● The plaintiff (First Nationwide Assurance Corp.
) now seeks
II. TRANSPORTATION OF GOODS
1. Extraordinary Diligence
EASTERN SHIPPING LINES, INC. petitioner vs.
THE COURT OF APPEALS and the FIRST NATIONWIDE
ASSURANCE CORPORATION, respondents
G.R. No. 94151. April 30, 1991
Facts:
● On September 14, 1978 thirteen coils of uncoat ed 7-wire
stress relieved wire strand for prestressed concrete were
shipped on board the vessel 'Japri Venture,' owned and
operated by the defendant Eastern Shipping Lines, Inc., at
Kobe, Japan, for delivery to Stresstek Post-Tensioning
Phils., Inc. in Manila, as evidenced by the bill of lading,
commercial invoice, packing list and commercial invoice.
● Said cargo was insured by the plaintiff First Nationwide
Assurance Corporation for P171,923.
● On September 16, 1978, the carrying vessel arrived in
Manila and discharged the cargo to the custody of the
defendant E. Razon, Inc. from whom the consignee's
customs broker received it for delivery to the consignee's
warehouse.
● On February 19, 1979, the plaintiff (First Nationwide
Assurance Corp.) indemnified the consignee in the
amount of P171,923.00 for damage and loss to the
insured cargo, whereupon the former was subrogated for
the latter.
to recover from the defendants (Eastern Shipping Lines,
Inc. & E. Razon, Inc. what it has indemnified the
consignee, less P48,293.70, the salvage value of the cargo,
or the total amount of P123,629.30.
● The facts from the master’s report were as follows:
○ It appears that while enroute from Kobe to Manila,
the carrying vessel encountered very rough seas
and stormy weather' for three days, more or less,
which caused it to roll and pound heavily.
○ That the coils wrapped in burlap cloth and
cardboard paper were stored in the lower hold of
the hatch of the vessel which was flooded with
water about one foot deep; that the water entered
the hatch when the vessel encountered heavy
weather enroute to Manila
○ A survey of bad order cargo was conducted at the
pier in the presence of the representatives of the
consignee and the defendant E. Razon, Inc. and it
was found that seven coils were rusty on one side
each;
○ Upon survey conducted at the consignee's
warehouse it was found that the wetting (of the
cargo) was caused by fresh water' that entered the
hatch when the vessel encountered heavy weather
enroute to Manila.
○ And that all thirteen coils were extremely rusty
and totally unsuitable for the intended purpose.
 ● The complaint filed by the First Nationwide Assurance
Corp. against Eastern Shipping Lines, Inc. and E. Razon,
Inc. was dismissed by the Regional Trial Court in a decision
dated November 25, 1985. The plaintiff appealed to the
Court of Appeals, which set aside the RTC decision,
ordering the appellees to pay the appellant the sum
demanded.
● Eastern Shipping Lines, Inc. filed this petition for review by
certiorari based on the following errors:
xxxxxxxxxxx
1. CA erred in concluding that the petitioner
herein is liable despite the fact that the
cargo was discharged and delivered
complete unto the custody of the arrastre
operator under clean tally sheets.
2. CA failed to hold the petitioner relieved of
any liability over the cargo notwithstanding
it found that the same was discharged and
delivered unto the custody arrastre
operator under clean tally sheets and ergo
to be considered good order cargo when
delivered.
xxxxxxxxxx
Issue:
W/N the petitioner’s contention is proper, which relieves
him of liability due to the clean tally sheet issued upon the cargo
when the same was delivered to the arrastre operator.
Held:
Petition dismissed. The court ruled that the petitioner’s
reliance on the arrastre operator’s issuance of a clean tally sheet
over the cargo was overturned by the fact that:
1. The heavy seas and rains referred in the master’s
report were not fortuitous events since these were
conditions that an ocean-going vessel should
naturally expect during the month of September.
2. Rain-water (and not sea-water) found its way to
the cargo hold of the ship. Which clearly indicates
that care and foresight did not attend the closing
of the ship’s hatches in order to avoid this
incident.
3. Lastly, since the carrier had failed to establish any caso fortuito,
the presumption by law of fault or negligence on the part of the
carrier, under Art. 1735 of the Civil Code applies. And since the
petitioner failed to adduce evidence showing that it exercised
EXTRAORDINARY DILIGENCE in carrying the cargo, the petitioner
was thus held liable.
DELSAN TRANSPORT LINES, INC. vs. THE HON. COURT OF
APPEALS and AMERICAN HOME ASSURANCE CORPORATION
G.R. No. 127897. November 15, 2001
DE LEON, JR., J.
FACTS: Caltex entered into a contract of affreightment
with Delsan for a period of 1year whereby the said common
carrier agreed to transport Caltex’s industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the country.
Under the contract, petitioner took on board its vessel, MT
Maysun, 2,277.314 kl of industrial fuel oil to be delivered to the
Caltex Oil Terminal in Zamboanga City. The shipment was insured
with the private respondent, American Home Assurance
Corporation.
MT Maysun set sail from Batangas for Zamboanga City.
Unfortunately, the vessel sank in the early morning of August 16,
1986 near Panay Gulf in the Visayas taking with it the entire cargo
of fuel oil. AHAC paid Caltex the sum of P5,096,635.57. Due to its
failure to collect from the petitioner, AHAC filed a complaint with
the RTC for collection of a sum of money.
RTC ruled that Delsan shall be free from liability due to force
majeure. The decision of the trial court, however, was reversed,
by CA. In the absence of any explanation as to what may have
caused the sinking of the vessel coupled with the finding that the
same was improperly manned, CA ruled that the petitioner is
liable on its obligation as common carrier. Thus, this instant
petition.
ISSUE: Whether or not petitioner failed to exercise extraordinary
diligence.
HELD:YES, thus petitioner shall be held liable. From the nature of
their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of passengers transported by them,
according to all the circumstances of each case. In the event of
loss, destruction or deterioration of the insured goods, common
carriers shall be responsible unless the same is brought about,
among others, by flood, storm, earthquake, lightning or other
natural disaster or calamity. In all other cases, if the goods are
lost, destroyed or deteriorated, common carriers are presumed
to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence.
In order to escape liability for the loss of its cargo of industrial
fuel oil belonging to Caltex, petitioner attributes the sinking of MT
Maysun to fortuitous event. From the testimonies of Jarabe and
Berina, captain and chief mate, respectively of the ill-fated vessel,
it appears that a sudden and unexpected change of weather
condition occurred in the early morning of August 16, 1986; that
at around 3:15a.m. a squall (“unos”) carrying strong winds with
an approximate velocity of 30 knots per hour and big waves
averaging eighteen 18-20ft. high, repeatedly buffeted MT Maysun
causing it to tilt, take in water and eventually sink with its cargo.
This tale of strong winds and big waves by the said officers of the
petitioner however, was effectively rebutted and belied by the
weather report from PAGASA showing that from 2:00 o’clock to
8:00 o’clock in the morning on August 16, 1986, the wind speed
remained at 10-20 knots per hour while the height of the waves
ranged from .7 -2 meters in the vicinity of Cuyo East Pass and
Panay Gulf where the subject vessel sank. Thus, as the appellate
court correctly ruled, petitioner’s vessel, MT Maysun, sank with
its entire cargo for the reason that it was not seaworthy. There
was no squall or bad weather or extremely poor sea condition in
the vicinity when the said vessel sank.
Neither may petitioner escape liability by presenting in evidence
certificates that tend to show that at the time of dry-docking and
inspection by the Philippine Coast Guard, MT Maysun, was fit for
voyage. These pieces of evidence do not necessarily take into
account the actual condition of the vessel at the time of the
commencement of the voyage.
Additionally, the exoneration of MT Maysun’s officers and crew
by the Board of Marine Inquiry merely concerns their respective
administrative liabilities. It does not in any way operate to
absolve the petitioner common carrier from its civil liability
arising from its failure to observe extraordinary diligence in the
vigilance over the goods it was transporting and for the negligent
acts or omissions of its employees, the determination of which
properly belongs to the courts. In the case at bar, petitioner is
liable for the insured value of the lost cargo of industrial fuel oil
belonging to Caltex for its failure to rebut the presumption of
fault or negligence as common carrier occasioned by the
unexplained sinking of its vessel, MT Maysun, while in transit.
PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN
OWNER OF THE VESSEL M/V “NATIONAL HONOR,” NATIONAL
SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL CONTAINER SERVICES, INC.
[G.R. No. 161833. July 8, 2005]
FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the
insurer of a shipment on board the vessel M/V “National Honor,”
represented in the Philippines by its agent, National Shipping
Corporation of the Philippines (NSCP).
The M/V “National Honor” arrived at the Manila International
Container Terminal (MICT). The International Container Terminal
Services, Incorporated (ICTSI) was furnished with a copy of the
crate cargo list and bill of lading, and it knew the contents of the
crate. The following day, the vessel started discharging its cargoes
using its winch crane. The crane was operated by Olegario Balsa,
a winchman from the ICTSI, exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with
the crew and the surveyor of the ICTSI, conducted an inspection
of the cargo. They inspected the hatches, checked the cargo and
found it in apparent good condition. Claudio Cansino, the
stevedore of the ICTSI, placed two sling cables on each end of
Crate No. 1. No sling cable was fastened on the mid-portion of
the crate. In Dauz’s experience, this was a normal procedure. As
the crate was being hoisted from the vessel’s hatch, the mid-
