safety
as well as her own and to avoid collision, either of them or of
herself, with other vessels. (The Syracuse, 9 Wall., 672, 675,
676; The Civilta, 103 U. S., 699, 701.)
But the barges in tow are by no means put under the control of
the master of the tug to the same extent as the tug herself, and
the cargo, if any, on board of her.
A general ship carrying goods for hire, whether employed in
internal, in coasting, or in foreign commerce, is a common
carrier; and the ship and her owners, in the absence of a valid
agreement to the contrary, are liable to the owners of the goods
carried as insurers against all losses, excepting only such
irresistible causes as the act of God and public enemies.
(Liverpool Steamship Co. vs. Phoenix Ins. Co., 129 U. S., 397,
437.) But a tug and her owners are subject to no such liability
to the owners of the vessels towed, or of the cargoes can not
maintain any action for the loss of either against the tug of her
owners, without proving negligence on her part. As was said by
Mr. Justice Strong, and repeated by the present Chief Justice:
"An engagement to tow does not impose either an obligation to
insure or the liability of common carriers. The burden is always
 upon him who alleges the breach of such a contract to show was used for fastening ropes in cases of towing, and, according to one
either that there has been no attempt at performance, or that witness of the plaintiff, for the purpose of fastening the launch to the
there has been negligence or unskillfulness to his injury in the wharf. At the time the loss occurred the towing line did not break, but
performance. Unlike the case of common carriers, damage this post did, and was found fastened to the towing lines when they
sustained by the tow does not ordinarily raise a presumption were pulled on board the steamer. The captain of the steamer and the
that the tug has been in fault. The contract requires no more first mate, both men of experience in the matter, testified that the lines
than that he who undertakes to tow shall carry out his were properly adjusted and the tow properly made fast to the steamer.
undertaking with that degree of caution and skill which prudent The only evidence to the contrary was the evidence furnished by one
navigators usually employ in similar services." (The Webb, 14 witness of the plaintiff, who testified that he was present when the
Wall., 406, 414; The Burlington, 137 U. S., 386, 391. See also towing lines were made fast by the captain himself, of the steamer; that
The L. P. Dayton, 120 U. S., 337, 351.) he then told the captain it should be done another way. The captain
The obligation of the defendant grew out of a contract made between it denied this. This witness had no experience, according to his own
and the plaintiff, and the liability of the former is defined in articles testimony, in the matter of towing; had never had occasion to make
1101 and 1104 of the Civil Code, which are as follows: fast a tow to a tug, and had never seen it done, with one exception; and
ART. 1101. Those who in fulfilling their obligations are guilty that when this same launch was towed from Manila to Aparri. We do
of fraud, negligence, or delay, and those who in any manner not think his evidence is sufficient to overcome the evidence of the
whatsoever act in contravention of the stipulations of the same, defendant.
shall be subject to indemnify for the losses and damages caused The judgment of the court below is reversed, and judgment entered for
thereby. the defendant, absolving it from the complaint, with the costs of the
ART. 1104. The fault or negligence of the debtor consists of lower court. No costs will be allowed to either party in this court. After
the omission of the steps which may be required by the the expiration of twenty days final judgment will be entered in
character of the obligation, and which may pertain to the accordance herewith and ten days thereafter the case remanded to the
circumstances of the persons, time, and place. lower court for proper procedure. So ordered.
Should the obligation not state what conduct is to be observe in
its fulfillment, that observed by a good father of a family shall
be required.
We do not think that the provisions of articles 1902 and 1903 are
applicable to this case. (Manresa's Commentaries on the Civil Code,
vol. 8, pp. 29, 69.)
By the terms of articles 1104 the defendant was bound to exercise
what is known in the American law as ordinary diligence, taking into
consideration the nature of the obligation and the circumstances of
persons, time, and place. We think the evidence in the case shows that
the defendant did exercise the diligence required of it by law. As we
understand the evidence the towing line was passed from the steamer
to the launch, around the stern of the launch once or twice, and one or
two other lines passed entirely around the bow of the launch and under
the keel. These lines were fastened to a post in the bow of the launch,
which post, according to the testimony of the defendant's witnesses,

DECISION
vs.
PHOENIX ASSURANCE COMPANY OF NEW
YORK/MCGEE & CO., INC., Respondent
TINGA, J.:
Before us is a petition for review on certiorari1 under Rule 45
of the 1997 Rules of Civil Procedure of the 29 October
20032 Decision of the Court of Appeals and the 26 February
2004 Resolution3 of the same court denying petitioner’s motion
for reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner
Mindanao Terminal and Brokerage Service, Inc. (Mindanao
Terminal), a stevedoring company, to load and stow a shipment
of 146,288 cartons of fresh green Philippine bananas and
15,202 cartons of fresh pineapples belonging to Del Monte
Fresh Produce International, Inc. (Del Monte Produce) into the
cargo hold of the vessel M/V Mistrau. The vessel was docked
at the port of Davao City and the goods were to be transported
by it to the port of Inchon, Korea in favor of consignee Taegu
Industries, Inc. Del Monte Produce insured the shipment under
an "open cargo policy" with private respondent Phoenix
Assurance Company of New York (Phoenix), a non-life
G.R. No. 162467 May 8, 2009
insurance company, and private respondent McGee & Co. Inc.
(McGee), the underwriting manager/agent of Phoenix.4
Mindanao Terminal loaded and stowed the cargoes aboard
the M/V Mistrau. The vessel set sail from the port of Davao
City and arrived at the port of Inchon, Korea. It was then
discovered upon discharge that some of the cargo was in bad
condition. The Marine Cargo Damage Surveyor of Incok Loss
and Average Adjuster of Korea, through its representative
Byeong Yong Ahn (Byeong), surveyed the extent of the
damage of the shipment. In a survey report, it was stated that
16,069 cartons of the banana shipment and 2,185 cartons of the
pineapple shipment were so damaged that they no longer had
commercial value.5
Del Monte Produce filed a claim under the open cargo policy
for the damages to its shipment. McGee’s Marine Claims
Insurance Adjuster evaluated the claim and recommended that
payment in the amount of $210,266.43 be made. A check for
the recommended amount was sent to Del Monte Produce; the
latter then issued a subrogation receipt6 to Phoenix and McGee.
Phoenix and McGee instituted an action for damages7 against
Mindanao Terminal in the Regional Trial Court (RTC) of
Davao City, Branch 12. After trial, the RTC,8 in a decision
dated 20 October 1999, held that the only participation of
Mindanao Terminal was to load the cargoes on board the M/V
Mistrau under the direction and supervision of the ship’s
officers, who would not have accepted the cargoes on board the
vessel and signed the foreman’s report unless they were
properly arranged and tightly secured to withstand voyage
across the open seas. Accordingly, Mindanao Terminal cannot
be held liable for whatever happened to the cargoes after it had
loaded and stowed them. Moreover, citing the survey report, it
was found by the RTC that the cargoes were damaged on
account of a typhoon which M/V Mistrau had encountered
during the voyage. It was further held that Phoenix and McGee
had no cause of action against Mindanao Terminal because the
latter, whose services were contracted by Del Monte, a distinct
corporation from Del Monte Produce, had no contract with the
assured Del Monte Produce. The RTC dismissed the complaint
and awarded the counterclaim of Mindanao Terminal in the
amount of ₱83,945.80 as actual damages and ₱100,000.00 as
attorney’s fees.9 The actual damages were awarded as
reimbursement for the expenses incurred by Mindanao
Terminal’s lawyer in attending the hearings in the case wherein
he had to travel all the way from Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The
appellate court reversed and set aside10 the decision of the RTC
in its 29 October 2003 decision. The same court ordered
Mindanao Terminal to pay Phoenix and McGee "the total
amount of $210,265.45 plus legal interest from the filing of the
complaint until fully paid and attorney’s fees of 20% of the
claim."11 It sustained Phoenix’s and McGee’s argument that the
damage in the cargoes was the result of improper stowage by
Mindanao Terminal. It imposed on Mindanao Terminal, as the
stevedore of the cargo, the duty to exercise extraordinary
diligence in loading and stowing the cargoes. It further held
that even with the absence of a contractual relationship
between Mindanao Terminal and Del Monte Produce, the cause
of action of Phoenix and McGee could be based on quasi-delict
under Article 2176 of the Civil Code.12
Mindanao Terminal filed a motion for reconsideration,13 which
the Court of Appeals denied in its 26 February
200414 resolution. Hence, the present petition for review.
Mindanao Terminal raises two issues in the case at bar,
namely: whether it was careless and negligent in the loading
and stowage of the cargoes onboard M/V Mistrau making it
liable for damages; and, whether Phoenix and McGee has a
cause of action against Mindanao Terminal under Article 2176
of the Civil Code on quasi-delict. To resolve the petition, three
questions have to be answered: first, whether Phoenix and
McGee have a cause of action against Mindanao Terminal;
second, whether Mindanao Terminal, as a stevedoring
company, is under obligation to observe the same extraordinary
degree of diligence in the conduct of its business as required by
law for common carriers15 and warehousemen;16 and third,
whether Mindanao Terminal observed the degree of diligence
required by law of a stevedoring company.
We agree with the Court of Appeals that the complaint filed by
Phoenix and McGee against Mindanao Terminal, from which
the present case has arisen, states a cause of action. The present
action is based on quasi-delict, arising from the negligent and
careless loading and stowing of the cargoes belonging to Del
Monte Produce. Even assuming that both Phoenix and McGee
have only been subrogated in the rights of Del Monte Produce,
who is not a party to the contract of service between Mindanao
Terminal and Del Monte, still the insurance carriers may have a
cause of action in light of the Court’s consistent ruling that the
act that breaks the contract may be also a tort.17 In fine, a
liability for tort may arise even under a contract, where tort is
that which breaches the contract18 . In the present case, Phoenix
and McGee are not suing for damages for injuries arising from
the breach of the contract of service but from the alleged
negligent manner by which Mindanao Terminal handled the
cargoes belonging to Del Monte Produce. Despite the absence
of contractual relationship between Del Monte Produce and
Mindanao Terminal, the allegation of negligence on the part of
the defendant should be sufficient to establish a cause of action
arising from quasi-delict.19
The resolution of the two remaining issues is determinative of
the ultimate result of this case.
