Pan American World Airways, Inc. v. Rapadas discriminatory acts or bad faith on the part of PanAm.
discriminatory acts or bad faith on the part of PanAm. The trial court ordered PanAm to pay
G.R. No. 60673, 19 May 1992, 209 SCRA 67
FACTS:
On 16 January 1975, Jose K. Rapadas held Passenger Ticket and Baggage Claim Check
026394830084-5 for Pan American World Airways Inc.’s (PanAm) Flight 841 with the route
from Guam to Manila. While standing in line to board the flight at the Guam airport, Rapadas
was ordered by PanAm’shandcarry control agent to check-in his Samsonite attache case.
Rapadas protested pointing to the fact that other co-passengers were permitted to
handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it
to try if he can get through without having to register his attache’ case. However, the same
man in charge of handcarry control did not fail to notice him and ordered him again to
register his baggage. For fear that he would miss the plane if he insisted and argued on
personally taking the valise with him, he acceded to checking it in. He then gave his attache’
case to his brother who happened to be around and who checked it in for him, but without
declaring its contents or the value of its contents. He was given a Baggage Claim Tag P-749-
713. Upon arriving in Manila on the same date, 16 January 1975, Rapadas claimed and was
given all his checked-in baggages except the attache’ case. Since Rapadas felt ill on his
arrival, he sent his son, Jorge Rapadas to request for the search of the missing luggage.
PanAm exerted efforts to locate the luggage through the Pan American World Airways-
Manila International Airport (PAN AM-MIA) Baggage Service. On 30 January 1975, PanAm
required the Rapadas to put the request in writing. Rapadas filled in a Baggage Claim Blank
Form. Thereafter, Rapadas personally followed up his claim. For several times, he called up
Mr. Panuelos, the head of the Baggage Section of PAN AM. He also sent letters demanding
and reminding the petitioner of his claim. Rapadas received a letter from PanAm’s counsel
dated 2 August 1975 offering to settle the claim for the sum of $160.00 representing
PanAm’s alleged limit of liability for loss or damage to a passenger’s personal property
under the contract of carriage between Rapadas and PAN-AM.
Refusing to accept this kind of settlement, Rapadas filed the instant action for damages on 1
October 1975. Rapadas alleged that PanAm discriminated or singled him out in ordering
that his luggage be checked in. He also alleged that PanAm neglected its duty in the handling
and safekeeping of his attache’ case from the point of embarkation in Guam to his
destination in Manila.He placed the value of the lost attache’ case and its contents at
US$42,403.90. According to him, the loss resulted in his failure to pay certain monetary
obligations, failure to remit money sent through him to relatives, inability to enjoy the fruits
of his retirement and vacation pay earned from working in Tonga Construction Company
(he retired in August 1974) and inability to return to Tonga to comply with then existing
contracts. The lower court ruled in favor of complainant Rapadas after finding no stipulation
giving notice to the baggage liability limitation. The court rejected the claim of PanAm that
its liability under the terms of the passenger ticket is only up to $160.00. However, it
scrutinized all the claims of Rapadas. It discredited insufficient evidence to show
Rapadas by way of actual damages the equivalent peso value of the amount of $5,228.90 and
100 paengs (Tongan money), nominal damages in the amount of P20,000.00 and attorney’s
fees of P5,000.00, and the costs of the suit. The trial court also dismissed PanAm’s
counterclaim. On appeal, the Court of Appeals affirmed the trial court decision. Hence, the
petition for review.
ISSUE:
Whether or not PanAm is liable to pay damages to Rapadas.
HELD:
The Supreme Court granted the petition, and reversed and set aside the decision of the
Court of Appeals. The Court ordered PanAm to pay Rapadas damages in the amount of
US$400.00 or its equivalent in Philippine Currency at the time of actual payment,
P10,000.00 in attorney’s fees, and costs of the suit.
SANTOS VS NORTHWEST
MARCH 28, 2013 ~ VBDIAZ
G.R. No. 101538 June 23, 1992
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto
Benedicto Santos vs. NORTHWEST ORIENT AIRLINES and CA
FACTS: The petitioner is a minor and a resident of the Philippines. Private respondent
Northwest Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota,
U.S.A. and licensed to do business and maintain a branch office in the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San
Francisco. U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The
scheduled departure date from Tokyo was December 20, 1986. No date was specified for his
return to San Francisco.
On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco
airport for his scheduled departure to Manila. Despite a previous confirmation and re-
confirmation, he was informed that he had no reservation for his flight from Tokyo to
Manila. He therefore had to be wait-listed.
On March 12, 1987, the petitioner sued NOA for damages in the RTC of Makati. On April 13,
1987, NOA moved to dismiss the complaint on the ground of lack of jurisdiction, citing
Article 28(1) of the Warsaw Convention, reading as follows:
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the
territory of one of the High Contracting Parties, either before the court of the domicile of the
carrier or of his principal place of business, or where he has a place of business through
which the contract has been made, or before the court at the place of destination.
The private respondent contended that the Philippines was not its domicile nor was this its
principal place of business. Neither was the petitioner’s ticket issued in this country nor was
his destination Manila but San Francisco in the United States.
Lower court granted the dismissal, CA affirmed.
ISSUE: WON the Philippines has jurisdiction over the case. (Issue raised by the party is WON
the provision of the Warsaw convention was constitutional)
HELD: No jurisdiction (the provision is constitutional)
The Convention is a treaty commitment voluntarily assumed by the Philippine government
and, as such, has the force and effect of law in this country. The petitioner’s allegations are
not convincing enough to overcome this presumption. Apparently, the Convention
considered the four places designated in Article 28 the most convenient forums for the
litigation of any claim that may arise between the airline and its passenger, as distinguished
from all other places.
NOTES:
WON Warsaw convention applies.
Convention applies to all international transportation of persons performed by aircraft for
hire. Whether the transportation is “international” is determined by the contract of the
parties, which in the case of passengers is the ticket. When the contract of carriage provides
for the transportation of the passenger between certain designated terminals “within the
territories of two High Contracting Parties,” the provisions of the Convention automatically
apply and exclusively govern the rights and liabilities of the airline and its passenger.
WON MNL or SFO was the destination.
The place of destination, within the meaning of the Warsaw Convention, is determined by
the terms of the contract of carriage or, specifically in this case, the ticket between the
passenger and the carrier. Examination of the petitioner’s ticket shows that his ultimate
destination is San Francisco. Although the date of the return flight was left open, the
contract of carriage between the parties indicates that NOA was bound to transport the
petitioner to San Francisco from Manila. Manila should therefore be considered merely an
agreed stopping place and not the destination.
WON Northwest has domicile in the Philippines
Notably, the domicile of the carrier is only one of the places where the complaint is allowed
to be filed under Article 28(1). By specifying the three other places, to wit, the principal
place of business of the carrier, its place of business where the contract was made, and the
place of destination, the article clearly meant that these three other places were not
comprehended in the term “domicile.”
Everett Streamship Corp. V. CA (1998)
G.R. No. 122494 October 8, 1998
Lessons Applicable: Contracting Parties (Transportation)
FACTS:
 Hernandez Trading Co., Inc. (Hernandez) imported 3 crates of bus spare parts
(MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14), from Maruman
Trading Company, Ltd. (Maruman), a foreign corporation based in Japan.
 The crates (covered by Bill of Lading No. NGO53MN) were shipped on
board “ADELFAEVERETTE,” a vessel owned by Everett Orient Lines
 Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing
 Hernandez made a formal claim for Y1,552,500.00, as shown in an Invoice No. MTM-
941, dated November 14, 1991
 Everett Streamship Corp. offered to pay only Y100,000.00 the maximum
amount stipulated under Clause 18 of the covering bill of lading
 Hernandez rejected the offer and thereafter instituted a suit for collection
 Trial Court: in favor of Hernandez
 CA: Affirmed but deleted the award of attorney’s fees
ISSUE:
1. W/N the limited liability clause in the Bill of Lading is valid
2. W/N Hernandez as consignee, who is not a signatory to the bill of lading is bound by
the stipulations thereof
HELD:
1. YES.
 A stipulation in the bill of lading limiting the common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares a
greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil
Code which provide:
ART. 1749. A stipulation that the common carrier’s liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is
binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
 Maruman Trading, had the option to declare a higher valuation if the value of its
cargo was higher than the limited liability of the carrier. Considering that the
shipper did not declare a higher valuation, it had itself to blame for not complying
with the stipulations.