portion of the wooden flooring suddenly snapped in the air,
about five feet high from the vessel’s twin deck, sending all its
contents crashing down hard, resulting in extensive damage to
the shipment.
PCIC paid the damage, and as subrogee, filed a case against M/V
National Honor, NSCP and ICTSI. Both RTC and CA dismissed the
complaint.
ISSUE:  loss, destruction or deterioration of the goods, the common
Whether or not the presumption of negligence is applicable in the
instant case.
HELD:  presumption of negligence does not apply to any of the following
No.
We agree with the contention of the petitioner that common
carriers, from the nature of their business and for reasons of
public policy, are mandated to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each
case. he Court has defined extraordinary diligence in the vigilance
over the goods as follows:
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and
to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the
greatest skill and foresight and “to use all reasonable means to
ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires.”
The common carrier’s duty to observe the requisite diligence in
the shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession of,
and received by, the carrier for transportation until delivered to,
or until the lapse of a reasonable time for their acceptance, by
the person entitled to receive them.] >When the goods shipped
are either lost or arrive in damaged condition, a presumption
arises against the carrier of its failure to observe that diligence,
and there need not be an express finding of negligence to hold it
liable. To overcome the presumption of negligence in the case of
carrier must prove that it exercised extraordinary diligence.
However, under Article 1734 of the New Civil Code, the
causes:
1. Flood, storm, earthquake, lightning or other natural disaster or
calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the
containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New
Civil Code which exempts the common carrier for the loss or
damage to the cargo is a closed list. To exculpate itself from
liability for the loss/damage to the cargo under any of the causes,
the common carrier is burdened to prove any of the aforecited
causes claimed by it by a preponderance of evidence. If the
carrier succeeds, the burden of evidence is shifted to the shipper
to prove that the carrier is negligent.
“Defect” is the want or absence of something necessary for
completeness or perfection; a lack or absence of something
essential to completeness; a deficiency in something essential to
the proper use for the purpose for which a thing is to be used. On
the other hand, inferior means of poor quality, mediocre, or
second rate. A thing may be of inferior quality but not necessarily
defective. In other words, “defectiveness” is not synonymous
with “inferiority.”
In the present case, the trial court declared that based on the
record, the loss of the shipment was caused by the negligence of
the petitioner as the shipper:
The same may be said with respect to defendant ICTSI. The
breakage and collapse of Crate No. 1 and the total destruction of
its contents were not imputable to any fault or negligence on the
part of said defendant in handling the unloading of the cargoes
from the carrying vessel, but was due solely to the inherent
defect and weakness of the materials used in the fabrication of
said crate.
The crate should have three solid and strong wooden batten
placed side by side underneath or on the flooring of the crate to
support the weight of its contents.
SALUDO v. CA
G.R. No. 95536, March 23, 1992
FACTS:
After the death of plaintiffs' mother, Crispina Galdo
Saludo, in Chicago, Illinois, (on) October 23, 1976, Pomierski and
Son Funeral Home of Chicago, made the necessary preparations
and arrangements for the shipment of the remains from Chicago
to the Philippines. On October 26, 1976, Pomierski brought the
remains to C.M.A.S. (Continental Mortuary Air Services) at the
airport (Chicago) which made the necessary arrangements such
as flights, transfers, etc. C.M.A.S. booked the shipment with PAL,
with Pomierski F.H. as the shipper and Mario (Maria) Saludo as
the consignee. PAL Airway Bill No. 079- 01180454 Ordinary was
issued wherein the requested routing was from Chicago to San
Francisco on board Trans World Airlines (TWA) Flight 131 of
October 27, 1976, and from San Francisco to Manila on board PAL
Flight No. 107 of the same date, and from Manila to Cebu on
board PAL Flight 149 of October 29, 1976. When petitioners
arrived at the Chicago Airport, they were informed that their
mother’s remains were on a place to Mexico City, that there were
two bodies at the terminal, and somehow they were switched.
The following day, October 28, 1976, the shipment of the remains
of Crispina Saludo arrived in San Francisco from Mexico, and was
then transferred to or received by PAL. The shipment arrived in
Manila on October 30, 1976, a day after its expected arrival on
October 29, 1976. Petitioner then filed a damage suit against
TWA and PAL. The court below absolved the two respondent
airline companies of liability. The Court of Appeals affirmed the
decision of the lower court in toto, and in a subsequent
resolution, denied herein petitioners' motion for reconsideration
for lack of merit.
ISSUE: thereto, for such duty to commence there must in fact have been
Whether or not private respondents failed to exercise delivery of the cargo subject of the contract of carriage. Only
extraordinary diligence required by law which resulted in the when such fact of delivery has been unequivocally established
switching and/or misdelivery of the remains of Crispina Saludo to can the liability for loss, destruction or deterioration of goods in
Mexico. the custody of the carrier, absent the excepting causes under
RULING: Article 1734, attach and the presumption of fault of the carrier
No. On October 26, 1976, the cargo containing the under Article 1735 be invoked.
casketed remains of Crispina Saludo was booked for PAL Flight
Number PR-107 leaving San Francisco for Manila on October 27,
1976. PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the Cargo on October 26, 1976,
but merely as a confirmation of the booking thus made for the
San Francisco-Manila flight scheduled on October 27, 1976.
Actually, it was not until October 28, 1976 that PAL received
physical delivery of the body at San Francisco, as duly evidenced
by the Interline Freight Transfer Manifest of the American Airline
Freight System and signed for by Virgilio Rosales at 1945H, or
7:45 P.M. on said date. Explicit is the rule under Article 1736 of
the Civil Code that the extraordinary responsibility of the
common carrier begins from the time the goods are delivered to
the carrier. This responsibility remains in full force and effect
even when they are temporarily unloaded or stored in transit,
unless the shipper or owner exercises the right of stoppage in
transitu, and terminates only after the lapse of a reasonable time
for the acceptance of the goods by the consignee or such other
person entitled to receive them. 30 And, there is delivery to the
carrier when the goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier for the
purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by
the carrier, the liability of the common carrier commences eo
instanti. Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to be observed by the
carrier instantaneously commences upon delivery of the goods
 RULING:
LORENZO SHIPPING V. BJ MARTHEL Petition denied. By accepting the cylinders when they were
G.R. NO. 145483 delivered to the warehouse, petitioner waived the claimed delay
Facts: in the delivery of said items. Supreme Court held that time was
Petitioner Lorenzo Shipping is engaged in coastwise not of the essence. In determining whether time is of the essence
shipping and owns the cargo M/V Dadiangas Express. BJ Marthel in a contract, the ultimate criterion is the actual or apparent
is engaged in trading, marketing and selling various industrial intention of the parties and before time may be so regarded by a
commodities. Since 1987, Respondent supplied petitioner with court, there must be a sufficient manifestation, either in the
spare parts for the latter's marine engines. Sometime in 1989, contract itself or the surrounding circumstances of that intention.
petitioner asked respondent for a quotation for various machine Petitioner insists that although its purchase orders did not specify
parts. According to the quotation it sent, deliveries of such items the dates when the cylinder liners were supposed to be
are “within 2 months after receipt of firm order.” Petitioner delivered, nevertheless, respondent should abide by the term of
thereafter issued a Purchase Order for the procurement of one delivery appearing on the quotation it submitted to petitioner.
set of cylinder liner, valued at P477,000. Petitioner ordered for Petitioner theorizes that the quotation embodied the offer from
the second time cylinder lines from the respondent stating the respondent while the purchase order represented its
term of payment to be 25% upon delivery, the balance payable in (petitioner's) acceptance of the proposed terms of the contract of
5 bi-monthly equal installments, not again stating the date of the sale. Thus, petitioner is of the view that these two documents
cylinder’s delivery. It was allegedly paid through post dated "cannot be taken separately as if there were two distinct
checks but the same was dishonored due to insufficiency of contracts."
funds.  The remaining nine postdated checks were eventually
returned by respondent to petitioner. Despite due demands by
the respondent, petitioner falied contending that time was of the
essence in the delivery of the cylinders and that there was a delay
since the respondent committed said items “ within two months
after receipt of fir order”. RTC held respondents bound to the
quotation with respect to the term of payment, which was
reversed by the Court of appeals ordering appellee to pay
appellant P954,000 plus interest. There was no delay since there
was no demand. 
Issue:
Whether or not there was late delivery of the subjects of
the contract of sale to justify petitioner to disregard the terms of
the contract considering that time was of the essence thereof