Article 1173 of the Civil Code is very clear that if the law or
contract does not state the degree of diligence which is to be
observed in the performance of an obligation then that which is
expected of a good father of a family or ordinary diligence
shall be required. Mindanao Terminal, a stevedoring company
which was charged with the loading and stowing the cargoes of
Del Monte Produce aboard M/V Mistrau, had acted merely as a
labor provider in the case at bar. There is no specific provision
of law that imposes a higher degree of diligence than ordinary
diligence for a stevedoring company or one who is charged
only with the loading and stowing of cargoes. It was neither
alleged nor proven by Phoenix and McGee that Mindanao
Terminal was bound by contractual stipulation to observe a
higher degree of diligence than that required of a good father of
a family. We therefore conclude that following Article 1173,
Mindanao Terminal was required to observe ordinary diligence
only in loading and stowing the cargoes of Del Monte Produce
aboard M/V Mistrau.
imposing a higher degree of diligence,21 on Mindanao Terminal
in loading and stowing the cargoes. The case of Summa
Insurance Corporation v. CA, which involved the issue of
whether an arrastre operator is legally liable for the loss of a
shipment in its custody and the extent of its liability, is
inapplicable to the factual circumstances of the case at bar.
Therein, 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
discharged from the vessel to the custody of the private
respondent, the exclusive arrastre operator at the South Harbor.
Accordingly, three good-order cargo receipts were issued by
NGSC, duly signed by the ship's checker and a representative
of private respondent. When Semirara inspected the shipment
at house, it discovered that the bundle of PC8U blades was
missing. From those facts, the Court observed:
x x x 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[22 ]. 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 operator's duty is to take good
care of the goods and to turn them over to the party
entitled to their possession. (Emphasis supplied)23
There is a distinction between an arrastre and a
stevedore.24 Arrastre, a Spanish word which refers to hauling of
cargo, comprehends the handling of cargo on the wharf or
between the establishment of the consignee or shipper and the
ship's tackle. The responsibility of the arrastre operator lasts
until the delivery of the cargo to the consignee. The service is
usually performed by longshoremen. On the other hand,
stevedoring refers to the handling of the cargo in the holds of
the vessel or between the ship's tackle and the holds of the
vessel. The responsibility of the stevedore ends upon the
loading and stowing of the cargo in the vessel.1avvphi1
It is not disputed that Mindanao Terminal was performing
purely stevedoring function while the private respondent in
the Summa case was performing arrastre function. In the
present case, Mindanao Terminal, as a stevedore, was only
charged with the loading and stowing of the cargoes from the
pier to the ship’s cargo hold; it was never the custodian of the
shipment of Del Monte Produce. A stevedore is not a common
carrier for it does not transport goods or passengers; it is not
akin to a warehouseman for it does not store goods for profit.
The loading and stowing of cargoes would not have a far
reaching public ramification as that of a common carrier and a
warehouseman; the public is adequately protected by our laws
on contract and on quasi-delict. The public policy
considerations in legally imposing upon a common carrier or a
warehouseman a higher degree of diligence is not present in a
stevedoring outfit which mainly provides labor in loading and
stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to prove by
preponderance of evidence25 that Mindanao Terminal had acted
negligently. Where the evidence on an issue of fact is in
equipoise or there is any doubt on which side the evidence
preponderates the party having the burden of proof fails upon
that issue. That is to say, if the evidence touching a disputed
fact is equally balanced, or if it does not produce a just, rational
belief of its existence, or if it leaves the mind in a state of
perplexity, the party holding the affirmative as to such fact
must fail.261avvphi1
We adopt the findings27 of the RTC,28 which are not disputed
by Phoenix and McGee. The Court of Appeals did not make
any new findings of fact when it reversed the decision of the
trial court. The only participation of Mindanao Terminal was to
load the cargoes on board M/V Mistrau.29 It was not disputed
by Phoenix and McGee that the materials, such as ropes,
pallets, and cardboards, used in lashing and rigging the cargoes
were all provided by M/V Mistrau and these materials meets
industry standard.30
It was further established that Mindanao Terminal loaded and
stowed the cargoes of Del Monte Produce aboard the M/V
Mistrau in accordance with the stowage plan, a guide for the
area assignments of the goods in the vessel’s hold, prepared by
Del Monte Produce and the officers of M/V Mistrau.31 The
loading and stowing was done under the direction and
supervision of the ship officers. The vessel’s officer would
order the closing of the hatches only if the loading was done
correctly after a final inspection.32 The said ship officers would
not have accepted the cargoes on board the vessel if they were
not properly arranged and tightly secured to withstand the
voyage in open seas. They would order the stevedore to rectify
any error in its loading and stowing. A foreman’s report, as
proof of work done on board the vessel, was prepared by the
checkers of Mindanao Terminal and concurred in by the Chief
Officer of M/V Mistrau after they were satisfied that the
cargoes were properly loaded.33
Phoenix and McGee relied heavily on the deposition of Byeong
Yong Ahn34 and on the survey report35 of the damage to the
cargoes. Byeong, whose testimony was refreshed by the survey
report,36 found that the cause of the damage was improper
stowage37 due to the manner the cargoes were arranged such
that there were no spaces between cartons, the use of
cardboards as support system, and the use of small rope to tie
the cartons together but not by the negligent conduct of
Mindanao Terminal in loading and stowing the cargoes. As
admitted by Phoenix and McGee in their Comment38 before us,
the latter is merely a stevedoring company which was tasked
by Del Monte to load and stow the shipments of fresh banana such right is exercised in good faith, even if
and pineapple of Del Monte Produce aboard the M/V Mistrau. erroneously.41 Likewise, the RTC erred in awarding
How and where it should load and stow a shipment in a vessel ₱83,945.80 actual damages to Mindanao Terminal. Although
is wholly dependent on the shipper and the officers of the actual expenses were incurred by Mindanao Terminal in
vessel. In other words, the work of the stevedore was under the relation to the trial of this case in Davao City, the lawyer of
supervision of the shipper and officers of the vessel. Even the Mindanao Terminal incurred expenses for plane fare, hotel
materials used for stowage, such as ropes, pallets, and accommodations and food, as well as other miscellaneous
cardboards, are provided for by the vessel. Even the survey expenses, as he attended the trials coming all the way from
report found that it was because of the boisterous stormy Manila. But there is no showing that Phoenix and McGee made
weather due to the typhoon Seth, as encountered by M/V a false claim against Mindanao Terminal resulting in the
Mistrau during its voyage, which caused the shipments in the protracted trial of the case necessitating the incurrence of
cargo hold to collapse, shift and bruise in extensive expenditures.42
extent.39 Even the deposition of Byeong was not supported by WHEREFORE, the petition is GRANTED. The decision of
the conclusion in the survey report that: the Court of Appeals in CA-G.R. CV No. 66121 is SET ASIDE
CAUSE OF DAMAGE and the decision of the Regional Trial Court of Davao City,
xxx Branch 12 in Civil Case No. 25,311.97 is
From the above facts and our survey results, we are of the hereby REINSTATED MINUS the awards of ₱100,000.00 as
opinion that damage occurred aboard the carrying vessel during attorney’s fees and ₱83,945.80 as actual damages.
sea transit, being caused by ship’s heavy rolling and pitching SO ORDERED.
under boisterous weather while proceeding from 1600 hrs on
7th October to 0700 hrs on 12th October, 1994 as described in
the sea protest.40
As it is clear that Mindanao Terminal had duly exercised the
required degree of diligence in loading and stowing the
cargoes, which is the ordinary diligence of a good father of a
family, the grant of the petition is in order.
However, the Court finds no basis for the award of attorney’s
fees in favor of petitioner.lawphil.net None of the
circumstances enumerated in Article 2208 of the Civil Code
exists. The present case is clearly not an unfounded civil action
against the plaintiff as there is no showing that it was instituted
for the mere purpose of vexation or injury. It is not sound
public policy to set a premium to the right to litigate where

G.R. No. 171194 February 4, 2010
ASIAN TERMINALS, INC., Petitioner,
vs.
DAEHAN FIRE AND MARINE INSURANCE CO.,
LTD., Respondent.
DECISION
NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court, assailing the Court of Appeals (CA) September
14, 2005 Decision1 and December 20, 2005 Resolution2 in CA-
G.R. CV No. 83647. The assailed Decision reversed and set
aside the Regional Trial Court (RTC)3 August 4, 2004
Decision4 in Civil Case No. 01-101309, while the assailed
resolution denied petitioner Asian Terminals, Inc.’s motion for
reconsideration.
The case stemmed from the following facts:
On July 8, 2000, Doosan Corporation (Doosan) shipped
twenty-six (26) boxes of printed aluminum sheets on board the
vessel Heung-A Dragon owned by Dongnama Shipping Co.,
Ltd. (Dongnama).5 The shipment was covered by Bill of
Lading No. DNALHMBUMN0100106 and consigned to
Access International, with address at No. 9 Parada St., San
Juan, Metro Manila. Doosan insured the subject shipment with
respondent Daehan Fire and Marine Insurance Co., Ltd. under
an "all-risk" marine cargo insurance policy,7 payable to its
settling agent in the Philippines, the Smith Bell & Co., Inc.
(Smith Bell).
On July 12, 2000, the vessel arrived in Manila and the
containerized van was discharged and unloaded in apparent
good condition, as no survey and exceptions were noted in the
Equipment Interchange Receipt (EIR) issued by
petitioner.8 The container van was stored in the Container Yard
of the Port. On July 18, 2000, Access International
requested9 from petitioner and the licensed Customs Broker,
Victoria Reyes Lazo (V. Reyes Lazo), a joint survey of the
shipment at the place of storage in the Container Yard, but no
such inspection was conducted.
On July 19, 2000, V. Reyes Lazo withdrew, and petitioner
released, the shipment and delivered it to Access
International’s warehouse in Binondo, Manila.10 While the
shipment was at Access International’s warehouse, the latter,
together with its surveyor, Lloyd’s Agency, conducted an
inspection and noted that only twelve (12) boxes were
accounted for, while fourteen (14) boxes were
missing.11 Access International thus filed a claim against
petitioner and V. Reyes Lazo for the missing shipment
amounting to $34,993.28.12 For failure to collect its claim,
Access International sought indemnification from respondent
in the amount of $45,742.81.13 On November 8, 2000,
respondent paid the amount of the claim and Access
International accordingly executed a Subrogation Receipt in
favor of the former.14
On July 10, 2001, respondent, represented by Smith Bell,
instituted the present case against Dongnama, Uni-ship, Inc.