 The trial court’s ratiocination that private respondent could not have “fairly and
freely” agreed to the limited liability clause in the bill of lading because the said
conditions were printed in small letters does not make the bill of lading invalid.
 contracts of adhesion are valid and binding
 Greater vigilance, however, is required of the courts when dealing with contracts of
adhesion in that the said contracts must be carefully scrutinized “in order to shield
the unwary (or weaker party) from deceptive schemes contained in ready-made
covenant
 Article 24 of the Civil Code which mandates that “(i)n all contractual,
property or other relations, when one of the parties is at a disadvantage on
account of his moral dependence, ignorance, indigence, mental weakness,
tender age or other handicap, the courts must be vigilant for his protection
 Maruman Trading, we assume, has been extensively engaged in the trading
business. It can not be said to be ignorant of the business transactions it entered
into involving the shipment of its goods to its customers. The shipper could not
have known, or should know the stipulations in the bill of lading and there it should
have declared a higher valuation of the goods shipped. Moreover, Maruman Trading
has not been heard to complain that it has been deceived or rushed into agreeing to
ship the cargo in petitioner’s vessel. In fact, it was not even impleaded in this case.
2. YES.
 the right of a party in the same situation as Hernandez, to recover for loss of a
shipment consigned to him under a bill of lading drawn up only by and between the
shipper and the carrier, springs from either a relation of agency that may exist
between him and the shipper or consignor, or his status as stranger in whose favor
some stipulation is made in said contract, and who becomes a party thereto when he
demands fulfillment of that stipulation, in this case the delivery of the goods or
cargo shipped
 When Hernandez formally claimed reimbursement for the missing goods from
Everett and subsequently filed a case against the it based on the very same bill of
lading, it accepted the provisions of the contract and thereby made itself a party
thereto, or at least has come to court to enforce it.[
 The commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly
show that Everett has knowledge of the value of the cargo as contended by
Hernandez
CASE DIGEST (Transportation Law): Valenzuela Hardwood vs. CA
(GR 102316, 30 June 1997)
FACTS:
Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the
Seven Brothers whereby the latter undertook to load on board its vessel M/V Seven
Ambassador the former’s lauan round logs numbering 940 at the port of Maconacon, Isabela
for shipment to Manila. VHIS insured the logs against loss and/or damage with South Sea
Surety and Insurance Co.
The said vessel sank resulting in the loss of VHIS’ insured logs. VHIS demanded from South
Sea Surety the payment of the proceeds of the policy but the latter denied liability under the
policy for non-payment of premium. VHIS likewise filed a formal claim with Seven Brothers
for the value of the lost logs but the latter denied the claim.
The RTC ruled in favor of the petitioner.Both Seven Brothers and South Sea Surety appealed.
The Court of Appeals affirmed the judgment except as to the liability of Seven
Brothers.South Sea Surety and VHIS filed separate petitions for review before the Supreme
Court. In a Resolution dated 2 June 1995, the Supreme Court denied the petition of South
Sea Surety. The present decision concerns itself to the petition for review filed by VHIS.
ISSUE:
Is a stipulation in a charter party that the “(o)wners shall not be responsible for loss, split,
short-landing, breakages and any kind of damages to the cargo” valid?
HELD:
Yes. Xxx [I]t is undisputed that private respondent had acted as a private carrier in
transporting petitioner’s lauan logs. Thus, Article 1745 and other Civil Code provisions on
common carriers which were cited by petitioner may not be applied unless expressly
stipulated by the parties in their charter party.
In a contract of private carriage, the parties may validly stipulate that responsibility for the
cargo rests solely on the charterer, exempting the shipowner from liability for loss of or
damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article
1306 of the Civil Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public order, or public
policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress
that in a contract of private carriage, the parties may freely stipulate their duties and
obligations which perforce would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers protecting the general public cannot
justifiably be applied to a ship transporting commercial goods as a private carrier.
Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving
common carriers.

x xx
The general public enters into a contract of transportation with common carriers without a
hand or a voice in the preparation thereof. The riding public merely adheres to the contract;
even if the public wants to, it cannot submit its own stipulations for the approval of the
common carrier. Thus, the law on common carriers extends its protective mantle against
one-sided stipulations inserted in tickets, invoices or other documents over which the riding
public has no understanding or, worse, no choice. Compared to the general public, a
charterer in a contract of private carriage is not similarly situated. It can -- and in fact it
usually does -- enter into a free and voluntary agreement. In practice, the parties in a
contract of private carriage can stipulate the carrier’s obligations and liabilities over the
shipment which, in turn, determine the price or consideration of the charter. Thus, a
charterer, in exchange for convenience and economy, may opt to set aside the protection of
the law on common carriers. When the charterer decides to exercise this option, he takes a
normal business risk.
PHILIPPINE AIRLINES, INC., petitioner,
 vs. COURT OF APPEALS and GILDA C. MEJIA,
respondents.
Court: Supreme Court of the Philippines
Case No.: G.R. No. 119706
Date: March 14, 1996
Ponente: REGALADO, J
<Facts>
This is definitely not a case of first impression. The incident, which eventuated in the
present controversy, is a drama of common contentious occurrence between passengers
and carriers whenever loss is sustained by the former. Withal, the exposition of the factual
ambience and the legal precepts in this adjudication may hopefully channel the
assertiveness of passengers and the intransigence of carriers into the realization that at
times a bad extrajudicial compromise could be better than a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of Appeals in CA-G.R.
CV No. 42744 1 which affirmed the decision of the lower court 2 finding petitioner
Philippine Air Lines, Inc. (PAL) liable as follows:
ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines, Inc.,
to pay plaintiff Gilda C. Mejia:
(1) P30, 000.00 by way of actual damages of the microwave oven;
(2) P10, 000.00 by way of moral damages;
(3) P20, 000.00 by way of exemplary damages;
(4) P10, 000.00 as attorney's fee;
All in addition to the costs of the suit.
Defendant's counterclaim is hereby dismissed for lack of merit.
Mejia shipped through PAL 1 microwave oven from San Francisco to Manila. Upon arrival,
she discovered that the front glass door was broken and the oven could not be used. Mejia
filed action against PAL. PAL denied liability and alleged that it acted in conformity with the
Warsaw Convention
<Issues>
Whether or not the air waybill should be strictly construed against petitioner?
<Ruling>
Although the airway bill is binding between the parties, the liability of Pal is not limited on
the provisions of the airway bill. While the Warsaw Convention is law in the Philippines, the
Philippines being a signatory thereto, it does not operate as an exclusive enumeration of the
instances when a carrier shall be liable for breach of contract or as an absolute limit of the
extent of liability nor does it preclude the operation of the Civil Code or other pertinent
laws.
Also, the willful misconduct and insensitivity of the officers of PAL in not attempting to
explain the damage despite due demand and the unexplained delay in acting on her claim
amounted to bad faith and renders unquestionable its liability for damages
Adhesion contract is one that is not negotiated by the parties having been drafted by the
dominant party and usually embodied in a standardized form. It is called a contract of
adhesion because the participation of 1 party is limited to affixing her signature.
Coastwise Lighterage Corp. v. Court of Appeals
GR No. 114167
July 12, 1995
Francisco, J:
Facts: Pag-asa Sales, Inc. entered into a contract to transport molasses from the province
of Negros to Manila with Coastwise Lighterage Corporation using the latter's dumb barges.
The barges were towed in tandem by the tugboat MT Marica, which is likewise owned by
Coastwise. Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
"Coastwise 9", struck an unknown sunken object. The forward buoyancy compartment was
damaged, and water gushed in through a hole "two inches wide and twenty-two inches
long". As a consequence, the molasses at the cargo tanks were contaminated and rendered
unfit for the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject
the shipment of molasses as a total loss.
Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein
private respondent, Philippine General Insurance Company (PhilGen, for short) and against
the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the claim
and it was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount of P700,000.00,
representing the value of the damaged cargo of molasses.
Issues: Whether or not whether or not petitioner Coastwise Lighterage was transformed
into a private carrier, by virtue of the contract of affreightment which it entered into with
the consignee, Pag-asa Sales, Inc.
Whether or not the insurer was subrogated into the rights of the consignee against
the carrier, upon payment by the insurer of the value of the consignee's goods lost while on
board one of the carrier's vessels.
Held: No, petitioner Coastwise Lighterage was not transformed into a private carrier, by
virtue of the contract of affreightment.
Yes, the insurer was subrogated into the rights of the consignee against the carrier.
Ratio: As regards the first issue:
Although a charter party may transform a common carrier into a private one, the same
however is not true in a contract of affreightment on account of the aforementioned
distinctions between the two. Petitioner admits that the contract it entered into with the
consignee was one of affreightment. We agree. Pag-asa Sales, Inc. only leased three of
petitioner's vessels, in order to carry cargo from one point to another, but the possession,
command and navigation of the vessels remained with petitioner Coastwise Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage, by
the contract of affreightment, was not converted into a private carrier, but remained a
common carrier and was still liable as such.
As a common carrier, petitioner is liable for breach of the contract of carriage, having failed
to overcome the presumption of negligence with the loss and destruction of goods it
transported, by proof of its exercise of extraordinary diligence.
As regards the second issue:
Article 2207 of the Civil Code is explicit on this point:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who violated the contract. . . .
Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to
Pag-asa Sales, Inc., the consignee of the cargo of molasses totally damaged while being
transported by petitioner Coastwise Lighterage, the former was subrogated into all the
rights which Pag-asa Sales, Inc. may have had against the carrier, herein petitioner
Coastwise Lighterage.
UNSWORTH TRANSPORT INTERNATIONAL V. CA
Facts: 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 xx banana
flavoring; 2) 2 drums (of) flammable liquids x xx 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,[5] covering 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 P1,779,664.77 under and by virtue of Marine Risk Note
Number MC RM UL 0627 92[6] and Open Cargo Policy No. HO-022-RIU.[7]
On the same day that the bill of lading was issued, the shipment was loaded in a sealed 1x40
container van, with no. APLU-982012, boarded on APLs vessel M/V Pres. Jackson, Voyage
42, and transshipped to APLs M/V Pres. Taft[8] for delivery to petitioner in favor of the
consignee United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992,
petitioner received the said shipment in its warehouse after it stamped the Permit to Deliver
Imported Goods[9] procured by the Champs Customs Brokerage.[10] Three days thereafter,
or on October 9, 1992, Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a
stripping survey of the shipment located in petitioners warehouse.
On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc. (Jardine) issued
Gate Pass No. 7614[12] which stated that 22 drums[13] Raw Materials for Pharmaceutical
Mfg. were loaded on a truck with Plate No. PCK-434 facilitated by Champs for delivery to
Unilabs 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 Unilabs warehouse and was immediately
surveyed by an independent surveyor.
On October 23 and 28, 1992, the same independent surveyor conducted final inspection
surveys which yielded the same results. Consequently, Unilabs 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 claim[17] 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 Receipt[18] 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.
The RTC decided in favor of private respondent and against APL, UTI and petitioner. On
appeal, the CA affirmed the RTC decision on April 29, 2004. The CA rejected UTIs defense
that it was merely a forwarder, declaring instead that it was a common carrier.
Issues: WON petitioner is a common carrier.
Ruling: 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.[23]
A freight forwarders liability is limited to damages arising from its own negligence,
including negligence in choosing the carrier; however, where the forwarder contracts to
deliver goods to their destination instead of merely arranging for their transportation, it
becomes liable as a common carrier for loss or damage to goods. A freight forwarder
assumes the responsibility of a carrier, which actually executes the transport, even though
the forwarder does not carry the merchandise itself.[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.
G.R. No. 165647, March 26, 2009
Philippines First Insurance Co., Inc.
vsWallemPhils. Shipping, Inc.
Facts:
October 1995, Anhui Chemicals Import and Export Corp. loaded on board M/S Offshore
Master a shipment consisting of sodium sulphate anhydrous, complete and in good order for
transportation to and delivery at the port of Manila for consignee, covered by a clean bill of
lading.
On October 16, 1995, the shipment arrived in port of manila and was discharged which
caused various degrees of spillage and losses as evidence by the turn over survey of the
arrastre operator. Asia Star Freight delivered the shipments from pier to the consignees in
Quezon City, during the unloading, it was found by the consignee that the shipment was
damaged and in bad condition.
April 29, 1996, the consignee filed a claim with Wallem for the value of the damaged
shipment, to no avail. Since the shipment was insured with Phil. First Insurance against all
risks in the amount of P2,470,213.50. The consignee filed a claim against the First Insurance.
First insurance after examining the turn-over survey, the bad order certificate and other
documents paid the consignee but later on sent a demand letter to Wallem for the recovery
of the amount paid to the consignee (in exercise of its right of subrogation). Wallem did not
respond to the claim.
First Insurance then instituted an action before RTC for damages against Wallem. RTC held
the shipping company and the arrastre operator solidarily liable since both are charged with
the obligation to deliver the goods in good order condition.
The CA reversed and set aside the RTC's decision. CA says that there is no solidary liability
between the carrier and the arrastre because it was clearly established that the damage and
losses of the shipment were attributed to the mishandling by the arrastre operator in the
discharge of the shipment.
Issues:
1. Whether or not the Court of Appeals erred in not holding that as a common carrier, the
carriers duties extend to the obligation to safely discharge the cargo from the vessel;
2. Whether or not the carrier should be held liable for the cost of the damaged shipment;
3. Whether or not Wallems failure to answer the extra judicial demand by petitioner for the
cost of the lost/damaged shipment is an implied admission of the formers liability for said
goods;
4. Whether or not the courts below erred in giving credence to the testimony of Mr. Talens.
Ruling:
(1) Yes, the vessel is a common carrier, and thus the determination of the existence or
absence of liability will be gauged on the degree of diligence required of a common carrier.
(2) The first and second issue will be resolved concurrently.
(3) The damage of the shipment was documented by the turn0over survey and request for
bad order survey, with these documents, petitioner insist that the shipment incurred
damages while still in the care and responsibility of Wallem before it was turned over to the
arrastre operator. However, RTC found the testimony of Mr. Talens (cargo surveyor) that
the loss was caused by the mishandling of the arrastre operator. This mishandling was
affirmed by the CA which was the basis for declaring the arrastre operator solely liable for
the damage.
It is established that damage or losses were incurred by the shipment during the unloading.
As common carrier, they are bound to observe extraordinary diligence in the vigilance over
the goods transported by them. Subject to certain exceptions enumerated under Article
1734 of the Civil Code, common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is
liable for the cargo from the time it is turned over to him at the dock or afloat alongside the
vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at
the port of unloading, unless agreed otherwise.
COGSA provides that under every contract of carriage of goods by sea, the carrier in relation
to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall
be subject to the responsibilities and liabilities and entitled to the rights and immunities set
forth in the Act. Section 3 (2) thereof then states that among the carriers responsibilities are
to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods
carried.
On the other hand, the functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the consignee or shipper and the
ship's tackle. 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.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody. Thus, in this case the appellate court is correct
insofar as it ruled that an arrastre operator and a carrier may not be held solidarily liable at
all times. But the precise question is which entity had custody of the shipment during its
unloading from the vessel?
The records are replete with evidence which show that the damage to the bags happened
before and after their discharge and it was caused by the stevedores of the arrastre operator
who were then under the supervision of Wallem.
It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier. In the instant case, the damage or losses were
incurred during the discharge of the shipment while under the supervision of the carrier.
Consequently, the carrier is liable for the damage or losses caused to the shipment. As the
cost of the actual damage to the subject shipment has long been settled, the trial courts
finding of actual damages in the amount of P397,879.69 has to be sustained.
(4) MrTalens credibility must be respected.