SEALOADER SHIPPING CORPORATION, Petitioner,
vs.
GRAND CEMENT MANUFACTURING CORPORATION, JOYCE
LAUNCH & TUG CO., INC., ROMULO DIANTAN & JOHNNY
PONCE, Respondents.
Facts:
Sealoader Shipping Corporation (Sealoader) is a domestic
corporation engaged in the business of shipping and hauling
cargo from one point to another using sea-going inter-island
barges.Grand Cement Manufacturing Corporation (now Taiheiyo
Cement Philippines, Inc.), on the other hand, is a domestic
corporation engaged in the business of manufacturing and selling
cement through its authorized distributors and, for which
purposes, it maintains its own private wharf in San Fernando,
Cebu, Philippines
Sealoader executed a Time Charter Party Agreement with Joyce
Launch for the chartering of MT Viper in order to tow its
unpropelled barges for a minimum of 15 days.
Sealoder entered into a contract with Grand Cement for the
loading of cement clinkers and the delivery thereof to Manila. On
March 31, 1994, Sealoder’s barge arrived at the wharf of Grand
Cement tugged by MT Viper. It was not immediately loaded as
the employees of Grand Cement were loading another vessel.
On April 4, typhoon Bising struck Cebu area. The barge was still
docked at the wharf of Grand Cement. As it became stronger, MT
Viper tried to tow the barge away but it was unsuccessful
because the towing lines connecting the vessels snapped since
the mooring lines were not cast off, which is the ultimate cause.
Hence, the barge rammed the wharf causing significant damage.
Grand Cement filed a complaint for damages (P2.4M) since
Sealoader ignored its demands. They allege that Sealoader was
negligent when it ignored its employee’s advice to move the
vessels after it had received weather updates. Sealoader filed a
motion to dismiss on the ground that Joyce Launch is the one
liable since it was the owner of MT Viper, who’s employees were
manning the vessel. Sealoader filed a cross-claim against Joyce
Launch. Joyce maintains that the damages were due to force
majeure and faulted Grand Cement’s employees for abandoning
the wharf leaving them helpless and for not warning them early
on.
Upon testimonies, the RTC rendered judgment in favor of Grand
Cement holding the two companies liable since there was
complete disregard of the storm signal, the captain of the vessel
was not present and the vessel was not equipped with a radio or
any navigational facility, which is mandatory. Joyce launch did not
appeal.
On appeal, the CA affirmed the decision but on MR, it partly
reversed its decision finding Grand Cement to be guilty of
contributory negligence since it was found that it was still loading
the other vessel at the last minute just before the storm hit,
hence Sealoder’s vessel did not move. Damages were reduced to
50%. Hence, petition for review to SC.