(Uni-ship), petitioner, and V. Reyes Lazo before the
RTC.15 Respondent alleged that the losses, shortages and short
deliveries sustained by the shipment were caused by the joint
fault and negligence of Dongnama, petitioner and V. Reyes
Lazo.
Dongnama and Uni-ship filed a Motion to Dismiss16 on the
grounds that Daehan lacked legal capacity to sue and that the
complaint stated no cause of action. The trial court, however,
denied the motion in an Order dated August 31, 2001.17
Thereafter, Dongnama and Uni-ship filed their Answer with
Counterclaim and Cross-Claim Ad Cautelam denying any
liability for the damages/losses sustained by the shipment,
pointing out that it was on a "Full Container Load," "Said to
Contain," and "Shipper’s Load and Count" bases, under which
they had no means of verifying the contents of the containers.
They also alleged that the container van was properly
discharged from the vessel with seals intact and no exceptions
noted. Moreover, they claimed that the losses occurred while
the subject shipment was in the custody, possession or control
of the shipper, its trucker, the arrastre operator, or their
representatives, or due to the consignee’s own negligence.
They further questioned the absence of notice of loss within the
three (3)-day period provided under the Carriage of Goods by
Sea Act. Finally, they averred that their liability, if there be
any, should only be limited to US$500.00 per package or
customary freight unit. 18
For its part, petitioner denied liability, claiming that it
exercised due diligence in handling and storing the subject
container van. It, likewise, assailed the timeliness of the
complaint, having been filed beyond the fifteen (15)-day period
under its Contract for Cargo Handling Services with the
Philippine Ports Authority (PPA). If at all, petitioner added, its
liability should only be limited to ₱5,000.00.19
In her Answer, V. Reyes Lazo questioned respondent’s
capacity to sue in Philippine courts. She accused respondent of
engaging in a fishing expedition since the latter could not
determine with clarity the party at fault.20
On December 2, 2002, in their Joint Motion to
Dismiss,21 respondent, on one hand, and Dongnama and Uni-
ship, on the other, prayed that the complaint be dismissed
against the latter, alleging that they could not be held liable
based on the EIR. The motion was granted on December 9,
2002.22 Consequently, the case proceeded as against petitioner
and V. Reyes Lazo.
As no amicable settlement was reached during the pretrial, trial
on the merits ensued.
On August 4, 2004, the RTC dismissed the complaint for
insufficiency of evidence.23 It found the complaint fatally
flawed, having been signed by a person who had no authority
from complainant (respondent herein) corporation to act for
and on behalf of the latter.24 The RTC, likewise, held that
respondent failed to prove that the loss/damage of the subject
cargoes was due to the fault or negligence of petitioner or V.
Reyes Lazo. It added that the cargoes were damaged when they
were already in Access International’s possession, considering
that an inspection was conducted in the latter’s warehouse.25
On appeal, the CA reversed and set aside the RTC decision.
The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the present appeal is
hereby GRANTED. The appealed Decision dated August 4,
2004 of the Regional Trial Court of Manila, Branch 21 in Civil
Case No. 01-101309 is hereby REVERSED and SET ASIDE.
A new judgment is hereby entered ordering the defendants-
appellees Asian Terminals, Inc. and V. Reyes Lazo to pay,
jointly and severally, the plaintiff-appellant Daehan Fire &
Marine Insurance Co., Ltd. the sums of ₱2,295,374.20 with
interest at the legal rate (6% per annum) from the date of the
filing of the complaint and ₱229,537.42 by way of attorney’s
fees.
No pronouncement as to costs.
SO ORDERED.26
Applying the principle of substantial compliance, the CA
recognized the validity of respondent’s complaint after the
submission, albeit late, of the board resolution, indicating the
authority of the signatory to represent the
corporation.27 Pursuant to the Management Contract between
petitioner and the PPA, the former may not disclaim
responsibility for the shortage of the subject cargoes while the
container van remained in its custody for seven (7) days,
despite the withdrawal of the subject shipment by the broker’s
representative without any complaint. Applying E. Razon, Inc.
v. Court of Appeals,28 the CA refused to impose the ₱5,000.00
limitation, considering that petitioner was aware of the value of
the subject goods shown in the pertinent shipping
documents.29 The CA added that petitioner could not disclaim
any liability, having refused or ignored Access International’s
request for a joint survey at the time when the goods were still
in the possession and custody of the former.30 Lastly, V. Reyes
Lazo was also made liable jointly and severally with petitioner
in negligently withdrawing the container van from the premises
of the pier, notwithstanding Access International’s request for a
joint survey.31
Aggrieved, petitioner comes before us in this petition for
review on certiorari, raising the following issues:
1. WHETHER OR NOT PETITIONER ATI IS
LIABLE FOR THE LOSS TO THE SUBJECT
SHIPMENT NOTWITHSTANDING THE
ACKNOWLEDGMENT BY THE CONSIGNEE’S
BROKER/REPRESENTATIVE IN THE EQUIPMENT
INTERCHANGE RECEIPT THAT THE SHIPMENT
WAS RECEIVED IN GOOD ORDER AND
WITHOUT EXCEPTION.
2. WHAT IS THE EXTENT OF PETITIONER ATI’S
LIABILITY, IF ANY?32
Simply put, we are tasked to determine the propriety of making
petitioner, as arrastre operator, liable for the loss of the subject
shipment, and if so, the extent of its liability.
Petitioner denies liability for the loss of the subject shipment,
considering that the consignee’s representative signified receipt
of the goods in good order without exception. This being the
case, respondent, as subrogee, is bound by such
acknowledgment. As to the extent of its liability, if there be
any, petitioner insists that it be limited to ₱5,000.00 per
package, as provided for in its Management Contract with the
PPA.33
We do not agree with petitioner.
Respondent, as insurer, was subrogated to the rights of the
consignee, pursuant to the subrogation receipt executed by the
latter in favor of the former. The relationship, therefore,
between the consignee and the arrastre operator must be
examined. This relationship is akin to that existing between the
consignee and/or the owner of the shipped goods and the
common carrier, or that between a depositor and a
warehouseman.34 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.
Being the custodian of the goods discharged from a vessel, an
arrastre operator’s duty is to take good care of the goods and to
turn them over to the party entitled to their possession.35
The loss of 14 out of 26 boxes of printed aluminum sheets is
undisputed. It is, likewise, settled that Dongnama (the shipping
company) and Uni-ship were absolved from liability because
respondent realized that they had no liability based on the EIR
issued by Dongnama. This resulted in the withdrawal of the
complaint against them. What remained was the complaint
against petitioner as the arrastre operator and V. Reyes Lazo as
the customs broker. Records show that the subject shipment
was discharged from the vessel and placed under the custody of
petitioner for a period of seven (7) days. Thereafter, the same
was withdrawn from the container yard by the customs broker,
then delivered to the consignee. It was after such delivery that
the loss of 14 boxes was discovered. Hence, the complaint
against both the arrastre operator and the customs broker.
In a claim for loss filed by the consignee (or the insurer), the
burden of proof to show compliance with the obligation to
deliver the goods to the appropriate party devolves upon the
arrastre operator. Since the safekeeping of the goods is its
responsibility, it must prove that the losses were not due to its
negligence or to that of its employees.36To prove the exercise
of diligence in handling the subject cargoes, petitioner must do
more than merely show the possibility that some other party
could be responsible for the loss or the damage. It must prove
that it exercised due care in the handling thereof.37 Petitioner
failed to do this. Instead, it insists that it be exonerated from
liability, because the customs broker’s representative received
the subject shipment in good order and condition without
exception. The appellate court’s conclusion on this matter is
instructive:
ATI may not disclaim responsibility for the shortage/pilferage
of fourteen (14) boxes of printed aluminum sheet while the
container van remained in its custody for seven (7) days (at the
Container Yard) simply because the alleged representative of
the customs broker had withdrawn the shipment from its
premises and signed the EIR without any complaint. The
signature of the person/broker representative merely signifies
that said person thereby frees the ATI from any liability for
loss or damage to the cargo so withdrawn while the same was
in the custody of such representative to whom the cargo was
released. It does not foreclose any remedy or right of the
consignee to prove that any loss or damage to the subject
shipment occurred while the same was under the custody,
control and possession of the arrastre operator.38
Clearly, petitioner cannot be excused from culpability simply
because another person could be responsible for the loss. This
is especially true in the instant case because, while the subject
shipment was in petitioner’s custody, Access International
requested39 that a joint survey be conducted at the place of
storage. And as correctly observed by the CA:
There is no dispute that it was the customs broker who in
behalf of the consignee took delivery of the subject shipment
from the arrastre operator. However, the trial court apparently
disregarded documentary evidence showing that the consignee
made a written request on both the appellees ATI and V. Reyes
Lazo for a joint survey of the container van on July 18, 2000
while the same was still in the possession, control and custody
of the arrastre operator at the Container Yard of the pier. Both
ATI and Lazo merely denied being aware of the letters
(Exhibits "M" and "N"). The fact remains that the consignee
complained of short-delivery and while inspection of the cargo
was made only at its warehouse after delivery by the customs
broker, the arrastre ATI together with said broker both refused
or ignored the written request for a joint survey at the premises
of the arrastre. Instead of complying with the consignee’s
demand, the broker withdrew and the arrastre released the
shipment the very next day, July 19, 2000 without even acting
upon the consignee’s request for a joint survey.40
Moreover, it was shown in the Survey Report prepared by
Access International’s surveyor that petitioner was remiss in its
obligations to handle the goods with due care and to ensure that
they reach the proper party in good order as to quality and
quantity. Specifically, the Survey Report states:
DELIVERY
On July 19, 2000, V. Reyes-Lazo (Licensed Customs Broker)
effected delivery of the 1 x 20’ Van Container from the
Container Yard of said port to the Consignee’s designated
warehouse at No. 622 Asuncion Street, Binondo, Manila.
Prior to withdrawal from the said port, the Broker’s
representative noticed that the padlock secured to the doors of
the Van Container was forcibly pulled-out resulting to its
breakage. He then immediately informed the Arrastre
Contractors (ATI) and requested that Van Container be opened
and inventory of its contents be made as he suspected the
contents might have been pilfered.