CA's decision is set aside. Wallem is liable.
NEW WORLD VS NYK-FILJAPAN (G.R. NO. 171468 AUGUST 24, 2011)
New World International Philippines Inc. vs Nyk-FilJapan Shipping Corp.
G.R. No. 171468 August 24, 2011
Facts: Petitioner New World International Development (Phils.), Inc. (New World) bought
from DMT Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech) three
emergency generator sets worth US$721,500.00. DMT shipped the generator sets by truck
from Wisconsin, United States, to LEP Profit International, Inc. (LEP Profit) in Chicago,
Illinois. From there, the shipment went by train to Oakland, California, where it was loaded
on S/S California Luna V59, owned and operated by NYK Fil-Japan Shipping Corporation
(NYK) for delivery to petitioner New World in Manila. NYK issued a bill of lading, declaring
that it received the goods in good condition. NYK unloaded the shipment in Hong Kong and
transshipped it to S/S ACX Ruby V/72 that it also owned and operated. On its journey to
Manila, however, ACX Ruby encountered typhoon Kadiang whose captain filed a sea protest
on arrival at the Manila South Harbor on October 5, 1993 respecting the loss and damage
that the goods on board his vessel suffered. Marina Port Services, Inc. (Marina), the Manila
South Harborarrastre or cargo-handling operator, received the shipment on October 7,
1993. Upon inspection of the three container vans separately carrying the generator sets,
two vans bore signs of external damage while the third van appeared unscathed. The
shipment remained at Pier 3s Container Yard under Marinas care pending clearance from
the Bureau of Customs. Eventually, on October 20, 1993 customs authorities allowed
petitioners customs broker, Serbros Carrier Corporation (Serbros), to withdraw the
shipment and deliver the same to petitioner New Worlds job site in Makati City. An
examination of the three generator sets in the presence of petitioner New Worlds
representatives, Federal Builders (the project contractor) and surveyors of petitioner New
Worlds insurer, SeaboardEastern Insurance Company (Seaboard), revealed that all three
sets suffered extensive damage and could no longer be repaired. For these reasons, New
World demanded recompense for its loss from respondents NYK, DMT, Advatech, LEP Profit,
LEP International Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK
acknowledged receipt of the demand, both denied liability for the loss.
Issue: Whether or not petitioner is entitled to the claim based from the insurance policy
including interests in the delay of the release of such claim.
Held: Yes. The marine open policy that Seaboard issued to New World was an all-risk policy.
Such a policy insured against all causes of conceivable loss or damage except when
otherwise excluded or when the loss or damage was due to fraud or intentional misconduct
committed by the insured. The policy covered all losses during the voyage whether or not
arising from a marine peril.
Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice,
delay in voyage, or vessels unseaworthiness, among others. But Seaboard had been unable
to show that petitioner New Worlds loss or damage fell within some or one of the
enumerated exceptions.
Seaboard cannot pretend that the above documents are inadequate since they were
precisely the documents listed in its insurance policy. Being a contract of adhesion, an
insurance policy is construed strongly against the insurer who prepared it. The Court cannot
read a requirement in the policy that was not there.
Section 241 of the Insurance Code provides that no insurance company doing business in
the Philippines shall refuse without just cause to pay or settle claims arising under
coverages provided by its policies. And, under Section 243, the insurer has 30 days after
proof of loss is received and ascertainment of the loss or damage within which to pay the
claim. If such ascertainment is not had within 60 days from receipt of evidence of loss, the
insurer has 90 days to pay or settle the claim. And, in case the insurer refuses or fails to pay
within the prescribed time, the insured shall be entitled to interest on the proceeds of the
policy for the duration of delay at the rate of twice the ceiling prescribed by the Monetary
Board.
Notably, Seaboard already incurred delay when it failed to settle petitioner New Worlds
claim as Section 243 required. Under Section 244, a prima facie evidence of unreasonable
delay in payment of the claim is created by the failure of the insurer to pay the claim within
the time fixed in Section 243.
Consequently, Seaboard should pay interest on the proceeds of the policy for the duration of
the delay until the claim is fully satisfied at the rate of twice the ceiling prescribed by the
Monetary Board. The term ceiling prescribed by the Monetary Board means the legal rate of
interest of 12% per annum provided in Central Bank Circular 416, pursuant to Presidential
Decree 116. Section 244 of the Insurance Code also provides for an award of attorneys fees
and other expenses incurred by the assured due to the unreasonable withholding of
payment of his claim.
NEW ZEALAND INS. CO., LTD. V. CHOA JOY, G.R. NO. L- 7311, SEPT. 30, 1955
What are the requisites before claim for damages under Art. 366 may be demanded?
1. Consignment of goods through a common carrier, by a consignor in one place to a
consignee in another place; and
2. The delivery of the merchandise by the carrier to the consignee at the place of destination
(New Zealand Ins. Co., Ltd. v. Choa Joy, G.R. No. L- 7311, Sept. 30, 1955).
This is an action for the recovery of the sum of P5,196.20 with legal interest thereon from
the date of the filing of the complaint.
FACTS
On May 20, 1950, the ship "Jupiter", on her voyage No. 149, received on board at Carangian,
Samar, in good order and condition, 107 bundles of first class loose weight hemp weighing
8,273 kilos, of 130.80 piculs, valued at P6,736.20, from Lee Teh& Co., Inc., for transportation
and delivery to Manila, under a bill of lading issued by the carrier to the shipper. The ship
was owned by Adriano Choa" Joy, doing business under the name of South Sea Shipping
Line, while the cargo was shipped by the branch office of Lee Teh& Co., Inc. at Carangian,
Samar, for transportation and delivery to its main office at Manila.
The cargo failed to arrive in Manila because the vessel ran aground while entering the
Laoang Bay, Samar, due to the negligence of its captain, Jose Molina, who, in the
investigation conducted by the Marine Board of Inquiry, was found negligent of his duties
and was suspended from office for a period of three months. Of the cargo, only 7,590 kilos,
or 120 piculs of hemp, were saved and because of their damaged condition, they were sold
for the sum of P2,040, the consignor having spent P500 for their salvage, thereby causing
Lee Teh& Co., Inc. losses in the sum of P5,196.20.
The cargo was insured by the New Zealand Insurance Co., Ltd., and because of the damage
caused to said cargo while in transit, the losses were paid by said company to the shipper.
The carrier having refused to reimburse these damages despite demands made to that
effect, the insurance company, as subrogee of the shipper instituted the present action
before the Court of First Instance of Manila.

CFI found that, while the shipper has suffered damages because of the inability of the carrier
to transport the cargo as agreed upon, however, the liability of the carrier did not attach
because of the failure of the shipper or of the consignee to file its claim for damages within
24 hours from receipt of the cargo as required by law. Consequently, the court dismissed the
case, with costs against the plaintiff. Plaintiff brought this case on appeal directly to this
Court.
issue: "Whether Lee Teh& Co., Inc. of Manila, as consignee, or Lee Teh& Co., Inc., of
Catarman, Samar, as consignor, should have filed its claim for damages to the cargo with the
shipping company, herein defendant, within twenty four hours from the date the said cargo
was salvaged by the consignor, in accordance with Article 366 of the Code of Commerce for
this action to prosper, or that neither the said consignee nor the said consignor was under
the obligation to file the said claim within the said period, as they are not bound by the
provisions of Article 366 of the Code of Commerce."
Article 366 of the Code of Commerce, which was applied by the court, provides:
"Within twenty-four hours following the receipt of the merchandise, the claim against the
carrier for damage or average which may be found therein upon opening the packages, may
be made, provided that the indications of the damage or average which gives rise to the
claim cannot be ascertained from the outside part of such packages, in which case the claim
shall be admitted only at the time of receipt.
"After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered."