Issue:
Whether or not Sealoader should be liable for damage sustained
by the wharf of Grand Cement
Ruling:
YES. Sealoader is liable for its negligence. First because it was not
equipped with a radio or a navigational facility and it failed to
monitor the prevailing weather conditions. Second, it cannot pass
the responsibility of casting off the mooring lines because the
people at the wharf could not just cast off the mooring lines
without any instructions from the crew of the vessel. It should
have taken the initiative to cast off the mooring lines early on.
With regard to Grand Cement’s contributory negligence, the
court found that it was not guilty thereof. It had timely informed
the barge of the impending typhoon and directed the vessels to
move to a safer place. Sealoader had the responsibility to inform
itself of the prevailing weather conditions in the areas where its
vessel was to sail. It cannot merely rely on other vessels for
weather updates and warnings on approaching storms. For to do
so would be to gamble with the safety of its own vessel, putting
the lives of its crew under the mercy of the sea, as well as running
the risk of causing damage to property of third parties for which
it would necessarily be liable.
2. Presumption of Negligence
DELSAN TRANSPORT V. AMERICAN HOME
-Delsan is a domestic corporation that owns and operates MT
Larusan. On aug. 5 1984 Delsan received on board Larusan a
shipment consisting of 1,986,627 k/l of diesel oil at the bataan
refinery corporation for transportation and delivery to the bulk
depot in Bacolod City of Caltex Phil., pursuant to a contract of
afreightment.
-On August 7, 1984 the shipment arrived in Bacolod City.
Unloading operations commenced however later on it had to be
stopped because of the discovery that the port bow mooring of
the vessel was intentionally cut or stolen by unknown persons.
- Because of that the vessel drifted and the hose connected to the
tanker broke and caused the diesel oil to spill into the sea.
-Caltex sought recovery of the loss from Delsan but the latter
refused to pay.
-RTC ruled in favor of respondent and against delsan and the
same wait sustained by the CA
-Delsan contended that the spillage was partly due to the
contributory negligence of Caltex and that the loss through the
backflow should not be borne by Delsan because it was already
delivered to Caltex’s shore tank.
ISSUE:
WON DELSAN SHOULD BE ABSOLVED?
HELD:
NO. a.) The trial cour and the CA uniformly ruled that
Delsan failed to prove its claim that there was contributory
negligence on the part of the owner of the goods- Caltex. The
actuation of the guager and the escort surveyor, both personnel
from the Caltex Bulk Depot, negates the allegation that Caltex
was remiss in its duties. the crew of the vessel should have
exerted utmost effort to immediately inform the shore tender
that the port bow mooring line was severed. Delsan is obliged to
prove that the damage to its cargo was caused by one of the
excepted causes if it were to seek exemption from
responsibility.
b.) The subject cargo was still in the custody of Delsan
because the discharging thereof has not yet been finished when
the backflow occurred. There is no reason to imply that there was
actual delivery of the cargo to the consignee.
DELSAN TRANSPORT LINES, INC. vs. THE HON. COURT OF
APPEALS and AMERICAN HOME ASSURANCE
CORPORATION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision of
the Court of Appeals promulgated on June 17, 1996, reversing the
decision of the Regional Trial Court of Makati City, Branch 137,
ordering petitioner to pay private respondent the sum of
P5,096,635.57 and costs and the Resolution dated January 21,
1997 which denied the subsequent motion for reconsideration.
Facts:Caltex Philippines (Caltex for brevity) entered into a
contract of affreightment with the petitioner, Delsan Transport
Lines, Inc., for a period of one year whereby the said common
carrier agreed to transport Caltex’s industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the country. Under
the contract, petitioner took on board its vessel, MT Maysun,
2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered
to the Caltex Oil Terminal in Zamboanga City.  The shipment was
insured with the private respondent, American Home Assurance
Corporation. On August 14, 1986, MT Maysun set sail from
Batangas for Zamboanga City.  Unfortunately, the vessel sank in
the early morning of August 16, 1986 near Panay Gulf in the
Visayas taking with it the entire cargo of fuel oil.
Subsequently, private respondent paid Caltex the sum of
P5,096,635.57 representing the insured value of the lost
cargo.  Exercising its right of subrogation under Article 2207 of
the New Civil Code, the private respondent demanded of the
petitioner the same amount it paid to Caltex. Due to its failure to
collect from the petitioner despite prior demand, private
respondent filed a complaint with the Regional Trial Court of
Makati City, Branch 137, for collection of a sum of money.  After
the trial and upon analyzing the evidence adduced, the trial court
rendered a decision on November 29, 1990 dismissing the
complaint against herein petitioner without pronouncement as to
cost.  The trial court found that the vessel, MT Maysun, was
seaworthy to undertake the voyage as determined by the
Philippine Coast Guard per Survey Certificate Report upon
inspection during its annual dry-docking and that the incident
was caused by unexpected inclement weather condition or force
majeure, thus exempting the common carrier from liability for
the loss of its cargo.
The decision of the trial court, however, was reversed, on appeal,
by the Court of Appeals.  The appellate court gave credence to
the weather report issued by the PAGASA which showed that
from 2:00 o’clock to 8:00 o’clock in the morning on August 16,
1986, the wind speed remained at 10 to 20 knots per hour while
the waves measured from .7 to 2 meters in height only in the
vicinity of the Panay Gulf where the subject vessel sank, in
contrast to herein petitioner’s allegation that the waves were 20
feet high.  In the absence of any explanation as to what may have
caused the sinking of the vessel coupled with the finding that the
same was improperly manned, the appellate court ruled that the
petitioner is liable on its obligation as common carrier to herein
private respondent insurance company as subrogee of
Caltex.  The subsequent motion for reconsideration of herein
petitioner was denied by the appellate court.
Petitioner invokes the provision of Section 113 of the Insurance
Code of the Philippines, which states that in every marine
insurance upon a ship or freight, or freightage, or upon any thing
which is the subject of marine insurance there is an implied
warranty by the shipper that the ship is seaworthy. Consequently,
the insurer will not be liable to the assured for any loss under the
policy in case the vessel would later on be found as not
seaworthy at the inception of the insurance.  It theorized that
when private respondent paid Caltex the value of its lost cargo,
the act of the private respondent is equivalent to a tacit
recognition that the ill-fated vessel was seaworthy; otherwise,
private respondent was not legally liable to Caltex due to the
latter’s breach of implied warranty under the marine insurance
policy that the vessel was seaworthy.
Issue 1: Whether or not the payment made by the private
respondent to Caltex for the insured value of the lost cargo
amounted to an admission that the vessel was seaworthy, thus
precluding any action for recovery against the petitioner?
Issue 2: Whether or not the non-presentation of the marine
insurance policy bars the complaint for recovery of sum of money
for lack of cause of action?
Held 1: No.The payment made by the private respondent for the belonging to Caltex for its failure to rebut the presumption of
insured value of the  lost cargo operates as waiver of its right to fault or negligence as common carrier occasioned by the
enforce the term of the implied warranty against Caltex under unexplained sinking of its vessel, MT Maysun, while in transit.
the marine insurance policy.  However, the same cannot be
validly interpreted as an automatic admission of the vessel’s
seaworthiness by the private respondent as to foreclose recourse
against the petitioner for any liability under its contractual Held 2: No. It is our view and so hold that the presentation in
obligation as a common carrier.  The fact of payment grants the evidence of the marine insurance policy is not indispensable in
private respondent subrogatory right which enables it to exercise this case before the insurer may recover from the common
legal remedies that would otherwise be available to Caltex as carrier the insured value of the lost cargo in the exercise of its
owner of the lost cargo against the petitioner common subrogatory right.  The subrogation receipt, by itself, is sufficient
carrier. Article 2207 of the New Civil Code provides that: to establish not only the relationship of herein private
respondent as insurer and Caltex, as the assured shipper of the
Art. 2207.  If the plaintiff’s property has been insured, and he has lost cargo of industrial fuel oil, but also the amount paid to settle
received indemnity from the insurance company for the injury or the insurance claim.  The right of subrogation accrues simply
loss arising out of the wrong or breach of contract complained of, upon payment by the insurance company of the insurance claim.
the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated
the contract.  If the amount paid by the insurance company does
not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing the
loss or injury.