However, his request was denied averring that stripping of
"FCL Van Containers" are not allowed inside the Customs
Zone. As all efforts exerted proved futile, he instead bought
new padlock and secured same to the Van. He then informed
the Consignee about the incident upon delivery of the
Container at the Consignee’s designated warehouse, who
immediately requested for survey.41
Considering that both petitioner and V. Reyes Lazo were
negligent in the performance of their duties in the handling,
storage and delivery of the subject shipment to the consignee,
resulting in the loss of 14 boxes of printed aluminum sheets,
both shall be solidarily liable for such loss.
As to the extent of petitioner’s liability, we cannot sustain its
contention that it be limited to ₱5,000.00 per package.
Petitioner’s responsibility and liability for losses and damages
are set forth in Section 7.01 of the Management Contract drawn
between the PPA and the Marina Port Services, Inc.,
petitioner’s predecessor-in-interest, to wit:
CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES
Section 7.01. Responsibility and Liability for Losses and
Damages; Exceptions. – The CONTRACTOR shall, at its own
expense, handle all merchandise in all work undertaken by it,
hereunder, diligently and in a skillful, workman-like and
efficient manner. The CONTRACTOR shall be solely
responsible as an independent contractor, and hereby agrees to
accept liability and to pay to the shipping company,
consignees, consignors or other interested party or parties for
the loss, damage or non-delivery of cargoes in its custody and
control to the extent of the actual invoice value of each package
which in no case shall be more than FIVE THOUSAND
PESOS (₱5,000.00) each, unless the value of the cargo
shipment is otherwise specified or manifested or communicated
in writing together with the declared Bill of Lading value and
supported by a certified packing list to the CONTRACTOR by
the interested party or parties before the discharge or loading
unto vessel of the goods. This amount of Five Thousand Pesos
(₱5,000.00) per package may be reviewed and adjusted by the
AUTHORITY from time to time. The CONTRACTOR shall
not be responsible for the condition or 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 remains in the piers, sheds, warehouses or facility,
if the loss, injury or damage is caused by force majeure or other
causes beyond the CONTRACTOR’S control or capacity to
prevent or remedy; PROVIDED that a formal claim together
with the necessary copies of Bill of Lading, Invoice, Certified
Packing List and Computation arrived at covering the loss,
injury or damage or non-delivery of such goods shall have been
filed with the CONTRACTOR within fifteen (15) days from
day of issuance by the CONTRACTOR of a certificate of non-
delivery; PROVIDED, however, that if said CONTRACTOR
fails to issue such certification within fifteen (15) days from
receipt of a written request by the shipper/consignee or his duly
authorized representative or any interested party, said
certification shall be deemed to have been issued, and
thereafter, the fifteen (15) day period within which to file the
claim commences; PROVIDED, finally, that the request for
certification of loss shall be made within thirty (30) days from
the date of delivery of the package to the consignee.
xxxx
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 under the Contract. Further,
the CONTRACTOR hereby agrees to hold free the
AUTHORITY, at all times, from any claim that may be
instituted by its employee by reason of the provisions of the
Labor Code, as amended.42
As clearly stated above, such limitation does not apply if the
value of the cargo shipment is communicated to the arrastre
operator before the discharge of the cargoes.1avvph!1
It is undisputed that Access International, upon arrival of the
shipment, declared the same for taxation purposes, as well as
for the assessment of arrastre charges and other fees. For the
purpose, the invoice, packing list and other shipping documents
were presented to the Bureau of Customs as well as to
petitioner for the proper assessment of the arrastre charges and
other fees. Such manifestation satisfies the condition of
declaration of the actual invoices of the value of the goods
before their arrival, to overcome the limitation on the liability
of the arrastre operator.43Then, the arrastre operator, by reason
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.44 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.45
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. This defines its
responsibility for loss of or damage to such cargo and
ascertains the compensation commensurate to such risk
assumed. Having been duly informed of the actual invoice
value of the merchandise under its custody and having received
payment of arrastre charges based thereon, petitioner cannot
therefore insist on a limitation of its liability under the contract
to less than the value of each lost cargo.46
The stipulation requiring the consignee to inform the arrastre
operator and to give advance notice of the actual invoice value
of the goods to be put in its custody is adopted for the purpose
of determining its liability, that it may obtain compensation
commensurate to the risk it assumes, not for the purpose of
determining the degree of care or diligence it must exercise as a
depositary or warehouseman.47
WHEREFORE, premises considered, the petition is hereby
DENIED for lack of merit. The Court of Appeals September
14, 2005 Decision and December 20, 2005 Resolution in CA-
G.R. CV No. 83647 are AFFIRMED.
SO ORDERED.
 the shipment was insured against all risks by GASI with FIRST
LEPANTO for ₱7,959,550.50 under Marine Open Policy No.
0123.
The shipment arrived in Manila on July 18, 1996 and was
discharged into the possession and custody of ATI, a domestic
corporation engaged in arrastre business. The shipment
remained for quite some time at ATI’s storage area until it was
withdrawn by broker, Proven Customs Brokerage Corporation
(PROVEN), on August 8 and 9, 1996 for delivery to the
consignee. Upon receipt of the shipment,5 GASI subjected the
same to inspection and found that the delivered goods incurred
G.R. No. 185964 June 16, 2014 shortages of 8,600 kilograms and spillage of 3,315 kg for a
ASIAN TERMINALS, INC., Petitioner, total of11,915 kg of loss/damage valued at ₱166,772.41.
vs. GASI sought recompense from COSCO, thru its Philippine
FIRST LEPANTO-TAISHO INSURANCE agent Smith Bell Shipping Lines, Inc. (SMITH
CORPORATION, Respondent. BELL),6ATI7 and PROVEN8 but was denied. Hence, it pursued
DECISION indemnification from the shipment’s insurer.9
REYES, J.: After the requisite investigation and adjustment, FIRST
LEPANTO paid GASI the amount of ₱165,772.40 as insurance
This is a Petition for Review on Certiorari1 under Rule 45 of indemnity.10
the Rules of Court seeking to annul and set aside the Thereafter, GASI executed a Release of Claim11 discharging
Decision2 dated October 10, 2008 of the Court of Appeals (CA) FIRST LEPANTO from any and all liabilities pertaining to the
in CA-G.R. SP No. 99021 which adjudged petitioner Asian lost/damaged shipment and subrogating it to all the rights of
Terminals, Inc. (ATI) liable to pay the money claims of recovery and claims the former may have against any person or
respondent First Lepanto-Taisho Insurance Corporation corporation in relation to the lost/damaged shipment.
(FIRST LEPANTO). As such subrogee, FIRST LEPANTO demanded from COSCO,
The Undisputed Facts its shipping agency in the Philippines, SMITH BELL,
On July 6, 1996,3 3,000 bags of sodium tripolyphosphate PROVEN and ATI, reimbursement of the amount it paid to
contained in 100 plain jumbo bags complete and in good GASI. When FIRST LEPANTO’s demands were not heeded, it
condition were loaded and received on board M/V "Da Feng" filed on May 29, 1997 a Complaint12 for sum of money before
owned by China Ocean Shipping Co. (COSCO) in favor of the Metropolitan Trial Court (MeTC) of Manila, Branch 3.
consignee, Grand Asian Sales, Inc. (GASI). Based on a FIRST LEPANTO sought that it be reimbursed the amount of
Certificate of Insurance4 dated August 24, 1995, it appears that
166,772.41, twenty-five percent (25%) thereof as attorney’s
fees, and costs of suit.
ATI denied liability for the lost/damaged shipment and claimed
that it exercised due diligence and care in handling the
same.13 ATI averred that upon arrival of the shipment, SMITH
BELL requested for its inspection14 and it was discovered that
one jumbo bag thereof sustained loss/damage while in the
custody of COSCO as evidenced by Turn Over Survey of Bad
Order Cargo No. 47890 dated August 6, 199615 jointly
executed by the respective representatives of ATI and COSCO.
During the withdrawal of the shipment by PROVEN from
ATI’s warehouse, the entire shipment was re-examined and it
was found to be exactly in the same condition as when it was
turned over to ATI such that one jumbo bag was damaged. To
bolster this claim, ATI submitted Request for Bad Order
Survey No. 40622 dated August 9, 199616 jointly executed by
the respective representatives of ATI and PROVEN. ATI also
submitted various Cargo Gate Passes17 showing that PROVEN
was able to completely withdraw all the shipment from ATI’s
warehouse in good order condition except for that one damaged
jumbo bag.
In the alternative, ATI asserted that even if it is found liable for
the lost/damaged portion of the shipment, its contract for cargo
handling services limits its liability to not more than ₱5,000.00
per package. ATI interposed a counterclaim of ₱20,000.00
against FIRST LEPANTO as and for attorney’s fees. It also
filed a cross-claim against its co-defendants COSCO and
SMITH BELL in the event that it is made liable to FIRST
LEPANTO.18
PROVEN denied any liability for the lost/damaged shipment
and averred that the complaint alleged no specific acts or
omissions that makes it liable for damages. PROVEN claimed
that the damages in the shipment were sustained before they
were withdrawn from ATI’s custody under which the shipment
was left in an open area exposed to the elements, thieves and
vandals. PROVEN contended that it exercised due diligence
and prudence in handling the shipment. PROVEN also filed a
counterclaim for attorney’s fees and damages.19
Despite receipt of summons on December 4, 1996,20 COSCO
and SMITH BELL failed to file an answer to the complaint.
FIRST LEPANTO thus moved that they be declared in
default21 but the motion was denied by the MeTC on the
ground that under Rule 9, Section 3 of the Rules of Civil
Procedure, "when a pleading asserting a claim states a common
cause of action against several defending parties, some of
whom answer and the other fail to do so, the Court shall try the
case against all upon the answers thus filed, and render
judgment upon the evidence presented."22
Ruling of the MeTC
In a Judgment23 dated May 30, 2006, the MeTC absolved ATI
and PROVEN from any liability and instead found COSCO to
be the party at fault and hence liable for the loss/damage
sustained by the subject shipment. However, the MeTC ruled it
has no jurisdiction over COSCO because it is a foreign
corporation. Also, it cannot enforce judgment upon SMITH
BELL because no evidence was presented establishing that it is
indeed the Philippine agent of COSCO. There is also no
evidence attributing any fault to SMITH BELL. Consequently,
the complaint was dismissed in this wise:
WHEREFORE, in light of the foregoing, judgment is hereby
rendered DISMISSING the instant case for failure of [FIRST
LEPANTO] to sufficiently establish its cause o faction against
[ATI, COSCO, SMITH BELL, and PROVEN].