It would appear from the above that in order that the condition therein provided may be
demanded there should be a consignment of goods, through a common carrier, by a
consignor in one place to a consignee in another place. And said article provides that the
claim for damages must be made "within twenty-four hours following the receipt of the
merchandise" by the consignee from the carrier. In other words, there must be delivery of
the merchandise by the carrier to the consignee at the place of destination. In the instant
case, the consignor is the branch office of Lee Teh& Co., Inc. at Catarman, Samar, which
placed the cargo on board the ship Jupiter, and the consignee, its main office at Manila. The
lower court found that the cargo never reached Manila, its destination, nor was1 it ever
delivered to the consignee, the office of the shipper in Manila, because the ship ran aground
upon entering Laoang Bay, Samar on the same day of the shipment. Such being the case, it
follows that the aforesaid article 366 does not have application because the cargo was never
received by the consignee. Moreover, under the bill of lading issued by the carrier (Exhibit
C), it was the tetter's undertaking to bring the cargo to its destination Manila, and deliver it
to consignee, which undertaking was never complied with. The carrier, therefore, breached
its contract, and, as such, it forefeited its right to invoke in its favor the conditions required
by article 366.
One case parallel to the present is Roldan vs. Lim Ponzo& Co., 37 Phil, 285. In that case,
plaintiff sought to recover damages for failure of defendant to transport 2,244 packages of
sugar from plaintiff's hacienda to Iloilo. It was proven that the cargo did not reach its
destination because the lorcha carrying it was wrecked in the river Jalaud through the
negligence and lack of skill of the master of ithelorcha. And of the total cargo of 2,244
packages of sugar, only 1,022 were saved in damaged condition through the efforts made by
the shipper. Because plaintiff failed to comply with the requirement of article 366 of the
Code of Commerce, the lower court found for defendant and dismissed the case. But this
Court held that said article "is limited to cases of claims for damages to goods actually
received by the consignee; it has no application in cases wherein the goods entrusted to the
carrier are not delivered to the consignee by the carrier in pursuance of the terms of the
carriage contract." Elaborating on this point, this Court commented:
"Article 366 of the Commercial Code is limited to cases of claims for damages to goods
actually turned over by the carrier and received by the consignee, whether those damages
be apparent from an examination of the packages in which the goods are delivered, or of
such character that the nature and extent of the damage is not apparent until the packages
are opened and the contents examined. Clearly it has no application in cases wherein the
goods entrusted to the carrier are not delivered by the carrier to the consignee. In such
cases there can be no question of & claim for damages suffered by the goods while in
transport, since the claim for damages arises exclusively out of the failure to make delivery."
***
"We are of opinion, however, that the necessity for making the claim in accordance with that
article did not arise if, as it is alleged, these 1,022 packages, of sugar were recovered from
the wreck by the plaintiff, himself^ in an effort, by his own activities, to save his property
from total loss. The measures to be taken under the terms of Article 367 of the Code when
the parties are unable to arrive at an amicable settlement of claims for damages set up in
accordance with Article 866, quite clearly indicate that the necessity for the presentation of
claims under this article arises only in those cases wherein the carrier makes delivery and
the consignee receives the goods in pursuance of the terms of the contract."
It is true that in the instant case there is some disagreement as to whether the salvage of the
portion of the cargo that was saved was due to the efforts of the carrier itself or to the
combined efforts of the latter and the shipper as a result of which the salvaged cargo was
placed in possession of the shipper who sold it and deducted its proceeds from the liability
of the carrier. But this discrepancy, in our opinion, would seem to be immaterial because the
law as well as the contract contemplates delivery of the cargo to the consignee at its port of
destination in order that the benefit of the law may be availed of. The liability of the carrier
must be determined in the light of the carriage contract, and since that contract calls for
reciprocal obligations, the carrier cannot demand fulfillment of its part from the shipper or
consignee unless it first complies with its own obligation. (Article 1100, old Civil Code.) The
fact that the consignor is but the branch office of the company that shipped the goods, and
the consignee is the main office at Manila, is of no moment, because the duties of each party
under the law are different. Moreover, even if the consignor and the consignee be
considered as one and the same party, still the carrier cannot disclaim responsibility under
its contract for the simple reason that it failed to comply with its obligation to bring the
cargo to its destination. This breach alone justifies its liability under the carriage contract.
Wherefore, the decision appealed from is hereby reversed, and another one will be entered
ordering the defendant to pay the plaintiff the sum of P5,196.20, with legal interest thereon
from the filing of the complaint, with costs against appellee.
Bengzon, Acting C.J., Padilla, Montemayor, Jugo, Labrador, Concepcion, and Reyes, J.B.L., JJ.,
concur.
Transportation Case Digest: Mayer Steel Pipe Corp. V. CA (1997)
G.R. No. 124050 June 19, 1997
Ancillary Contracts (transportation)
FACTS:
 1983: Hongkong Government Supplies Department (Hongkong) contracted Mayer
Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and
fittings
 August to October, 1983: Mayer shipped the pipes and fittings to Hongkong as
evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-
1017 and MSPC-1022
 Prior to the shipping, Mayer insured the pipes and fittings against all risks with
South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp.
(Charter)
 South Sea:Invoice Nos. MSPC-1014, 1015 and 1025 for US$212,772.09
 Charter: Invoice Nos. 1020, 1017 and 1022 for US$149,470.00
 Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as
third-party inspector to examine whether the pipes and fittings are manufactured in
accordance with the specifications in the contract
 Industrial Inspection certified all the pipes and fittings to be in good order
condition before they were loaded in the vessel
 When the goods reached Hongkong, it was discovered that a substantial
portion thereof was damaged
 Mayer and Hongkong a claim against private respondents for indemnity under the
insurance contract
 Charter paid petitioner Hongkong the amount of HK$64,904.75
 demanded payment of the balance of HK$299,345.30 which was refused
 April 17, 1986: filed an action to recover HK$299,345.30
 Defense: insurance surveyor's report allegedly showed that the damage is a
factory defect
 Trial Court: in favor of Mayer and Hongkong
 CA: reversed
 affirmed the finding of the trial court that the damage is not due to factory
defect and that it was covered by the "all risks" insurance policies
 BUT held that Section 3(6) of the Carriage of Goods by Sea Act provides that
"the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the
goods or the date when the goods should have been delivered
 applies not only to the carrier but also to the insurer
ISSUE: W/N Section 3(6) of the Carriage of Goods by Sea also applies to insurer
HELD: NO. Petition is granted. CA reversed. RTC reinstated
 Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship
shall be discharged from all liability for loss or damage to the goods if no suit is filed
within one year after delivery of the goods or the date when they should have been
delivered. Under this provision, only the carrier's liability is extinguished if no suit
is brought within one year. But the liability of the insurer is not extinguished
because the insurer's liability is based not on the contract of carriage but on the
contract of insurance - governed by the Insurance Code
 An insurance contract is a contract whereby one party, for a consideration known as
the premium, agrees to indemnify another for loss or damage which he may suffer
from a specified peril
 "all risks" insurance policy covers all kinds of loss other than those due to
willful and fraudulent act of the insured
 prescribes in ten years, in accordance with Article 1144 of the New Civil
Code
RIZAL SURETY v. MACONDRAY
130 Phil. 936
CONCEPCION, C.J.:
Plaintiff, Rizal Surety & Insurance Company seeks the reversal of a decision of the Court of
First Instance of Manila dismissing the complaint herein, with costs.
Plaintiff seeks to recover from defendant, Macondray Co., Inc., as authorized agent, in
Manila, of Barber Steamship Line, Inc., which operates the vessel "SS Tai Ping," the sum of
P2,020.00, representing the maximum value recoverable under the corresponding- bill of
lading of some machinery parts shipped, on board said vessel, at New York, and consigned
to Edwardson Manufacturing Corporation, in Manila, but not discharged by the vessel in
Manila, in view of which the plaintiff had to pay, pursuant to its contract of insurance with
the consignee, the value of said effects to the latter.
In its answer, the defendant set up the defense of pre-scription which the lower court
sustained. Hence, the dismissal of the complaint, which has been appealed directly to this
Court.
Defendant's plea is predicated upon Section 3, Title I, of the Carriage of Goods by Sea Act,
the penultimate paragraph of subparagraph 6 of which reads:
"In any event the carrier and the ship shall be discharged from all liability in respect to loss
or damages unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered: Provided, That if a notice of loss or damage,
either apparent or concealed, is not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within one year after the delivery of
the goods or the date when the goods should have been delivered."