Additionally, the exoneration of MT Maysun’s officers and crew

by the Board of Marine Inquiry merely concerns their respective
administrative liabilities.  It does not in any way operate to
absolve the petitioner common carrier from its civil liability
arising from its failure to observe extraordinary diligence in the
vigilance over the goods it was transporting and for the negligent
acts or omissions of its employees, the determination of which
properly belongs to the courts. In the case at bar, petitioner is
liable for the insured value of the lost cargo of industrial fuel oil
 MAERSK LINE vs. COURT OF APPEALS AND EFREN V.
CASTILLO
Petitioner Maersk Line is engaged in the transportation of
goods by sea, doing business in the Philippines. Private
respondent Efren Castillo is the proprietor of Ethegal
Laboratories, a firm engaged in the manufacture of
pharmaceutical products.
On November 12, 1976, private respondent ordered from Eli Lilly.
Inc. of Puerto Rico through its agent in the Philippines, Elanco
Products, 600,000 empty gelatin capsules for the manufacture of
his pharmaceutical products.
Eli Lilly, Inc. of Puerto Rico advised private respondent as
consignee that the 600,000 empty gelatin capsules were already
shipped on board MV "Anders Maerskline" for shipment to the
Philippines via Oakland, California and specified the date of
arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and
diverted to Richmond, Virginia, USA and then transported back
Oakland, California. The goods finally arrived in the Philippines on
June 10, 1977 or after two (2) months from the date specified. As
a consequence, private respondent as consignee refused to take
delivery of the goods on account of its failure to arrive on time.
Private respondent filed an action before the court a
quo for rescission of contract with damages against petitioner
alleging gross negligence and undue delay in the delivery of the
goods. Petitioner alleged the shipment was transported in
accordance with the provisions of the covering bill of lading and
that its liability under the law on transportation of good attaches
only in case of loss, destruction or deterioration of the goods as
provided for in Article 1734 of Civil Code
Issue: Whether or not private respondent Castillo is entitled to
damages resulting from delay in the delivery of the shipment in
the absence in the bill of lading of a stipulation on the delivery of
goods
Held: Yes. While it is true that common carriers are not
obligated by law to carry and to deliver merchandise, and persons
are not vested with the right to prompt delivery, unless such
common carriers previously assume the obligation to deliver at a
given date or time, delivery of shipment or cargo should at least
be made within a reasonable time. An examination of the subject
bill of lading shows that the subject shipment was estimated to
arrive in Manila on April 3, 1977. While there was no special
contract entered into by the parties indicating the date of arrival
of the subject shipment, petitioner nevertheless, was very well
aware of the specific date when the goods were expected to
arrive as indicated in the bill of lading itself. In this regard, there
arises no need to execute another contract for the purpose as it
would be a mere superfluity. The court ruled that a delay in the
delivery of the goods spanning a period of two (2) months and
seven (7) days falls was beyond the realm of reasonableness.
Petitioner never even bothered to explain the course for
the delay for more than two (2) months, in the delivery of subject
shipment. The petitioner is liable for breach of contract of
carriage through gross negligence amounting to bad faith and
awarded moral damages.
The court held also that even though generally, contracts
of adhesion are considered void since almost all the provisions of
these types of contracts are prepared and drafted only by one
party, usually the carrier, bills of lading are contracts not entirely
prohibited. They further explained that one who adheres to the
contract is in reality free to reject it in its entirety; if he adheres,
he gives his consent.
 FGU INSURANCE CORP. V. CA
Facts:
On April 21, 1987, a car owned by private respondent FILCAR
Transport Inc., rented to and driven by Dahl-Jensen, a Danish
tourist, swerved into the right and hit the car owned by Lydia
Soriano and driven by Benjamin Jacildone. Dahl-Jensen did not
possess a Philippine driver’s license. Petitioner, as the insurer of
Soriano’s car, paid the latter P25,382.20 and, by way of
subrogation, sued FILCAR, Dahl-Jensen, and Fortune Insurance
Corporation, FILCAR’s insurer, for quasi-delict. The trial court
dismissed the petition for failure to substantiate the claim for
subrogation. The Court of Appeals affirmed the decision, but on
the ground that only Dahl-Jensen’s negligence was proven, not
that of FILCAR. Hence, this instant petition.
Issues:
(1) Whether an action based on quasi-delict will prosper against a
rent-a-car company and, consequently, its insurer for fault or
negligence of the car lessee in driving the rented vehicle
(2) Whether the ruling in MYC-Agro-Industrial Corporation v. Vda.
de Caldo is applicable in the case at bar
Held:
(1) We find no reversible error committed by respondent court in
upholding the dismissal of petitioner's complaint. The pertinent
provision is Art. 2176 of the Civil Code which states: "Whoever by
act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict . . . . ". To sustain a
claim based thereon, the following requisites must concur: (a)
damage suffered by the plaintiff; (b) fault or negligence of the
defendant; and, (c) connection of cause and effect between the
fault or negligence of the defendant and the damage incurred by
the plaintiff. We agree with respondent court that petitioner
failed to prove the existence of the second requisite, i.e., fault or
negligence of defendant FILCAR, because only the fault or
negligence of Dahl-Jensen was sufficiently established, not that of
FILCAR. It should be noted that the damage caused on the vehicle
of Soriano was brought about by the circumstance that Dahl-
Jensen swerved to the right while the vehicle that he was driving
was at the center lane. It is plain that the negligence was solely
attributable to Dahl-Jensen thus making the damage suffered by
the other vehicle his personal liability. Respondent FILCAR did not
have any participation therein. Respondent FILCAR being engaged
in a rent-a-car business was only the owner of the car leased to
Dahl-Jensen. As such, there was no vinculum juris between them
as employer and employee. Respondent FILCAR cannot in any
way be responsible for the negligent act of Dahl-Jensen, the
former not being an employer of the latter.
(2) Petitioner's insistence on MYC-Agro-Industrial Corporation is
rooted in a misapprehension of our ruling therein. In that case,
the negligent and reckless operation of the truck owned by
petitioner corporation caused injuries to several persons and
damage to property. Intending to exculpate itself from liability,
the corporation raised the defense that at the time of the
collision it had no more control over the vehicle as it was leased
to another; and, that the driver was not its employee but of the
lessee. The trial court was not persuaded as it found that the true
nature of the alleged lease contract was nothing more than a
disguise effected by the corporation to relieve itself of the
burdens and responsibilities of an employer. We upheld this
finding and affirmed the declaration of joint and several liability
of the corporation with its driver.
 DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC.,
petitioners, vs. FEDERAL PHOENIX ASSURANCE CO., INC.,
respondent.
Nature: Petition for review on certiorari
FACTS:
Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial
trees to C.F. Sharp and Company, Inc. (C.F. Sharp), the General
Ship Agent of DSR-Senator Lines, a foreign shipping corporation,
for transportation and delivery to the consignee, Al-Mohr
International Group, in Riyadh, Saudi Arabia. C.F. Sharp issued a
Bill of Lading for the cargo. Under the Bill of Lading, the port of
discharge for the cargo was at the Khor Fakkan port and the port
of delivery was Riyadh, Saudi Arabia, via Port Dammam. The
cargo was loaded in M/S “Arabian Senator.”
FederalPhoenix Assurance Company, Inc. (Federal Phoenix
Assurance) insured the cargo against all risks. On July 3, 1993 M/S
“Arabian Senator” left the Manila South Harbor for Saudi Arabia
with the cargo on board. When the vessel arrived in Khor Fakkan
Port, the cargo was reloaded on board DSR-Senator Lines’ feeder
vessel, M/V “Kapitan Sakharov,” bound for Port Dammam, Saudi
Arabia.
However, while intransit, the vessel and all its cargo caught fire.
On July 5, 1993, DSR-Senator Lines informed Berde Plants that
M/V “Kapitan Sakharov” with its cargo was gutted by fire and
sank on or about July 4, 1993. Consequently, Federal Phoenix
Assurance paid Berde Plants corresponding to the amount of
insurance for the cargo. Federal Phoenix Assurance sent a letter
to C.F. Sharp demanding payment from C.F. Sharp. C.F. Sharp
denied any liability on the ground that such liability was
extinguished when the vessel carrying the cargo was gutted by
fire. Thus, Federal Phoenix Assurance filed with the RTC a
complaint for damages against DSR-Senator Lines and C.F. Sharp.
RTC rendered a decision in favor if Federal Phoenix Assurance. CA
affirmed, appellant carrier presumed to have acted negligently
for the fire. It’s liability as ship agent continued and remained
until the carge was delivered to the consignee.
ISSUE: WON C.F. Sharp’s liability is extinguished by reason of the
fire
HELD:
No. Fire is not one of those enumerated under Art. 1734 of the
Civil Code which exempts a carrier from liability for loss or
destruction of the cargo. In Eastern Shipping Lines, Inc. vs.
Intermediate Appellate Court, we ruled that since the peril of fire
is not comprehended within the exceptions in Article 1734, then
the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the
extraordinary diligence required by law.
Even if fire were to be considered a natural disaster within the
purview of Article 1734, it is required under Article 1739[10] of
the same Code that the natural disaster must have been the
proximate and only cause of the loss, and that the carrier has
exercised due diligence to prevent or minimize the loss before,
during or after the occurrence of the disaster.
A common carrier's duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession of,
and received by, the carrier for transportation until delivered to
or until the lapse of a reasonable time for their acceptance by the
person entitled to receive them. When the goods shipped either
are lost or arrive in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and
there need not be an express finding of negligence to hold it
liable.
Common carriers are obliged to observe extraordinary diligence
in the vigilance over the goods transported by them. Accordingly,
they are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. There
are very few instances when the presumption of negligence does
not attach and these instances are enumerated in Article 1734. In
those cases where the presumption is applied, the common
carrier must prove that it exercised extraordinary diligence in
order to overcome the presumption.
Respondent Federal Phoenix Assurance raised the presumption
of negligence against petitioners. However, they failed to
overcome it by sufficient proof of extraordinary diligence
Dispositive: Petition DENIED
PHILLIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC
vs. CA
FACTS:
On September 4, 1985 the Davao Union Marketing Corporation of
Davao City shipped on board the vessel M/V "Crazy Horse"
operated by the Transpacific Towage, Inc. cargo consisting of
9,750 sheets of union brand GI sheets with a declared value of
P1,086,750.00 and 86,860 bags of union Pozzolan and union
Portland Cement with a declared value of P4,300,000.00. The
cargo was consigned to the Bicol Union Center of Pasacao,
Camarines Sur, with a certain Pedro Olivan as the "Notify-Party."
On October 16, 1985, a super typhoon code named "Saling"
entered the Philippine area of responsibility and was felt in the
eastern coast of the country. At the time the discharging of the
cargo was suspended, a total of 59,625 bags of cement and 26
crates of GI sheets had already been discharged.
The wharf where the vessel had to dock was shallow and rocky,
hence it had to drop anchor some distance away in a private port.
Buoys had to be constructed in order that the vessel may
properly moored. After the buoys were installed a wooden stage
had to be constructed so that the stevedores could reach the
vessel. For this they needed a floating crane which was not
immediately available. The barges that were to load the cargo
from the vessel could not go near the wharf because of the
shallow and rocky condition. A catwalk had to be installed
between the barge and the wharf. This necessitated the
dismantling of the wooden stage previously installed.
Apart from these preparations and constructions that had to be earlier discussed. The cargo having been lost due to typhoon
made, the weather was not cooperative. Even before the "Saling", and the delay incurred in its unloading not due to
typhoon struck there were intermittent rains, hence the negligence, private respondent is exempt from liability for the
unloading was not continuous. The actual unloading started on loss of the cargo, pursuant to Art. 1740 of the Civil Code.
September 13, 1985 and could have been finished in 4 or 5 days
but because of the rains it was delayed. Another factor that
caused further delay was the fact that the fiesta of the Virgin of
Penafrancia was celebrated and for the length of time that the
celebrations were held, the stevedores who were from the place
refused to work.

ISSUE:

WON the delay involved in the unloading of the goods is deemed

negligently incurred in so as not to free private respondent from
responsibility?

HELD:

No, the delay incurred in the unloading of the goods was not due
to the negligence of the parties but was occasioned by causes
that may not be attributed solely to human factors, among which
were the natural conditions of the port where the M/V Crazy
Horse had docked, the customs of the place and the weather
conditions. Under Art. 1740 of the New Civil Code, if the common
carrier negligently incurs in delay in transporting the goods, a
natural disaster shall not free the carrier from responsibility.
While it is true that there was indeed delay in discharging the
cargo from the vessel, we agree with the Court of Appeals that
neither of the parties herein could be faulted for such delay , for
the same delay was due not to negligence, but to several factors
 BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and
JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners,,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondent.
June 5, 2002
PANGANIBAN, J.:
NATURE: Petition for review under Rule 45 of a CA Decision
SUMMARY: Belgian Overseas Chartering and Shipping N.V. and
Jardine Davies Transport Services Inc. are common carriers who
are carrying 242 coils of Prime Cold Rolled Steel Sheets, shipped
by CMC Trading A.G. to consignee, Phil. Steel Trading Corp. (PSTC)
4 coils were found to be in bad order, PSTC declared the
shipment a total loss, causing insurer-respondent, Phil. First
Insurance Corp. (PFIC) to pay PSTC and seek recovery of the sum
from the carriers. The carriers tried to exempt themselves from
liability by alleging they had exercised extraordinary diligence,
but the Court ruled that 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. (Art. 1735, NCC) In order to avoid responsibility for any
loss or damage, therefore, they have the burden of proving that
they observed such diligence.
DOCTRINE:
- 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
FACTS:
- CMC Trading A.G. (CMC) -
shipper
Philippine Steel Trading Corporation (PSTC) -
consignee
Belgian Overseas Chartering and Shipping N.V. (Belgian) -
carrier
Jardine Davies Transport Services, Inc. (Jardine) -
carrier
Philippine First Insurance Co., Inc. (PFIC) -
insurer
 On June 13, 1990, CMC shipped on board the M/V
'Anangel Sky' at Hamburg, Germany 242 coils of various
Prime Cold Rolled Steel sheets for transportation to
Manila consigned to the Philippine Steel Trading
Corporation.
o July 28, 1990, M/V Anangel Sky arrived at the port
of Manila and, within the subsequent days,
discharged the subject cargo
o Four (4) coils were found to be in bad order. It was
noted on the Bill of Lading that “metal envelopes
rust stained and slightly dented.”
o PSTC declared them to be a total loss.
 PFIC paid the insurance for the damaged goods (Php
506,086.50) to PSTC. It formally demanded Belgian and
Jardine for recovery of the said amount but both refused
to submit to PFIC’s claim which then instituted a
complaint for recovery
 Belgian and Jardine contend the following
o that damage and/or loss was due to pre-shipment
damage, to the inherent nature, vice or defect of
the goods, or to perils, danger and accidents of the
sea, or to insufficiency of packing thereof, or to
 the act or omission of the shipper of the goods or
their representatives;
o that their liability, if there be any, should not
exceed the limitations of liability provided for in
the bill of lading and other pertinent laws;
o they exercised due diligence and foresight
required by law to prevent any damage/loss to
said shipment.
o RTC of Makati dismissed the petition of PFIC for
not proving its claims with quantum of proof
required by law.
 CA: Overturned the RTC, and ruled that Belgian and
Jardine were liable for the loss or the damage of the
goods shipped. They had failed to overcome the
presumption of negligence imposed on common carriers
o Found that the Stay Order of Branch could not be
clearer. It was lifted because of Rombe’s
insolvency, misrepresentations, and infeasible
rehabilitation plan
o Also observe that the Branch 15 TRO interfered
with and set aside the earlier Branch 7 Order, and
such intervention thwarted the foreclosure of
Rombe’s assets
ISSUE:
1. WON petitioners have overcome the presumption of
negligence of a common carrier. NO
2. WON the notice of loss was timely filed. YES
3. WON the stipulation in a bill of lading limiting to a certain
sum the carrier’s liability is valid. YES
RATIO:
1. Negligence; Presumption of Fault or Negligence; Owing to
the high degree of diligence required of them, common
carriers, as a general rule, are presumed to have been at
fault or negligent if the goods they transported
deteriorated or got lost or destroyed.
o The extraordinary responsibility lasts from the time
the goods are unconditionally placed in the possession
of and received for transportation by the carrier until
they are delivered, actually or constructively, to the
consignee or to the person who has a right to receive
them.
o 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
o The exceptions to the presumption of fault or
negligence is a closed list—if the cause of destruction,
loss or deterioration is other than the enumerated
circumstances, then the carrier is liable therefor.
 The presumption of fault or negligence will not
arise if the loss is due to any of the following
causes: (1) flood, storm, earthquake, lightning,
or other natural disaster or calamity; (2) an act
ofthe public enemy in war, whether
international or civil; (3) an act or omission of
the shipper or owner of the goods; (4) the
character of the goods or defects in the
packing or the container; or (5) an order or act
of competent public authority.
 This is a closed list. If the cause of destruction,
loss or deterioration is other than the
 enumerated circumstances, then the carrier is
liable therefor
 Mere proof of delivery of the goods in good
order to a common carrier and of their arrival
in bad order at their destination constitutes a
prima facie case of fault or negligence against
the carrier.
 If no adequate explanation is given as to how
the deterioration, the loss or the destruction of
the goods happened, the transporter shall be
held responsible.
o The master of the vessel, having been in the service
for several years, should have known at the outset
that metal envelopes in the said state would
eventually deteriorate when not properly stored while
in transit.
o Petitioners attempt to argue:
 They cite the notation “metal envelopes rust
stained and slightly dented” printed on the Bill
of Lading as evidencethat the character of the
goods or defect in the packing or the
containers was the proximate cause of the
damage.
 However, from the evidence on record, it
cannot be reasonably concluded that the
damage to the four coils was due to the
condition noted on the Bill of Lading.
 Exception refers to cases when goods are lost
or damaged while in transit as a result of the
natural decay of perishable goods or the
fermentation or evaporation of substances
liable therefor, the necessary and natural wear
of goods in transport, defects in packages in
which they are shipped, or the natural
propensities of animals. None of these is
present in the instant case.
 Furthermore, even if the fact of improper
packing was known to the carrier or its crew or
was apparent upon ordinary observation, it is
not relieved of liability for loss or injury
resulting therefrom, once it accepts the goods
notwithstanding such condition. Thus,
petitioners have not successfully proven the
application of any of the aforecited exceptions
in the present case
2. The cargo was discharged on July 31, 1990, while the
complaint was filed by PFIC on July 25, 1991. Within the 1
year prescriptive period.
 a failure to file a notice of claim within three days
will not bar recovery if it is nonetheless filed within
one year.
 This one-year prescriptive period also applies to
the shipper, the consignee, the insurer of the
goods or any legal holder of the bill of lading.
3. A stipulation in the bill of lading limiting to a certain sum
the common carrier’s liability for loss or destruction of a
cargo, unless the shipper or owner declares a greater
value, is sanctioned by law
 two conditions to be satisfied:
 the contract is reasonable and just
under the circumstances,
  it has been fairly and freely agreed
upon by the parties.
 Petitioners contend that their liability should be
limited to US$500 per package as provided in the
Bill of Lading and by Section 4(5) of COGSA but
respondent asserts otherwise. Section 4(5) of
COGSA is inapplicable, because the value of the
subject shipment was declared by petitioners
beforehand, as evidenced by the reference to and
the insertion of the Letter of Credit or "L/C No.
90/02447" in the said Bill of Lading.
 The Civil Code does not limit the liability of the
common carrier to a fixed amount per package.
The COGSA, meanwhile, which is suppletory to the
provisions of the Civil Code, supplements the latter
by establishing a statutory provision limiting the
carrier's liability in the absence of a shipper's
declaration of a higher value in the bill of lading.
 There was no stipulation in the Bill of Lading
limiting the carrier's liability. Neither did the
shipper declare a higher valuation of the goods to
be shipped. This fact notwithstanding, the
insertion of the words "L/C No. 90/02447 cannot