The counterclaims of [ATI and PROVEN] are likewise
dismissed for lack of legal basis.
No pronouncement as to cost.
SO ORDERED.24
Ruling of the Regional Trial Court
On appeal, the Regional Trial Court (RTC) reversed the
MeTC’s findings. In its Decision25 dated January 26, 2007, the
RTC of Manila, Branch 21, in Civil Case No. 06-116237,
rejected the contentions of ATI upon its observation that the
same is belied by its very own documentary evidence. The
RTC remarked that, if, as alleged by ATI, one jumbo bag was
already in bad order condition upon its receipt of the shipment
from COSCO on July 18, 1996, then how come that the
Request for Bad Order Survey and the Turn Over Survey of
Bad Order Cargo were prepared only weeks thereafter or on
August 9, 1996 and August 6, 1996, respectively. ATI was
adjudged unable to prove that it exercised due diligence while
in custody of the shipment and hence, negligent and should be
held liable for the damages caused to GASI which, in turn, is
subrogated by FIRST LEPANTO.
The RTC rejected ATI’s contention that its liability is limited
only to ₱5,000.00 per package because its Management
Contract with the Philippine Ports Authority (PPA) purportedly
containing the same was not presented as evidence. More
importantly, FIRST LEPANTO or GASI cannot be deemed
bound thereby because they were not parties thereto. Lastly, the
RTC did not give merit to ATI’s defense that any claim against
it has already prescribed because GASI failed to file any claim
within the 15-day period stated in the gate pass issued by ATI
to GASI’s broker, PROVEN. Accordingly, the RTC disposed
thus:
WHEREFORE, in light of the foregoing, the judgment on
appeal is hereby REVERSED.
[ATI] is hereby ordered to reimburse [FIRST LEPANTO] the
amount of [P]165,772.40 with legal interest until fully paid, to
pay [FIRST LEPANTO] 10% of the amount due the latter as
and for attorney’s fees plus the costs of suit.
The complaint against [COSCO/SMITH BELL and PROVEN]
are DISMISSED for lack of evidence against them. The
counterclaim and cross[-]claim of [ATI] are likewise
DISMISSED for lack of merit.
SO ORDERED.26
Ruling of the CA
ATI sought recourse with the CA challenging the RTC’s
finding that FIRST LEPANTO was validly subrogated to the
rights of GASI with respect to the lost/damaged shipment. ATI
argued that there was no valid subrogation because
FIRSTLEPANTO failed to present a valid, existing and
enforceable Marine Open Policy or insurance contract. ATI
reasoned that the Certificate of Insurance or Marine Cover
Note submitted by FIRST LEPANTO as evidence is not the
same as an actual insurance contract.
In its Decision27 dated October 10, 2008, the CA dismissed the
appeal and held that the Release of Claim and the Certificate of
Insurance presented by FIRST LEPANTO sufficiently
established its relationship with the consignee and that upon
proof of payment of the latter’s claim for damages, FIRST
LEPANTO was subrogated to its rights against those liable for
the lost/damaged shipment.
The CA also affirmed the ruling of the RTC that the subject
shipment was damaged while in the custody of ATI. Thus, the
CA disposed as follows:
WHEREFORE, premises considered, the assailed Decision is
hereby AFFIRMED and the instant petition is DENIED for
lack of merit.
SO ORDERED.28
ATI moved for reconsideration but the motion was denied in There are only specific instances when the Court deviates from
the CA Resolution29 dated January 12, 2009. Hence, this the rule and conducts a review of the courts a quo’s factual
petition arguing that: findings, such as when: (1) the inference made is manifestly
(a) The presentation of the insurance policy is indispensable in mistaken, absurd or impossible; (2) there is grave abuse of
proving the right of FIRST LEPANTO to be subrogated to the discretion;(3) the findings are grounded entirely on
right of the consignee pursuant to the ruling in Wallem speculations, surmises or conjectures; (4) the judgment of the
Philippines Shipping, Inc. v. Prudential Guarantee and CA is based on misapprehension of facts; (5) the CA, in
Assurance Inc.;30 making its findings, went beyond the issues of the case and the
(b) ATI cannot be barred from invoking the defense of same is contrary to the admissions of both appellant and
prescription as provided for in the gate passes in consonance appellee; (6) the findings of fact are conclusions without
with the ruling in International Container Terminal Services, citation of specific evidence on which they are based; (7) the
Inc. v. Prudential Guarantee and Assurance Co, Inc.31 CA manifestly overlooked certain relevant facts not disputed
Ruling of the Court by the parties and which, if properly considered, would justify
The Court denies the petition. a different conclusion; and (8) the findings of fact of the CA
ATI failed to prove that it exercised are premised on the absence of evidence and are contradicted
due care and diligence while the by the evidence on record.33
shipment was under its custody, None of these instances, however, are present in this case.
control and possession as arrastre Moreover, it is unmistakable that ATI has already conceded to
operator. the factual findings of RTC and CA adjudging it liable for the
It must be emphasized that factual questions pertaining to shipment’s loss/damage considering the absence of arguments
ATI’s liability for the loss/damage sustained by GASI has pertaining to such issue in the petition at bar.
already been settled in the uniform factual findings of the RTC These notwithstanding, the Court scrutinized the records of the
and the CA that: ATI failed to prove by preponderance of case and found that indeed, ATI is liable as the arrastre
evidence that it exercised due diligence in handling the operator for the lost/damaged portion of the shipment.
shipment. The relationship between the consignee and the arrastre
Such findings are binding and conclusive upon this Court since operator is akin to that existing between the consignee and/or
a review thereof is proscribed by the nature of the present the owner of the shipped goods and the common carrier, or that
petition. Only questions of law are allowed in petitions for between a depositor and a warehouseman. Hence, in the
review on certiorari under Rule 45 of the Rules of Court. It is performance of its obligations, an arrastre operator should
not the Court’s duty to review, examine, and evaluate or weigh observe the same degree of diligence as that required of a
all over again the probative value of the evidence presented, common carrier and a warehouseman. Being the custodian of
especially where the findings of the RTC are affirmed by the the goods discharged from a vessel, an arrastre operator’s duty
CA, as in this case.32
is to take good care of the goods and to turn them over to the
party entitled to their possession.34
In a claim for loss filed by the consignee (or the insurer), the
burden of proof to show compliance with the obligation to
deliver the goods to the appropriate party devolves upon the
arrastre operator. Since the safekeeping of the goods is its
responsibility, it must prove that the losses were not due to its
negligence or to that of its employees. To avoid liability, the
arrastre operator must prove that it exercised diligence and due
care in handling the shipment.35
ATI failed to discharge its burden of proof. Instead, it insisted
on shifting the blame to COSCO on the basis of the Request for
Bad Order Survey dated August 9, 1996 purportedly showing
that when ATI received the shipment, one jumbo bag thereof
was already in damaged condition.
The RTC and CA were both correct in concluding that ATI’s
contention was improbable and illogical. As judiciously
discerned by the courts a quo, the date of the document was too
distant from the date when the shipment was actually received
by ATI from COSCO on July 18, 1996. In fact, what the
document established is that when the loss/damage was
discovered, the shipment has been in ATI’s custody for at least
two weeks. This circumstance, coupled with the undisputed
declaration of PROVEN’s witnesses that while the shipment
was in ATI’s custody, it was left in an open area exposed to the
elements, thieves and vandals,36 all generate the conclusion that
ATI failed to exercise due care and diligence while the subject
shipment was under its custody, control and possession as
arrastre operator.
To prove the exercise of diligence in handling the subject
cargoes, an arrastre operator must do more than merely show
the possibility that some other party could be responsible for
the loss or the damage.37 It must prove that it used all
reasonable means to handle and store the shipment with due
care and diligence including safeguarding it from weather
elements, thieves or vandals.
Non-presentation of the insurance
contract is not fatal to FIRST
LEPANTO’s cause of action for
reimbursement as subrogee.
It is conspicuous from the records that ATI put in issue the
submission of the insurance contract for the first time before
the CA. Despite opportunity to study FIRST LEPANTO’s
complaint before the MeTC, ATI failed to allege in its answer
the necessity of the insurance contract. Neither was the same
considered during pre-trial as one of the decisive matters in the
case. Further, ATI never challenged the relevancy or
materiality of the Certificate of Insurance presented by FIRST
LEPANTO as evidence during trial as proof of its right to be
subrogated in the consignee’s stead. Since it was not agreed
during the pre-trial proceedings that FIRST LEPANTO will
have to prove its subrogation rights by presenting a copy of the
insurance contract, ATI is barred from pleading the absence of
such contract in its appeal. It is imperative for the parties to
disclose during pre-trial all issues they intend to raise during
the trial because, they are bound by the delimitation of such
issues. The determination of issues during the pre-trial
conference bars the consideration of other questions, whether
during trial or on appeal.38
A faithful adherence to the rule by litigants is ensured by the
equally settled principle that a party cannot change his theory
on appeal as such act violates the basic rudiments of fair play
and due process. As stressed in Jose v. Alfuerto:39
[A] party cannot change his theory ofthe case or his cause of
action on appeal. Points of law, theories, issues and arguments
not brought to the attention of the lower court will not be
considered by the reviewing court. The defenses not pleaded in
the answer cannot, on appeal, change fundamentally the nature
of the issue in the case. To do so would be unfair to the adverse
party, who had no opportunity to present evidence in
connection with the new theory; this would offend the basic
rules of due process and fair play.40 (Citation omitted)
While the Court may adopt a liberal stance and relax the rule,
no reasonable explanation, however, was introduced to justify
ATI’s failure to timely question the basis of FIRST
LEPANTO’s rights as a subrogee.
The fact that the CA took cognizance of and resolved the said
issue did not cure or ratify ATI’s faux pas. "[A] judgment that
goes beyond the issues and purports to adjudicate something on
which the court did not hear the parties, is not only irregular
but also extrajudicial and invalid."41 Thus, for resolving an
issue not framed during the pre-trial and on which the parties
were not heard during the trial, that portion of the CA’s
judgment discussing the necessity of presenting an insurance
contract was erroneous.
At any rate, the non-presentation of the insurance contract is
not fatal to FIRST LEPANTO’s right to collect reimbursement
as the subrogee of GASI.
"Subrogation is the substitution of one person in the place of
another with reference to a lawful claim or right, so that he who
is substituted succeeds to the rights of the other in relation to a
debt or claim, including its remedies or securities."42 The right
of subrogation springs from Article 2207 of the Civil Code
which states:
Art. 2207. If the plaintiff’s 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 wrong-doer 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.