The only question submitted for our determination is whe-ther the period of prescription in
the foregoing provision is con-trolling in the case at bar, considering the conditions
obtaining therein.
Plaintiff maintains the negative view, upon the theory that the above-quoted provision
cannot apply when the shipment in question has not been discharged from the carrying
vessel, as in the case at bar. In such event, it claims, our general statute of limi-tations of
action should apply.
We find no merit in this contention. The aforementioned provision contemplates not only
the case of damage, but also, that of loss. It goes without saying that there could be no
possible charge of goods lost during the voyage and before reaching the destination. Then
again, said provision, likewise, anticipates two (2 other possibilities, viz.: 1) that delivery
has been made, in which case the action should be brought "within one year after delivery of
the goods;" or 2) that no delivery has taken place, in which event said period should be
computed from "the date when goods should have been delivered." In the latter
contingency, the cause of such non-delivery that is to say, whether the goods have been
discharged from the vessel or not is immaterial. If the goods have not been discharged from
the vessel, the non-delivery is imputable to the carrier. So would it be, if the goods had been
unloaded from the vessel, but not delivered to the consignee. Indeed, in such case of
discharge of the goods from the vessel, the carrier would still be liable for non-delivery of
goods, because the same would be due to its own omission, if undertook to make the
delivery by itself, or to the omission of its agent, if the carrier entrusted the custody of the
goods and/or its delivery to a third party.
Again, our statute of limitations of action cannot be applied to the present case because the
corresponding bill of lading which is the contract and, hence, the law between the parties
expressly stipulates that it is "subject to the Provisions of the Carriage by Sea Act of the U. S.
of America, approved April 16, 1936 which shall be deemed to be incorporated" therein.
The lower court held, and, correctly, that, inasmuch as "SS Tai Ping" arrived at the Port of
Manila on November 2, 1962 and left it on November 4, 1962, it was on the latter date that
the carrier had the last opportunity to deliver the goods; that the period of one year within
which the carrier could be sued commence to run, therefore, from November 5, 1962 and
expired on November 4, 1963; and that said period has expired before this action was
commenced on February 10, 1964.
WHEREFORE, the decision appealed from should as it is hereby, affirmed, with costs against
plaintiff-appellant.
IT IS SO ORDERED.
Union Carbide Philippines, Inc. vs. Manila Railroad Co. (1977)
FACTS
- Dec 18 1961: the vessel Daishin Maru arrived in Manila with a cargo of synthetic resin
which was later sold to Union Carbide Philippines, Inc.
- Dec 19 1961: that cargo was delivered to the Manila Port Service in good order and
condition except for 25 bags which were in bad order
- 898 bags of resin out of the 1,000 bags were delivered by the customs broker to the
consignee. 102 bags were missing. 25 bags were damaged or pilfered while they were in the
custody of the arrastre operator.
- The consignee filed with the Manila Port Service, as arrastre operator, and the American
Steamship Agencies, Inc., as agent of the carrier, a provisional claim advising them that the
shipment in question was "shorthanded, short delivered and/or landed in bad order"
- Formal claims were then filed but as the claims were not paid, Union Carbide Philippines,
Inc. filed a complaint for the recovery of damages on Dec 21, 1962
- Union Carbide's complaint was a joinder of 2 causes of action. One was an action in
admiralty under the Carriage of Goods by Sea Act against the carrier's agent for the value of
25 bags of resin which were damaged before they were landed. The other was an action
under the management contract between the Bureau of Customs and the Manila Port
Service, a subsidiary of the Manila Railroad Company, for the recovery of the value of the
undelivered 102 bags of resin and 25 bags, the contents of which were damaged or pilfered
while in the custody of the arrastre operator.
- TC dismissed the case as to the carrier's agent on the ground that the action had already
prescribed because it was not "brought w/in 1 year after delivery of the goods", as
contemplated in section 3(6) of the Carriage of Goods by Sea Act. The 1-year period was
counted from December 19, 1961 when the cargo was delivered to the arrastre operator.
The action was brought on December 21, 1962 or 2 days late, according to the TC's
reckoning. With respect to the consignee's claim against the arrastre operator, TC found that
the provisional claim was filed within the 15-day period fixed in the arrastre contract but
the TC still dismissed the action against the arrastre operator.
- CA elevated the case to court
- Union Carbide alleged that the TC erred (1) in finding that its action was barred by the
statute of limitations and (2) in not holding that the carrier and the arrastre operator were
liable for the value of the undelivered and damaged cargo.
ISSUE:
1. WoN the action was barred by the statute of limitations? YES
2. WoN the carrier and the arrastre operator were liable for the value of the undelivered
and damaged cargo? YES
RATIO
1. Under the Carriage of Goods by Sea Act, the 1-year period within which the consignee
should sue the carrier is computed from "the delivery of the goods or the date when the
goods should have been delivered".
TC construed delivery as referring to the discharge or landing of the cargo.
Union Carbide contends that "delivery" does not mean the discharge of goods or the delivery
to the arrastre operator but the actual delivery of the goods to the consignee by the customs
broker.
The carrier contends that delivery means discharge from the vessel into the custody of the
customs arrastre operator because under sections 1201 and 1206 of the Tariff and Customs
Code merchandise cannot be directly delivered by the carrier to the consignee but should
first pass through the customhouse at a port of entry for the collection of customs duties.
What is the meaning of "delivery" in section 3(6) of the Carriage of Goods by Sea Act? Tariff
and Customs Code allows the delivery of imported merchandise to the arrastre operator.
Delivery within the meaning of section 3(6) of the Carriage of Goods by Sea Law means
delivery to the arrastre operator. That delivery is evidenced by tally sheets which show
whether the goods were landed in good order or in bad order, a fact which the consignee or
shipper can easily ascertain through the customs broker.
To use as basis for computing the one-year period the delivery to the consignee would be
unrealistic and might generate confusion between the loss or damage sustained by the
goods while in the carrier's custody and the loss or damage caused to the goods while in the
arrastre operator's possession.
Section 3(6) adheres to the common-law rule that the duty imposed water carriers was
merely to transport from wharf to wharf and that the carrier was not bound to deliver the
goods at the warehouse of the consignee. The common-law requirements as to the proper
delivery of goods by water carrier apply only when customs regulations at the port of
destination do not otherwise provide. The delivery must be in accordance with the usages of
the port in order that such delivery would discharge the carrier of responsibility.
In this case, we held that the one-year period was correctly reckoned by the trial court from
December 19, 1961. Inasmuch as the action was filed on December 21, 1962, it was barred
by the statute of limitations. Defendant American Steamship Agencies, Inc., as agent of the
carrier, has no more liability to the consignee's assignee, Union Carbide Philippines, Inc., in
connection with the damaged twenty-five bags of resin.
2. The liability of the arrastre contractor has a factual and legal basis different from that of
the carrier's. The management contract between the Manila Port Service and the Bureau of
Customs provides that the action against the arrastre operator to enforce liability for loss of
the cargo or damage thereto should be filed within 1 year from the date of the discharge of
the goods or from the date when the claim for the value of such goods has been rejected or
denied by the arrastre operator.
But before the action can be filed, a condition precedent should be complied with-- that a
claim (provisional or final) shall have been previously filed with the arrastre operator w/in
15-days from the date of the discharge of the last package from the carrying vessel.
In this case, the consignee's customs broker filed with the Manila Port Service a provisional
claim on January 3, 1962 or on the 15th day following December 19, 1961, the date of the
discharge of the last package from the carrying vessel. That claim was never formally rejected
or denied by the Manila Port Service.
Having complied with the condition precedent for the filing of a claim within the 15-day
period, Union Carbide could file the court action within 1 year, either from December 19,
1961 or from December 19, 1962. This second date is regarded as the expiration of the
period within which the Manila Port Service should have acted on the claim.
Thus, the claimant or consignee has a 2-year prescriptive period, counted from the date of the
discharge of the goods, within which to file the action in the event that the arrastre
contractor, as in this case, has not rejected nor admitted liability.