be the basis for petitioners' liability.
 Petiioners' liability should be computed based on
US$500 per package and not on the per metric ton
price declared in the Letter of Credit. By
“package,” in accordance with COGSA, it means
the number of units disclosed in the shipping
documents.
DISPOSITIVE: Petition DENIED.
EDGAR COKALIONG SHIPPING LINES, INC. vs UCPB GENERAL
INSURANCE COMPANY
[G.R. No. 146018. June 25, 2003.]
Facts:
 On December 11, 1991, Nestor Angelia delivered to Edgar
Cokaliong Shipping Lines, Inc., one carton of Christmas
décor and two sacks of plastic toys, to be transported on
board the M/V Tandang on its Voyage No. T-189, to
depart from Cebu the next day for Tandang Surigao del
Sur. Cokaliong issued Bill of Lading No. 58, freight prepaid,
covering the cargo. Nestor Angelia was both the
consignee and shipper of the goods valued at P6,500.
 Zosimo Mercado, likewise, delivered two cartons of plastic
toys and Christmas décor, one roll of floor mat and one
bundle of assorted goods for transport from Cebu to
Tandang covered by Bill of Lading No. 59 valued at
P14,000. Under the Bill of Lading Zosimo Mercado was
both shipper and consignee.
 Feliciana Legaspi insured the cargo covered by Bill of
Lading No. 59 with UCPB General Insurance Co. Inc. for
P100,000 against all risk. She also insured the cargo
covered by Bill of Lading No. 58, for the amount of
P50,000.
 The fire ensued in the engine room of the vessel after it
had passed the Mandaue Mactan Bridge. Despite earnest
efforts, the fire consumed the whole vessel resulting in
the loss of the vessel and the cargo therein.
 Feliciana Legaspi filed a claim for the cargo covered by Bill
of Lading No. 59 with UCPB. She was given P99,000 and
after which she executed a Subrogation Receipt/Deed for
said amount. She also filed another claim for the cargo
covered by Bill of Lading No. 58 and was remitted the net
 amount of P49,500. She signed another Subrogation
Receipt/Deed.
 UCPB, as a subrogee of Feliciana Legaspi, filed a complaint
against Cokaliong with the RTC for the collection of the
total principal amount of 148,500.00 for the loss of cargo.
UCPB alleged that the loss was due to the negligence of
Cokaliong.
 Cokaliong in its Answer to the complaint alleged that it
was cleared by the Board of Marine Inquiry of any
negligence and that the shippers/consignee had been
already paid the value of goods stated in the Bill of Lading
and cannot be held liable beyond the value declared in
the Bill of Lading.
 CA held the Cokaliong failed to prove that the fire was
caused by something other than its negligence in the
upkeep, maintenance of the vessel. It also ruled that
Cokaliong is not bound by the valuation of the cargo
unther the Bills of Lading, nor is the value of the cargo
under said Bills of Lading conclusive because goods were
insured with UCPB for the total amount of P150,000
which is considered the face value of the goods.
ISSUES:
1) Whether or not Cokaliong is liable for the goods.
2) If it is liable, what is the extent of its liability?
HELD:
1) Yes. The uncontroverted findings of the Philippine Coast
Guard show that the M/V Tandag sank due to a fire, which
resulted from a crack in the auxiliary engine fuel oil service
tank. Fuel spurted out of the crack and dripped to the heating
exhaust manifold, causing the ship to burst into flames. The crack
was located on the side of the fuel oil tank, which had a mere
two-inch gap from the engine room walling, thus precluding
constant inspection and care by the crew. Having originated from
an unchecked crack in the fuel oil service tank, the fire could not
have been caused by force majeure. Broadly speaking, force
majeure generally applies to a natural accident, such as that
caused by a lightning, an earthquake, a tempest or a public
enemy.
The law provides that a common carrier is presumed to
have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported. Ensuring
the seaworthiness of the vessel is the first step in exercising the
required vigilance. Petitioner did not present sufficient evidence
showing what measures or acts it had undertaken to ensure the
seaworthiness of the vessel. It failed to show when the last
inspection and care of the auxiliary engine fuel oil service tank
was made, what the normal practice was for its maintenance, or
some other evidence to establish that it had exercised
extraordinary diligence. 
2) The records show that the Bills of Lading covering the lost
goods contain the stipulation that in case of claim for loss or for
damage to the shipped merchandise or property, the liability of
the common carrier x x x shall not exceed the value of the goods
as appearing in the bill of lading.
A stipulation in the bill of lading limiting the common carriers
liability for loss or destruction of a cargo to a certain sum, unless
the shipper or owner declares a greater value, is sanctioned by
law, particularly Articles 1749 and 1750 of the Civil Code which
provides:
Art. 1749. A stipulation that the common carriers liability is
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
The purpose of the limiting stipulation in the Bill of Lading is to
protect the common carrier. Such stipulation obliges the
shipper/consignee to notify the common carrier of the amount
that the latter may be liable for in case of loss of the goods. The
common carrier can then take appropriate measures -- getting
insurance, if needed, to cover or protect itself. This precaution on
the part of the carrier is reasonable and prudent. Hence, a
shipper/consignee that undervalues the real worth of the goods it
seeks to transport does not only violate a valid contractual
stipulation, but commits a fraudulent act when it seeks to make
the common carrier liable for more than the amount it declared
in the bill of lading.
Zosimo Mercado and Nestor Angelia misled Cokaliong by
undervaluing the goods in their respective Bills of Lading. Hence,
Cokaliong was exposed to a risk that was deliberately hidden
from it, and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged
actual value of the goods) the insurance company was paid the
correct higher premium by Feliciana Legaspi; while Cokaliong was
paid a fee lower than what it was entitled to for transporting the
goods that had been deliberately undervalued by the shippers in
the Bill of Lading.Between the two of them, the insurer should
bear the loss in excess of the value declared in the Bills of
Lading. This is the just and equitable solution.
SARKIES TOURS PH, INC. vs CA, DR. ELINO FORTADES, MARISOL
FORTADES & FATIMA MINERVA FORTADES
FACTS:
On Aug 31, 1984, Fatima Fortades boarded the petitioner's
deluxe bus no.5 in Manila on her way to Legaspi City. With her
was 3 pieces of luggage containing all of her optometry review
books, materials and equipment, trial lenses, trial contact lenses,
passport and visa, as well as her mother Marisol’s U.S.
immigration (green) card, among other important documents and
personal belongings. Her brother helped her load her 3 pieces of
luggage and were kept in the baggage compartment of the bus.
However, during a stopover at Daet it was discovered that only
one bag remained in the open compartment. All others, including
Fatima's things, were missing and could have dropped along the
way. Some of the passengers suggested retracing the route to try
to recover the lost items but the driver ignored them and
proceeded to Legaspi City.
Fatima immediately reported the loss to her mother who then
went to petitioner's office in Legaspi City, and later in Manila. The
petitioner offered her 1,000 pesos for each piece of luggage lost
which she turned down. One of Fatima's bags was recovered thru
their own effort such as asking assistance from radio stations and
from Philtranco bus drivers who plied the same route on Aug 31.
Fatima and others, thru counsel, formally demanded satisfaction
of their claim from petitioner. In a letter, the petitioner
apologized for the delay and said that a team was sent to Bicol
for the purpose of recovering or at least getting the full detail of
the incident. After more than 9 months of fruitless waiting, they
decided to file a case to recover the value of the lost items.
Respondents claimed that the loss was due to petitioner’s failure
to observe extraordinary diligence in the care of Fatima’s luggage
and that petitioner dealt with them in bad faith from the start.
Petitioner, on the other hand, disowned any liability for the loss
on the ground that Fatima allegedly did not declare any excess
baggage upon boarding its bus. The trial court and the CA rules
against the petitioner, hence this appeal.
right to receive them,” unless the loss is due to any of the
excepted causes under Article 1734 thereof.
 The cause of the loss in the case at bar was petitioner’s
negligence in not ensuring that the doors of the baggage
compartment of its bus were securely fastened. As a
result of this lack of care, almost all of the luggage was
lost, to the prejudice of the paying passengers.
 Moreover, records revealed that Fatima was not the only
one who lost her luggage. Apparently other passengers
suffered a similar fate. Also, in the letter made by the
petitioner, the petitioner admitted its liability by
apologizing to the respondents and assuring them that
efforts were being made to recover the lost items.