As a general rule, the marine insurance policy needs to be
presented in evidence before the insurer may recover the
insured value of the lost/damaged cargo in the exercise of its
subrogatory right. In Malayan Insurance Co., Inc. v.Regis
Brokerage Corp.,43 the Court stated that the presentation of the
contract constitutive of the insurance relationship between the
consignee and insurer is critical because it is the legal basis of
the latter’s right to subrogation.44
In Home Insurance Corporation v. CA,45 the Court also held
that the insurance contract was necessary to prove that it
covered the hauling portion of the shipment and was not
limited to the transport of the cargo while at sea. The shipment
in that case passed through six stages with different parties
involved in each stage until it reached the consignee. The
insurance contract, which was not presented in evidence, was
necessary to determine the scope of the insurer’s liability, if
any, since no evidence was adduced indicating at what stage in
the handling process the damage to the cargo was sustained.46
An analogous disposition was arrived at in the Wallem47 case
cited by ATI wherein the Court held that the insurance contract
must be presented in evidence in order to determine the extent
of its coverage. It was further ruled therein that the liability of
the carrier from whom reimbursement was demanded was not
established with certainty because the alleged shortage incurred
by the cargoes was not definitively determined.48
Nevertheless, the rule is not inflexible. In certain instances, the
Court has admitted exceptions by declaring that a marine
insurance policy is dispensable evidence in reimbursement
claims instituted by the insurer.
In Delsan Transport Lines, Inc. v. CA,49 the Court ruled that
the right of subrogation accrues simply upon payment by the
insurance company of the insurance claim. Hence, presentation
in evidence of the marine insurance policy is not indispensable
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, was held sufficient to
establish not only the relationship between the insurer and
consignee, but also the amount paid to settle the insurance
claim. The presentation of the insurance contract was deemed
not fatal to the insurer’s cause of action because the loss of the
cargo undoubtedly occurred while on board the petitioner’s
vessel.50
The same rationale was the basis of the judgment in
International Container Terminal Services, Inc. v. FGU
Insurance Corporation,51 wherein the arrastre operator was
found liable for the lost shipment despite the failure of the
insurance company to offer in evidence the insurance contract
or policy. As in Delsan, it was certain that the loss of the cargo
occurred while in the petitioner’s custody.52
Based on the attendant facts of the instant case, the application
of the exception is warranted.1âwphi1 As discussed above, it is
already settled that the loss/damage to the GASI’s shipment
occurred while they were in ATI’s custody, possession and
control as arrastre operator. Verily, the Certificate of
Insurance53 and the Release of Claim54presented as evidence
sufficiently established FIRST LEPANTO’s right to collect
reimbursement as the subrogee of the consignee, GASI.
With ATI’s liability having been positively established, to
strictly require the presentation of the insurance contract will
run counter to the principle of equity upon which the doctrine
of subrogation is premised. Subrogation 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,
equity and good conscience ought to pay.55
The payment by the insurer to the insured operates as an
equitable assignment to the insurer of all the remedies which
the insured may have against the third party whose negligence
or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of contract
or upon payment by the insurance company of the insurance
claim. It accrues simply upon payment by the insurance
company of the insurance claim.56
ATI cannot invoke prescription
ATI argued that the consignee, thru its insurer, FIRST
LEPANTO is barred from seeking payment for the
lost/damaged shipment because the claim letter of GASI to ATI
was served only on September 27, 1996 or more than one
month from the date the shipment was delivered to the
consignee’s warehouse on August 9, 1996. The claim of GASI
was thus filed beyond the 15-day period stated in ATI’s
Management Contract with PPA which in turn was reproduced
in the gate passes issued to the consignee’s broker, PROVEN,
as follows:
Issuance of this Gate Pass Constitutes delivery to and receipt
by consignee of the goods as described above in good order
and condition unless an accompanying x x x certificates duly
issued and noted on the face of this Gate Pass appeals. [sic]
This Gate pass is subject to all terms and conditions defined in
the Management Contract between the Philippine Port[s]
Authority and Asian Terminals, Inc. and amendment thereto
and alterations thereof particularly but not limited to the
[A]rticle VI thereof, limiting the contractor’s liability to
[P]5,000.00 per package unless 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 and corresponding arrastre charges have
been paid providing exception or restrictions from liability
releasing the contractor from liability among others unless a
formal claim with the required annexes shall have been filed
with the contractor within fifteen (15) days from date of
issuance by the contractors or certificate of loss, damages,
injury, or Certificate of non-delivery.57
The contention is bereft of merit. As clarified in Insurance
Company of North America v. Asian Terminals,
Inc.,58substantial compliance with the 15-day time limitation is
allowed provided that the consignee has made a provisional
claim thru a request for bad order survey or examination report,
viz:
Although the formal claim was filed beyond the 15-day period
from the issuance of the examination report on the request for
bad order survey, the purpose of the time limitations for the
filing of claims had already been fully satisfied by the request
of the consignee’s broker for a bad order survey and by the
examination report of the arrastre operator on the result thereof,
as the arrastre operator had become aware of and had verified
the facts giving rise to its liability. Hence, the arrastre operator
suffered no prejudice by the lack of strict compliance with the
15-day limitation to file the formal complaint.59 (Citations
omitted)
In the present case, ATI was notified of the loss/damage to the
subject shipment as early as August 9, 1996 thru a Request for
Bad Order Survey60 jointly prepared by the consignee’s broker,
PROVEN, and the representatives of ATI. For having
submitted a provisional claim, GASI is thus deemed to have
substantially complied with the notice requirement to the
arrastre operator notwithstanding that a formal claim was sent
to the latter only on September 27, 1996. ATI was not deprived
the best opportunity to probe immediately the veracity of such
claims. Verily then, GASI, thru its subrogee FIRST
LEPANTO, is not barred by filing the herein action in court.
ATI cannot rely on the ruling in Prudentiat61 because the
consignee therein made no provisional claim thru request for
bad order survey and instead filed a claim for the first time
after four months from receipt of the shipment.
Attorney's fees and interests
All told, ATI is liable to pay FIRST LEPANTO the amount of
the Pl 65, 772.40 representing the insurance indemnity paid by
the latter to GASI. Pursuant to Nacar v. Gallery Frames,62 the
said amount shall earn a legal interest at the rate of six percent
(6%) per annum from the date of finality of this judgment until
its full satisfaction.
As correctly imposed by the RTC and the CA, ten percent
(10%) of the judgment award is reasonable as and for attorney's
fees considering the length of time that has passed in
prosecuting the claim.63
WHEREFORE, premises considered, the petition is hereby
DENIED. The Decision dated October 10, 2008 of the Court of
Appeals in CA-G.R. SP No. 99021 is hereby AFFIRMED
insofar as it adjudged liable and ordered Asian Terminals, Inc.,
to pay First Lepanto-Taisho Insurance Corp., the amount of
₱165,772.40, ten percent (10%) thereof as and for attorney's
fees, plus costs of suit. The said amount shall earn legal interest
at the rate of six percent ( 6%) per annum from the date of
finality of this judgment until its full satisfaction.
SO ORDERED.
 On August 31, 1992, the shipper Sylvex Purchasing
Corporation delivered to UTI a shipment of 27 drums of
various raw materials for pharmaceutical manufacturing,
consisting of: "1) 3 drums (of) extracts, flavoring liquid,
flammable liquid x x x banana flavoring; 2) 2 drums (of)
flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags
dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex
Extract."4 UTI issued Bill of Lading No. C320/C15991-
2,5covering the aforesaid shipment. The subject shipment was
insured with private respondent Pioneer Insurance and Surety
Corporation in favor of Unilab against all risks in the amount
of ₱1,779,664.77 under and by virtue of Marine Risk Note
Number MC RM UL 0627 926 and Open Cargo Policy No.
HO-022-RIU.7
G.R. No. 166250 July 26, 2010 On the same day that the bill of lading was issued, the shipment
UNSWORTH TRANSPORT INTERNATIONAL was loaded in a sealed 1x40 container van, with no. APLU-
(PHILS.), INC., Petitioner, 982012, boarded on APL’s vessel M/V "Pres. Jackson,"
vs. Voyage 42, and transshipped to APL’s M/V "Pres. Taft"8 for
COURT OF APPEALS and PIONEER INSURANCE AND delivery to petitioner in favor of the consignee United
SURETY CORPORATION, Respondents. Laboratories, Inc. (Unilab).
DECISION On September 30, 1992, the shipment arrived at the port of
NACHURA, J.: Manila. On October 6, 1992, petitioner received the said
shipment in its warehouse after it stamped the Permit to
For review is the Court of Appeals (CA) Decision1 dated April Deliver Imported Goods9 procured by the Champs Customs
29, 2004 and Resolution2 dated November 26, 2004. The Brokerage.10 Three days thereafter, or on October 9, 1992,
assailed Decision affirmed the Regional Trial Court (RTC) Oceanica Cargo Marine Surveyors Corporation (OCMSC)
decision3 dated February 22, 2001; while the assailed conducted a stripping survey of the shipment located in
Resolution denied petitioner Unsworth Transport International petitioner’s warehouse. The survey results stated:
(Philippines), Inc., American President Lines, Ltd. (APL), and 2-pallets STC 40 bags Dried Yeast, both in good order
Unsworth Transport International, Inc.’s (UTI’s) motion for condition and properly sealed
reconsideration. 19- steel drums STC Vitamin B Complex Extract, all in
The facts of the case are: good order condition and properly sealed
 1-steel drum STC Vitamin B Complex Extra[ct] with
cut/hole on side, with approx. spilling of 1%11
On October 15, 1992, the arrastre Jardine Davies
Transport Services, Inc. (Jardine) issued Gate Pass No.
761412 which stated that "22 drums13 Raw Materials for
Pharmaceutical Mfg." were loaded on a truck with Plate
No. PCK-434 facilitated by Champs for delivery to
Unilab’s warehouse. The materials were noted to be
complete and in good order in the gate pass.14 On the
same day, the shipment arrived in Unilab’s warehouse
and was immediately surveyed by an independent
surveyor, J.G. Bernas Adjusters & Surveyors, Inc. (J.G.