The arrastre operator is responsible for the value of 102 bags of resin which were not
delivered, and twenty-five bags, which were damaged, or a total of one hundred twenty-
seven bags valued at P6,185.22.
Dispositive: TC's judgment is affirmed insofar as it dismissed plaintiff-appellant's claim
against defendant American Steamship Agencies, Inc. on the ground of prescription BUT
reversed insofar as it dismissed plaintiff's claim against the Manila Railroad Company, as
arrastre operator.
What cases are covered under the COGSA?
It applies only in case of loss or damage, and not to misdelivery or conversion of
goods. (Ang v. American Steamship Agencies, Inc., G.R. No. L-22491, Jan. 27,
2967)
Domingo Ang vs. American Steamship agencies inc.
Articles 17 & 18
FACTS:
Yau Yae comerical Bank LTD of Hongkong represented by Yau Yae agreed to sell 140
packsges of galvanized steel dursink sheets to one Herminio G Teves. Said agreement was
subject to the terms and arrangements.
Pursuant to said terms and arrangements, Yau Yae through Tokyo boeki LTD of Tokyo
Japan, shipped the articles at Yakata, Japan and later to Manila which was processed by
American Staemship Agencies INC. in which under a shipping agreement or bill of lading it
consigned to order of the shipper with Mr Teves.
On May 9, 1961 the article arrived in manila, and under the bill of lading of the arrival of the
goods and requested payments of the demand draft representing the purchased price of the
article, however, Mr Teves did not pay the demand draft to Hongkong and Shanghai bank
where it was to be processed the payments. Prompting the bank to make corresponding
protest and the bank likewise returned the bill of lading and demand draft to Yau Yae which
later endorsed the bill of lading to Domingo Ang.
Meanwhile, despite his non-payments of the purchase price of the articles. Teves was able to
obtain a bank guaranty in favor of American Steamship agencies INC. as carriers agent to the
effect that he would surrender the negotiable bill of lading duly endorsed by Yau Yae on the
strength of this guaranty. Teves succeded in securing a permit to deliver imported goods
from the carriers agent, which he presented to Bureau of customs which in turn release to
him the articles covered by the bill of lading.
Subsequently, Domingo Ang claimed for the articles from the American steamship agencies
Inc. by presenting the indorsed bill of lading, but he was informed by the latter that the
articled he claimed was already delivered to Mr. Teves.
ISSUE:
Whether or not the American Steamship Agencies Inc. punishable under carriage of goods
by Sea act for misdelivery of goods?
HELD:
When the delivery of articles carried by the herein defendant-appellee (American steamship
agencies Inc) on May 9, 1961 to Herminio Teves but supposedly to Mr Domingo Ang
,plaintiff-appellant and upon knowing by the plaintiff-appellant that the articles intended to
him was misdelivered to other person, he filed in court of first instance of Manila on October
30, 1963 against American Steamship agencies Inc for allegedly wrongful delivery of goods
belonging to him.
The defendant-appellee filed motion to dismissed with the contention that the ground of the
plaitiff’s caused of action is prescribed under the carriage of goods by sea act particular
section 3(6) paragraph 4, which provides that;
“In any event, the carrier and the ship shall be discharge from all liability in respect to loss
or damage unless suit is brought within one year, after delivery of the goods or date when
the goods should have been delivered”
The defendant further contented that the action of the plaintiff-appellant even allowing a
reasonable time from the date of delivery on May 9, 1961, still initiated his action on
October 30, 1963 which beyond the prescribed period of One (1) year under the preceding
paragraph.
The court rendered it decision dismissing the complaint of the plaintiff, appellant for the
ground of prescription, however the provision involved in this case as mentioned earlier
speaks ”loss or damage” despite that the plaintiff filed motion for reconsideration and it has
been denied by the lower court, afterwards, the plaintiff directly appealed to the higher
court for the matter that; has plaintiff-appellant cause of action prescribed under section
3(6) paragraph 4 of the carriage of goods by sea act?
The court ruled that, the word” loss or damage “as speaks to the provision in this case was
not transpired because only the misdelivery of goods occurred to the defendant, and upon
admitted by the defendant in motion to dismissed that the articles belongs for Mr. Ang has
been misdelivered to Mr. Teves.
Therefore it clearly shows that the defendant violates the provision of civil code of the
Philppines particular in Article 1144, which provides; the following actions must be brought
within ten (10) years from the time the right of the action accrues, paragraph (1) upon a
written contract and Article 1146, the following action must be instituted within four(4)
years, paragraph (2) quasi delict, wherein it supplies the deficiency provided in article 18 of
the same code. To read” in matters which are governed by the code of commerce and
special laws, their deficiency shall be supplied by the provision of this code.”
Wherefore, suits predicated not upon loss or damage but misdelivery of goods that so, the
defendant was not held liable for carriage of goods by sea act and the court hereby
reversed the dismissal order afterwards remanded to the lower court for further
proceedings.
FILIPINO MERCHANTS INSURANCE CO., Inc. v. CA
GR No. 85141 Nov. 28, 1989 Second Division [Regalado]
Nature: Petition for review on certiorari challenging a CA decision finding
FilMerchant liable to pay plaintiff.
Facts:
This is a story about a consignee/buyer who bought fishmeal
products from Bangkok and had it delivered to the port of Manila. He
entered into an insurance contract with defendant insurance company
(FilMerchant) under policy no. M-2678 for P267,653.59 and for goods
described as 600 metric tons of fishmeal in new gunny bags of 90 kilos each.
What was actually imported was 59.940mtons in 666 gunny bags. Upon
arrival at Manila, arrastre and defendant’s surveyor found 227 bags in bad
order condition. Because of this loss, buyer formally claimed from
FilMerchant but the said insurance company refused to pay. He brought suit.
Trial court ruled for him and against FilMerchant, CA affirmed trial court
hence this petition.
FilMerchant argues: (1) CA erred in the interpretation and application of the “all risk”
clause of maritime insurance policy. It says it should not be held
liable for partial loss notwithstanding the clear absence of proof of
some fortuitous event, casualty, or accidental cause to which the loss
is attributable.
(2) Respondent had no insurable interest in the subject cargo. The
shipment reveals that it is a “C & F” contract of shipment. The seller,
not the consignee, paid for the shipment. As there was yet no
delivery to the consignee, ownership (and interest) does not yet pass
to him.
Issues: W/N CA was correct in its interpretation of the “all risk” clause in
the maritime insurance contract.
W/N the insured had insurable interest over the property insured.
Ruling:
a) “All risks policy” has no technical meaning.
The clause in question reproduced:
“5. This insurance is against all risks of loss or damage to the subject-matter insured
but shall in no case be deemed to extend to cover loss, damage, or expense
proximately caused by delay or inherent vice or nature of the subject-matter insured.
Claims recoverable hereunder shall be payable irrespective of percentage “
An "all risks policy" should be read literally as meaning all risks whatsoever and covering all
losses by an accidental cause of any kind. The very nature of the term "all risks" must be
given a broad and comprehensive meaning as covering any loss other than a willful and
fraudulent act of the insured. 7 This is pursuant to the very purpose of an "all risks" insurance
to give protection to the insured in those cases where difficulties of logical explanation or
some mystery surround the loss or damage to property.
Burden of proof shifts to the insurer.
Generally, the burden of proof is upon the insured to show that a loss arose from a covered
peril, but under an "all risks" policy the burden is not on the insured to prove the precise
cause of loss or damage for which it seeks compensation. The insured under an "all risks
insurance policy" has the initial burden of proving that the cargo was in good condition when
the policy attached and that the cargo was damaged when unloaded from the vessel;
thereafter, the burden then shifts to the insurer to show the exception to the coverage.
b) Vendee/Consignee has insurable interest
SC: The shipment contract being that of cost and freight (C&F) is immaterial in the
determination of insurable interest. The perfected contract of sale vests in the vendee an
equitable title, an interest sufficient enough to be insurable. Further, Art. 1523 NCC
provides that where, in pursuance of a contract of sale, the seller is authorized or
required to send the goods to the buyer, delivery of the goods to a carrier, whether
named by the buyer or not, for, the purpose of transmission to the buyer is deemed to be
a delivery of the goods to the buyer, the exceptions to said rule not obtaining in the
present case. The Court has heretofore ruled that the delivery of the goods on board the
carrying vessels partake of the nature of actual delivery since, from that time, the
foreign buyers assumed the risks of loss of the goods and paid the insurance premium
covering them.
WHEREFORE, the instant petition is DENIED and the assailed decision of the respondent
Court of Appeals is AFFIRMED in toto.
DOLE PHILIPPINES, INC. v MARITIME COMPANY OF THE PHILIPPINES
Facts:
The cargo subject of the instant case was discharged in Dadiangas unto the custody of the consignee,
Dole Philippines. The corresponding claim for the damages sustained by the cargo was filed by the
plaintiff with the defendant, Maritime Company on May 4, 1972.
On June 11, 1973 the plaintiff filed a complaint in the CFI Manila embodying 3 causes of action
involving 3 separate and different shipments. The third cause of action therein involved the cargo now
subject of this present litigation.
On December 11, 1974, Judge Serafin Cuevas issued an Order dismissing the first two causes of
action. The third cause of action which covered the cargo subject of this case now was likewise
dismissed but without prejudice as it was not covered by the settlement. Because of the dismissal of the
complaint with respect to the third cause of action, DOLE instituted this present complaint on January 6,
1975.
Maritime filed an answer pleading inter alia the affirmative defense of prescription under the provisions
of the Carriage of Goods by Sea Act. The Trial Court granted the motion, scheduling the preliminary
hearing on April 27, 1977. The record before the Court does not show whether or not that hearing was
held, but under date of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the
ground of prescription.
The Trial Court, after due consideration, resolved the matter in favor of Maritime and dismissed the
complaint.
Issue:
Whether or not Article 1155 of the Civil Code applies in lieu of the COGSA.
Held:
No. Article 1155 of the Civil Code provides that the prescription of actions is interrupted by the making
of an extrajudicial written demand by the creditor
Section 3, paragraph 6 of the COGSA provides that:
the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or the date when the goods should have been
delivered; Provided, That, if a notice of loss or damage, either apparent or conceded, is not given as
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when.the goods should have been delivered.
1. Dole argues that since the provisions of the Civil Code are, by express mandate of said Code,
suppletory of deficiencies in the Code of Commerce and special laws in matters governed by the latter
and there being a patent deficiency with respect to the tolling of the prescriptive period provided for in
the Carriage of Goods by Sea Act, prescription under said Act is subject to the provisions of Article
1155 of the Civil Code on tolling. Since Dole's claim for loss or damage was filed on May 4, 1972
amounted to a written extrajudicial demand which would toll or interrupt prescription under Article 1155,
it operated to toll prescription also in actions under the Carriage of Goods by Sea Act.
These arguments might merit weightier consideration were it not for the fact that the question has
already received a definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire &
Marine Insurance Co., Ltd. vs. American President Lines, Inc.
2. Dole argues that it was error for the court not to have considered the action of plaintiff-appellant
suspended by the extrajudicial demand which took place, according to defendant's own motion to
dismiss on August 22, 1952.
Court noticed that while plaintiff avoids stating any date when the goods arrived in Manila, it relies upon
the allegation made in the motion to dismiss that a protest was filed on August 22, 1952 — which goes
to show that plaintiff-appellant's counsel has not been laying the facts squarely before the court for the
consideration of the merits of the case. We have already decided that in a case governed by the
Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription
should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.)
We hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot be made to
apply, as such application would have the effect of extending the one-year period of prescription fixed in
the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a
time as possible; the application of the provisions of Article 1155 of the new Civil Code would
unnecessarily extend the period and permit delays in the settlement of questions affecting
transportation, contrary to the clear intent and purpose of the law.
Under Dole's theory, when its claim was received by Maritime, the one-year prescriptive period was
interrupted and began to run anew from May 4, 1972, affording Dole another period of one year counted
from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new
period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than
one month after that period has expired and its right of action had prescribed.
What cases are covered under the COGSA?
Also, the deterioration of goods due to delay in their transportation constitutes
"loss" or "damage" within the meaning of Sec. 3(6) of COGSA. (Mitsui O.S.K.
Lines Ltd. v. CA, G.R. No. 119571, Mar. 11, 1998)
MITSUI VS. CA, 287 SCRA 366
Facts:
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation
represented in the Philippines by its agent, Magsaysay Agencies. It
entered into a contract of carriage through Meister Transport, Inc., an
international freight forwarder, with private respondent Lavine
Loungewear Manufacturing Corporation to transport goods of the latter
from Manila to Le Havre, France. Petitioner undertook to deliver the goods
to France 28 days from initial loading. On July 24, 1991, petitioner's
vessel loaded private respondent's container van for carriage at the said
port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped
immediately, with the result that the shipment arrived in Le Havre only on
November 14, 1991. The consignee allegedly paid only half the value of
the said goods on the ground that they did not arrive in France until the
"off season" in that country. The remaining half was allegedly charged to
the account of private respondent which in turn demanded payment from
petitioner through its agent.
Issue:
Whether or not private respondent's action is for "loss or damage" to
goods shipped, within the meaning of the Carriage of Goods by Sea Act
(COGSA).
Ruling:
No. The suit is not for "loss or damage" to goods contemplated in
§3(6), the question of prescription of action is governed not by the
COGSA but by Art. 1144 of the Civil Code which provides for a
prescriptive period of ten years. As defined in the Civil Code and as
applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act,
"loss" contemplates merely a situation where no delivery at all was made
by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence is unknown
or they cannot be recovered.
There would be some merit in appellant's insistence that the damages
suffered by him as a result of the delay in the shipment of his cargo are
not covered by the prescriptive provision of the Carriage of Goods by Sea
Act above referred to, if such damages were due, not to the deterioration
and decay of the goods while in transit, but to other causes independent
of the condition of the cargo upon arrival, like a drop in their market
value.
WALLEM PHILIPPINES SHIPPING, INC., Petitioner vs. S.R. FARMS, INC., Respondent, G.R. No.
161849, July 9, 2010
Facts: On March 25, 1992, Continental Enterprises, Ltd. loaded on board the vessel M/V
“Hui Yang,” a shipment of Indian Soya Bean Meal weighing 1,100 metric tons, for
transportation and delivery from India to Manila, with SR Farms as consignee.The vessel is
owned and operated by Conti-Feed, with petitioner Wallem as its ship agent.
On April 11, 1992, the said vessel, M/V “Hui Yang” arrived at the port of Manila and was
discharged and transferred into the custody of the receiving barges. Upon checking the
cargo, a shortage in the shipment of 80.467 metric tons was found. Petitioner then filed a
Complaint for damages against Conti-Feed and on June 7, 1993, respondent filed an
Amended Complaint impleading herein petitioner as defendant.
Petitioner denied the allegations of respondent claiming, among others, that respondent’s
claim is already barred by laches and/or prescription. RTC dismissed the petition. The CA
reversed the decision of the RTC. Hence, this petition.
Issue: Whether or not the claim against petitioner was timely filed.
Held: NO.Under Section 3 (6) of the COGSA, notice of loss or damages must be filed within
three days of delivery. Admittedly, respondent did not comply with this provision.Under the
same provision, however, a failure to file a notice of claim within three days will not bar
recovery if a suit is nonetheless filed within one year from delivery of the goods or from
the date when the goods should have been delivered.

There is no dispute that the vessel carrying the shipment arrived at the Port of Manila on
April 11, 1992 and that the cargo was completely discharged therefrom on April 15, 1992.
However, respondent erred in arguing that the complaint for damages, insofar as the
petitioner is concerned, was filed on March 11, 1993.

In the instant case, petitioner was only impleaded in the amended Complaint of June 7,
1993, or one (1) year, one (1) month and twenty-three (23) days from April 15, 1992, the
date when the subject cargo was fully unloaded from the vessel. The filing of an amended
pleading does not retroact to the date of the filing of the original; the statute of limitation
runs until the submission of the amendment.Hence, reckoned from April 15, 1992, the one-
year prescriptive period had already lapsed.