Bernas). The Report stated:
1-p/bag torn on side contents partly spilled
1-s/drum #7 punctured and retaped on bottom side
content lacking
5-drums shortship/short delivery15
On October 23 and 28, 1992, the same independent surveyor
conducted final inspection surveys which yielded the same
results. Consequently, Unilab’s quality control representative
rejected one paper bag containing dried yeast and one steel
drum containing Vitamin B Complex as unfit for the intended
purpose.16
On November 7, 1992, Unilab filed a formal claim17 for the
damage against private respondent and UTI. On November 20,
1992, UTI denied liability on the basis of the gate pass issued
by Jardine that the goods were in complete and good condition;
while private respondent paid the claimed amount on March
23, 1993. By virtue of the Loss and Subrogation
Receipt18 issued by Unilab in favor of private respondent, the
latter filed a complaint for Damages against APL, UTI and
petitioner with the RTC of Makati.19 The case was docketed as
Civil Case No. 93-3473 and was raffled to Branch 134.
After the termination of the pre-trial conference, trial on the
merits ensued. On February 22, 2001, the RTC decided in favor
of private respondent and against APL, UTI and petitioner, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of
plaintif PIONEER INSURANCE & SURETY
CORPORATION and against the defendants AMERICAN
PRESIDENT LINES and UNSWORTH TRANSPORT
INTERNATIONAL (PHILS.), INC. (now known as JUGRO
TRANSPORT INT’L., PHILS.), ordering the latter to pay,
jointly and severally, the former the following amounts:
1. The sum of SEVENTY SIX THOUSAND TWO
HUNDRED THIRTY ONE and 27/100 (Php76,231.27)
with interest at the legal rate of 6% per annum to be
computed starting from September 30, 1993 until fully
paid, for and as actual damages;
2. The amount equivalent to 25% of the total sum as
attorney’s fees;
3. Cost of this litigation.
SO ORDERED.20
On appeal, the CA affirmed the RTC decision on April 29,
2004. The CA rejected UTI’s defense that it was merely a
forwarder, declaring instead that it was a common carrier. The
appellate court added that by issuing the Bill of Lading, UTI
acknowledged receipt of the goods and agreed to transport and
deliver them at a specific place to a person named or his order.
The court further concluded that upon the delivery of the
subject shipment to petitioner’s warehouse, its liability became
similar to that of a depositary. As such, it ought to have
exercised ordinary diligence in the care of the goods. And as
found by the RTC, the CA agreed that petitioner failed to
exercise the required diligence. The CA also rejected
petitioner’s claim that its liability should be limited to $500 per
package pursuant to the Carriage of Goods by Sea Act
(COGSA) considering that the value of the shipment was
declared pursuant to the letter of credit and the pro forma
invoice. As to APL, the court considered it as a common carrier
notwithstanding the non-issuance of a bill of lading inasmuch
as a bill of lading is not indispensable for the execution of a
contract of carriage.21
Unsatisfied, petitioner comes to us in this petition for review on
certiorari, raising the following issues:
1. WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN UPHOLDING THE DECISION OF THE
REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001,
AWARDING THE SUM OF SEVENTY SIX THOUSAND
TWO HUNDRED THIRTY ONE AND 27/100 PESOS
(PHP76,231.27) WITH LEGAL INTEREST AT 6% PER
ANNUM AS ACTUAL DAMAGES AND 25% AS
ATTORNEY’S FEES.
2. WHETHER OR NOT PETITIONER UTI IS A COMMON
CARRIER.
3. WHETHER OR NOT PETITIONER UTI EXERCISED
THE REQUIRED ORDINARY DILIGENCE.
4. WHETHER OR NOT THE PRIVATE RESPONDENT
SUFFICIENTLY ESTABLISHED THE ALLEGED
DAMAGE TO ITS CARGO.22
Petitioner admits that it is a forwarder but disagrees with the
CA’s conclusion that it is a common carrier. It also questions
the appellate court’s findings that it failed to establish that it
exercised extraordinary or ordinary diligence in the vigilance
over the subject shipment. As to the damages allegedly
suffered by private respondent, petitioner counters that they
were not sufficiently proven. Lastly, it insists that its liability,
in any event, should be limited to $500 pursuant to the package
limitation rule. Indeed, petitioner wants us to review the factual
findings of the RTC and the CA and to evaluate anew the
evidence presented by the parties.
The petition is partly meritorious.
Well established is the rule that factual questions may not be
raised in a petition for review on certiorari as clearly stated in
Section 1, Rule 45 of the Rules of Court, viz.:
Section 1. Filing of petition with Supreme Court. – A party
desiring to appeal by certiorari from a judgment or final order
or resolution of the Court of Appeals, the Sandiganbayan, the
Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified petition for
review on certiorari. The petition shall raise only questions of
law which must be distinctly set forth.
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.231avvphi1
A freight forwarder’s 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.24
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.25 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. As a receipt, it recites the
date and place of shipment, describes the goods as to quantity,
weight, dimensions, identification marks, 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.26
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.28
Though it is not our function to evaluate anew the evidence
presented, we refer to the records of the case to show that, as
correctly found by the RTC and the CA, petitioner failed to
rebut the prima facie presumption of negligence in the carriage
of the subject shipment.
First, as stated in the bill of lading, the subject shipment was
received by UTI in apparent good order and condition in New
York, United States of America. Second, the OCMSC Survey
Report stated that one steel drum STC Vitamin B Complex
Extract was discovered to be with a cut/hole on the side, with
approximate spilling of 1%. Third, though Gate Pass No. 7614,
issued by Jardine, noted that the subject shipment was in good
order and condition, it was specifically stated that there were
22 (should be 27 drums per Bill of Lading No. C320/C15991-
2) drums of raw materials for pharmaceutical manufacturing.
Last, J.G. Bernas’ Survey Report stated that "1-s/drum was
punctured and retaped on the bottom side and the content was
lacking, and there was a short delivery of 5-drums."
All these conclusively prove the fact of shipment in good order
and condition, and the consequent damage to one steel drum of
Vitamin B Complex Extract while in the possession of
petitioner which failed to explain the reason for the damage.
Further, petitioner failed to prove that it observed the
extraordinary diligence and precaution which the law requires a
common carrier to exercise and to follow in order to avoid
damage to or destruction of the goods entrusted to it for safe
carriage and delivery.29
However, we affirm the applicability of the Package Limitation
Rule under the COGSA, contrary to the RTC and the CA’s
findings.
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 are AFFIRMED with MODIFICATION by reducing the
Commerce and special laws. Thus, the COGSA supplements principal amount due private respondent Pioneer Insurance and
the Civil Code by establishing a provision limiting the carrier’s Surety Corporation from ₱76,231.27 to $500, with interest of
liability in the absence of a shipper’s declaration of a higher 6% per annum from date of demand, and 25% of the amount
value in the bill of lading.30 Section 4(5) of the COGSA due as attorney’s fees.
provides: The other aspects of the assailed Decision and Resolution
(5) Neither the carrier nor the ship shall in any event be or STAND.
become liable for any loss or damage to or in connection with SO ORDERED.
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. Contrary to the CA’s
conclusion, the insertion of the words "L/C No. LC No. 1-187-
008394/ NY 69867 covering shipment of raw materials for
pharmaceutical Mfg. x x x" cannot be the basis of petitioner’s
liability.31 Furthermore, the insertion of an invoice number
does not in itself sufficiently and convincingly show that
petitioner had knowledge of the value of the cargo.32
In light of the foregoing, petitioner’s 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. In addition to said amount, as aptly held
by the trial court, an interest rate of 6% per annum should also
be imposed, plus 25% of the total sum as attorney’s fees.
WHEREFORE, premises considered, the petition is
PARTIALLY GRANTED. The Court of Appeals Decision
dated April 29, 2004 and Resolution dated November 26, 2004

G.R. No. 138334 August 25, 2003
ESTELA L. CRISOSTOMO, Petitioner,
vs.
The Court of Appeals and CARAVAN TRAVEL &
TOURS INTERNATIONAL, INC., Respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the
services of respondent Caravan Travel and Tours International,
Inc. to arrange and facilitate her booking, ticketing and
accommodation in a tour dubbed "Jewels of Europe". The
package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a
total cost of P74,322.70. Petitioner was given a 5% discount on
the amount, which included airfare, and the booking fee was
also waived because petitioner’s niece, Meriam Menor, was
respondent company’s ticketing manager.
Pursuant to said contract, Menor went to her aunt’s residence
on June 12, 1991 – a Wednesday – to deliver petitioner’s travel
documents and plane tickets. Petitioner, in turn, gave Menor
the full payment for the package tour. Menor then told her to be
at the Ninoy Aquino International Airport (NAIA) on Saturday,
two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to
NAIA on Saturday, June 15, 1991, to take the flight for the first
leg of her journey from Manila to Hongkong. To petitioner’s
dismay, she discovered that the flight she was supposed to take
had already departed the previous day. She learned that her
plane ticket was for the flight scheduled on June 14, 1991. She
thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another
tour – the "British Pageant" – which included England,
Scotland and Wales in its itinerary. For this tour package,
petitioner was asked anew to pay US$785.00 or P20,881.00 (at
the then prevailing exchange rate of P26.60). She gave
respondent US$300 or P7,980.00 as partial payment and
commenced the trip in July 1991.
Upon petitioner’s return from Europe, she demanded from
respondent the reimbursement of P61,421.70, representing the
difference between the sum she paid for "Jewels of Europe"
and the amount she owed respondent for the "British Pageant"
tour. Despite several demands, respondent company refused to
reimburse the amount, contending that the same was non-
refundable.1 Petitioner was thus constrained to file a complaint
against respondent for breach of contract of carriage and
damages, which was docketed as Civil Case No. 92-133 and
raffled to Branch 59 of the Regional Trial Court of Makati
City.
In her complaint,2 petitioner alleged that her failure to join
"Jewels of Europe" was due to respondent’s fault since it did
not clearly indicate the departure date on the plane ticket.
Respondent was also negligent in informing her of the wrong
flight schedule through its employee Menor. She insisted that
the "British Pageant" was merely a substitute for the "Jewels of
Europe" tour, such that the cost of the former should be
properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations
Manager, Concepcion Chipeco, denied responsibility for
petitioner’s failure to join the first tour. Chipeco insisted that
petitioner was informed of the correct departure date, which
was clearly and legibly printed on the plane ticket. The travel
documents were given to petitioner two days ahead of the
scheduled trip. Petitioner had only herself to blame for missing
the flight, as she did not bother to read or confirm her flight
schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the
amount paid for "Jewels of Europe", considering that the same
had already been remitted to its principal in Singapore, Lotus
Travel Ltd., which had already billed the same even if
petitioner did not join the tour. Lotus’ European tour organizer,
Insight International Tours Ltd., determines the cost of a
package tour based on a minimum number of projected
participants. For this reason, it is accepted industry practice to
disallow refund for individuals who failed to take a booked
tour.3
Lastly, respondent maintained that the "British Pageant" was
not a substitute for the package tour that petitioner missed. This
tour was independently procured by petitioner after realizing
that she made a mistake in missing her flight for "Jewels of
Europe". Petitioner was allowed to make a partial payment of
only US$300.00 for the second tour because her niece was then
an employee of the travel agency. Consequently, respondent
prayed that petitioner be ordered to pay the balance of
P12,901.00 for the "British Pageant" package tour.
After due proceedings, the trial court rendered a decision,4 the
dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
1. Ordering the defendant to return and/or refund to the
plaintiff the amount of Fifty Three Thousand Nine
Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of
twelve percent (12%) per annum starting January 16,
1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the
amount of Five Thousand (P5,000.00) Pesos as and for
reasonable attorney’s fees;
3. Dismissing the defendant’s counterclaim, for lack of
merit; and
4. With costs against the defendant.
SO ORDERED.5
The trial court held that respondent was negligent in
erroneously advising petitioner of her departure date through
its employee, Menor, who was not presented as witness to
rebut petitioner’s testimony. However, petitioner should have
verified the exact date and time of departure by looking at her
ticket and should have simply not relied on Menor’s verbal
representation. The trial court thus declared that petitioner was
guilty of contributory negligence and accordingly, deducted
10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise
found both parties to be at fault. However, the appellate court
held that petitioner is more negligent than respondent because
as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being
so, she is not entitled to any form of damages. Petitioner also
forfeited her right to the "Jewels of Europe" tour and must
therefore pay respondent the balance of the price for the
"British Pageant" tour. The dispositive portion of the judgment
appealed from reads as follows:
WHEREFORE, premises considered, the decision of the
Regional Trial Court dated October 26, 1995 is hereby
REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the
defendant-appellant the amount of P12,901.00, representing the
balance of the price of the British Pageant Package Tour, the
same to earn legal interest at the rate of SIX PERCENT (6%)
per annum, to be computed from the time the counterclaim was
filed until the finality of this decision. After this decision
becomes final and executory, the rate of TWELVE PERCENT
(12%) interest per annum shall be additionally imposed on the
total obligation until payment thereof is satisfied. The award of
attorney’s fees is DELETED. Costs against the plaintiff-
appellee.
SO ORDERED.6
Upon denial of her motion for reconsideration,7 petitioner filed
the instant petition under Rule 45 on the following grounds:
I was the direct consequence of its employee’s gross negligence.
It is respectfully submitted that the Honorable Court of
Appeals committed a reversible error in reversing and
setting aside the decision of the trial court by ruling that
the petitioner is not entitled to a refund of the cost of
unavailed "Jewels of Europe" tour she being equally, if
not more, negligent than the private respondent, for in
the contract of carriage the common carrier is obliged to
observe utmost care and extra-ordinary diligence which
is higher in degree than the ordinary diligence required
of the passenger. Thus, even if the petitioner and private
respondent were both negligent, the petitioner cannot be
considered to be equally, or worse, more guilty than the
private respondent. At best, petitioner’s negligence is
only contributory while the private respondent [is
guilty] of gross negligence making the principle of pari
delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling
that the "Jewels of Europe" tour was not indivisible and
the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the
petitioner the consequential damages due her as a result
of breach of contract of carriage.8
Petitioner contends that respondent did not observe the
standard of care required of a common carrier when it informed
her wrongly of the flight schedule. She could not be deemed
more negligent than respondent since the latter is required by
law to exercise extraordinary diligence in the fulfillment of its
obligation. If she were negligent at all, the same is merely
contributory and not the proximate cause of the damage she
suffered. Her loss could only be attributed to respondent as it
Petitioner’s contention has no merit.
By definition, a contract of carriage or transportation is one
whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place
to another for a fixed price.9 Such person or association of
persons are regarded as carriers and are classified as private or
special carriers and common or public carriers.10 A common
carrier is defined under Article 1732 of the Civil Code 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.
It is obvious from the above definition that respondent is not an
entity engaged in the business of transporting either passengers
or goods and is therefore, neither a private nor a common
carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers
is simply to make travel arrangements in their behalf.
Respondent’s services as a travel agency include procuring
tickets and facilitating travel permits or visas as well as
booking customers for tours.
While petitioner concededly bought her plane ticket through
the efforts of respondent company, this does not mean that the
latter ipso facto is a common carrier. At most, respondent acted
merely as an agent of the airline, with whom petitioner
ultimately contracted for her carriage to Europe. Respondent’s
obligation to petitioner in this regard was simply to see to it
that petitioner was properly booked with the airline for the
appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.
The object of petitioner’s contractual relation with respondent
is the latter’s service of arranging and facilitating petitioner’s
booking, ticketing and accommodation in the package tour. In
contrast, the object of a contract of carriage is the
transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one
for services and not one of carriage. Petitioner’s submission is
premised on a wrong assumption.
The nature of the contractual relation between petitioner and
respondent is determinative of the degree of care required in
the performance of the latter’s obligation under the contract.
For reasons of public policy, a common carrier in a contract of
carriage is bound by law to carry passengers as far as human
care and foresight can provide using the utmost diligence of
very cautious persons and with due regard for all the
circumstances.11 As earlier stated, however, respondent is not a
common carrier but a travel agency. It is thus not bound under
the law to observe extraordinary diligence in the performance
of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for
services, the standard of care required of respondent is that of a
good father of a family under Article 1173 of the Civil
Code.12 This connotes reasonable care consistent with that
which an ordinarily prudent person would have observed when
confronted with a similar situation. The test to determine
whether negligence attended the performance of an obligation
is: did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty
of negligence.13
In the case at bar, the lower court found Menor negligent when
she allegedly informed petitioner of the wrong day of
departure. Petitioner’s testimony was accepted as indubitable
evidence of Menor’s alleged negligent act since respondent did
not call Menor to the witness stand to refute the allegation. The
lower court applied the presumption under Rule 131, Section 3
(e)14 of the Rules of Court that evidence willfully suppressed
would be adverse if produced and thus considered petitioner’s
uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that
Menor was negligent and maintains that petitioner’s assertion
is belied by the evidence on record. The date and time of
departure was legibly written on the plane ticket and the travel
papers were delivered two days in advance precisely so that
petitioner could prepare for the trip. It performed all its
obligations to enable petitioner to join the tour and exercised
due diligence in its dealings with the latter.
We agree with respondent.
Respondent’s failure to present Menor as witness to rebut
petitioner’s testimony could not give rise to an inference
unfavorable to the former. Menor was already working in
France at the time of the filing of the complaint,15 thereby
making it physically impossible for respondent to present her
as a witness. Then too, even if it were possible for respondent
to secure Menor’s testimony, the presumption under Rule 131,
Section 3(e) would still not apply. The opportunity and
possibility for obtaining Menor’s testimony belonged to both
parties, considering that Menor was not just respondent’s
employee, but also petitioner’s niece. It was thus error for the
lower court to invoke the presumption that respondent willfully
suppressed evidence under Rule 131, Section 3(e). Said
presumption would logically be inoperative if the evidence is
not intentionally omitted but is simply unavailable, or when the
same could have been obtained by both parties.16
In sum, we do not agree with the finding of the lower court that
Menor’s negligence concurred with the negligence of petitioner
and resultantly caused damage to the latter. Menor’s negligence
was not sufficiently proved, considering that the only evidence
presented on this score was petitioner’s uncorroborated
narration of the events. It is well-settled that the party alleging
a fact has the burden of proving it and a mere allegation cannot
take the place of evidence.17 If the plaintiff, upon whom rests
the burden of proving his cause of action, fails to show in a
satisfactory manner facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or
defense.18
Contrary to petitioner’s claim, the evidence on record shows
that respondent exercised due diligence in performing its
obligations under the contract and followed standard procedure
in rendering its services to petitioner. As correctly observed by
the lower court, the plane ticket19 issued to petitioner clearly
reflected the departure date and time, contrary to petitioner’s
contention. The travel documents, consisting of the tour
itinerary, vouchers and instructions, were likewise delivered to
petitioner two days prior to the trip. Respondent also properly
booked petitioner for the tour, prepared the necessary
documents and procured the plane tickets. It arranged
petitioner’s hotel accommodation as well as food, land
transfers and sightseeing excursions, in accordance with its
avowed undertaking.
Therefore, it is clear that respondent performed its prestation
under the contract as well as everything else that was essential
to book petitioner for the tour. Had petitioner exercised due
diligence in the conduct of her affairs, there would have been
no reason for her to miss the flight. Needless to say, after the
travel papers were delivered to petitioner, it became incumbent
upon her to take ordinary care of her concerns. This
undoubtedly would require that she at least read the documents
in order to assure herself of the important details regarding the
trip.
The negligence of the obligor in the performance of the
obligation renders him liable for damages for the resulting loss
suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so
demands.20 There is no fixed standard of diligence applicable to
each and every contractual obligation and each case must be
determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific
obligation and whether one has been negligent is a question of
fact that is to be determined after taking into account the
particulars of each case.21 1âwphi1
The lower court declared that respondent’s employee was
negligent. This factual finding, however, is not supported by
the evidence on record. While factual findings below are computed from the time the counterclaim was filed until the
generally conclusive upon this court, the rule is subject to finality of this Decision. After this Decision becomes final and
certain exceptions, as when the trial court overlooked, executory, the rate of 12% per annum shall be imposed until
misunderstood, or misapplied some facts or circumstances of the obligation is fully settled, this interim period being deemed
weight and substance which will affect the result of the case.22 to be by then an equivalent to a forbearance of credit.23
In the case at bar, the evidence on record shows that respondent SO ORDERED.
company performed its duty diligently and did not commit any
contractual breach. Hence, petitioner cannot recover and must
bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of
merit. The decision of the Court of Appeals in CA-G.R. CV
No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to
pay respondent the amount of P12,901.00 representing the
balance of the price of the British Pageant Package Tour, with
legal interest thereon at the rate of 6% per annum, to be