ISSUE: WON the petitioner, Sarkies Tours PH, is liable for the loss
of the baggage

HELD: YES. The decision of the CA was affirmed.

 Under the Civil Code, “Common carriers, from the nature

of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance
over the goods transported by them,” and this liability
“lasts from the time the goods are unconditionally placed
in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to. . . the person who has a
 VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY,
INC., petitioner, vs. COURT OF APPEALS AND SEVEN BROTHERS
SHIPPING CORPORATION, respondents.
Facts:
16 January 1984, plaintiff (Valenzuela Hardwood and
Industrial Supply, Inc.) entered into an agreement with the
defendant Seven Brothers (Shipping Corporation) whereby the
latter undertook to load on board its vessel M/V Seven
Ambassador the formers lauan round logs numbering 940 at the
port of Maconacon, Isabela for shipment to Manila. 20 January
1984, plaintiff insured the logs against loss and/or damage with
defendant South Sea Surety and Insurance Co., Inc.
for P2,000,000.00 and the latter issued its Marine Cargo
Insurance Policy No. 84/24229 for P2,000,000.00 on said date.
25 January 1984 The said vessel M/V Seven Ambassador sank,
resulting in the loss of the plaintiffs insured logs. 30 January
1984, a check for P5,625.00 to cover payment of the premium
and documentary stamps due on the policy was tendered due to
the insurer but was not accepted. Instead, the South Sea Surety
and Insurance Co., Inc. cancelled the insurance policy it issued as
of the date of the inception for non-payment of the premium due
in accordance with Section 77 of the Insurance Code.
2 February 1984, plaintiff demanded from defendant South Sea
Surety and Insurance Co., Inc. the payment of the proceeds of the
policy but the latter denied liability under the policy. Plaintiff
likewise filed a formal claim with defendant Seven Brothers
Shipping Corporation for the value of the lost logs but the latter
denied the claim. After due hearing and trial, REGIONAL trial
court rendered judgment in favor of plaintiff. CA affirmed in part
the RTC judgment by sustaining the liability of South Sea Surety
and Insurance Company (South Sea), but modified it by holding
that Seven Brothers Shipping Corporation (Seven Brothers) was
not liable for the lost cargo. THUS, this case.
HELD: PETITION UNMERITORIOUS. RESPONDENT NOT LIABLE.
The charter party between the petitioner and private
respondent stipulated that the (o)wners shall not be responsible
for loss, split, short-landing, breakages and any kind of damages
to the cargo.  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[17] 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. 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.
“Common carrier undertaking to carry a special cargo or
chartered to a special person only, becomes a private carrier. As a
private carrier, a stipulation exempting the owner from liability
for the negligence of its agent is not against public policy, and is
deemed valid.Such doctrine We find reasonable. The Civil Code
provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier. The
stipulation in the charter party absolving the owner from liability
for loss due to the negligence of its agent would be void only if
the strict public policy governing common carriers is
applied. Such policy has no force where the public at large is not
involved, as in this case of a ship totally chartered for the use of a
single party. ( Home Insurance Co. vs. American Steamship
Agencies)
 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 In common carriers 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 carriers 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.
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC. vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING
CORPORATION
FACTS:
 It appears that on 16 January 1984, plaintiff (Valenzuela
Hardwood and Industrial Supply, Inc.) entered into an
agreement with the defendant Seven Brothers (Shipping
Corporation) 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.
 The charter party between the Valenzuela Hardwood and
Seven Brothers stipulated that owner (Seven Brothers)
will not be responsible for the split split, short-landing,
breakages and any kind of damages to the cargo.
 On 20 January 1984, plaintiff insured the logs against loss
and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2,000,000.00.
 In the meantime, the said vessel M/V Seven Ambassador
sank on 25 January 1984 resulting in the loss of the
plaintiff's insured logs.
 On 30 January 1984, a check for P5,625.00 to cover
payment of the premium and documentary stamps due
on the policy was tendered due to the insurer but was not
accepted. Instead, the South Sea Surety and Insurance
Co., Inc. cancelled the insurance policy it issued as of the
date of the inception for non-payment of the premium
due.
 On 2 February 1984, plaintiff demanded from defendant
South Sea Surety and Insurance Co., Inc. the payment of
the proceeds of the policy but the latter denied liability
under the policy. Plaintiff likewise filed a formal claim with
defendant Seven Brothers Shipping Corporation for the
value of the lost logs but the latter denied the claim.
RESPONDENT’S CONTENTION:
 That the lower court erred in declaring that the non-
liability clause of the Seven Brothers Shipping
Corporation for logs of the cargo stipulated in the
 charter party is void for being contrary to public policy
invoking article 1745 of the New Civil Code
 The Court of Appeals affirmed in part the RTC judgment
by sustaining the liability of South Sea Surety and
Insurance Company (South Sea), but modified it by
holding that Seven Brothers Shipping Corporation
(Seven Brothers) was not liable for the lost cargo.
ISSUE:
 W/N a stipulation in a charter party that the "owners shall
not be responsible for loss, split, short-landing, breakages
and any kind of damages to the cargo" is valid
RULING:
 VALID. It should be noted at the outset that there is no
dispute between the parties that the proximate cause of
the sinking of M/V Seven Ambassadors resulting in the
loss of its cargo was the "snapping of the iron chains and
the subsequent rolling of the logs to the portside due to
the negligence of the captain in stowing and securing the
logs on board the vessel and not due to fortuitous event."
Likewise undisputed is the status of Private Respondent
Seven Brothers as a private carrier when it contracted to
transport the cargo of Petitioner Valenzuela. Even the
latter admits this in its petition.
In a contract of private carriage, the parties may
validly stipulate that responsibility for the cargo rests
solely on the charterer, exempting the ship owner from
liability for loss of or damage to the cargo caused even by
the negligence of the ship captain. The Civil Code
provisions on common carriers should not be applied
where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the
owner from liability for loss due to the negligence of its
agent would be void only if the strict public policy
governing common carriers is applied. Such policy has no
force where the public at large is not involved, as in this
case of a ship totally chartered for the use of a single
party. 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.
The issue were resolved long ago by this Court in
Home Insurance Co. vs. American Steamship Agencies.
 ALBERTA YOBIDO V CA failed to discharge its duty to overthrow the presumption of
negligence with clear and convincing evidence, petitioners are
hereby held liable for damages. Moreover, Art. 1755 provides A
FACTS:
common carrier is bound to carry the passengers safely as far as
Spouses Tito Tumboy and Leny Tumboy together with
human care and foresight can provide, using the utmost diligence
their minor child boarded Yobido liner, owned by petitioners
of very cautious persons, with a due regard for all the
Alberta Yobido. The tires of the bus they boarded exploded,
circumstances.
which caused it to fall into a ravine and struck a tree. Leaving
Also, it has been well settled that an accident caused by the
some injured, and Tito dead. A complaint was filed by his widow
defects in the automobile or through negligence of the driver is
against petitioners of r the breach of contract of carriage, the
not a caso fortuito and would not exempt carrier from liability.
petitioners interposed the defense of caso fortuito, and also that
they exercised extraordinary diligence as: 1) the tire that
exploded was new 2) they were also cruising at 50 to 60 kph and
that 3) drivers under went driving tests before they were
employed and were professionals. Private respondents
contended that the bus driver failed to exercise diligence
required of the carrier as they were, according to the widow,
speeding eventhough it was raining and the road was rough. She
also contends that she told the driver to slow down but the driver
did not listen.

ISSUE:
W/N petitioners exercised extraordinary diligence
required.

HELD:
Art. 1756 of the Civil Code states that in case of death of
or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in Articles
1733 and 1755. A common carrier may not be absolved from
liability in case of force majeure or fortuitous event alone. The
common carrier must still prove that it was not negligent in
causing the death or injury resulting from an accident. Having
3. Defenses and Conditions
CENTRAL SHIPPING COMPANY, INC VS. INSURANCE COMPANY
OF NORTH AMERICA
Facts:
On July 25, 1990 at Puerto Princesa, Palawan, petitioner received
on board its vessel, the M/V Central Bohol, 376 pieces of
Philippine Apitong Round Logs and undertook to transport said
shipment to Manila for delivery to Alaska Lumber Co., Inc. The
cargo was insured for P3,000,000.00 against total loss under
respondents Marine Cargo. On July 25, 1990, upon completion of
loading of the cargo, the vessel left Palawan and commenced the
voyage to Manila. At about 0125 hours on July 26, 1990, while
enroute to Manila, the vessel listed about 10 degrees starboard
side, due to the shifting of logs in the hold. At about 0128 hours,
after the listing of the vessel had increased to 15 degrees, the
ship captain ordered his men to abandon ship and at about 0130
hours of the same day the vessel completely sank. Due to the
sinking of the vessel, the cargo was totally lost. Respondent
alleged that the total loss of the shipment was caused by the fault
and negligence of the petitioner and its captain and as direct
consequence thereof the consignee suffered damage in the sum
of P3,000,000.00. The consignee, Alaska Lumber Co. Inc.,
presented a claim for the value of the shipment to the petitioner
but the latter failed and refused to settle the claim, hence
respondent, being the insurer, paid said claim and now seeks to
be subrogated to all the rights and actions of the consignee as
against the petitioner. Petitioner, while admitting the sinking of
the vessel, interposed the defense that the vessel was fully
manned, fully equipped and in all respects seaworthy; that all the
logs were properly loaded and secured; that the vessels master
exercised due diligence to prevent or minimize the loss before,
during and after the occurrence of the storm. It raised as its main
defense that the proximate and only cause of the sinking of its
vessel and the loss of its cargo was a natural disaster, a tropical
storm which neither petitioner nor the captain of its vessel could
have foreseen.
RTC – petitioner was found to be negligent because monsoons
were normal occurrences during the months of July to December,
could have been foreseen and provided for by an ocean-going
vessel.
CA – Affirmed RTC adding that weather disturbance was not the
sole and proximate cause of the sinking of the vessel, which was
also due to the concurrent shifting of the logs in the hold that
could have resulted only from improper stowage. Thus, the
carrier was held responsible for the consequent loss of or damage
to the cargo, because its own negligence had contributed
thereto.
petitioner disclaims responsibility for the loss of the cargo by
claiming the occurrence of a storm under Article 1734(1). It
attributes the sinking of its vessel solely to the weather condition
between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26,
1990.
Issue:
Whether or not petitioner is negligent and liable for the loss of
the cargo
Held:
YES. The pieces of evidence with respect to the weather
conditions encountered by the vessel showed that there was a
southwestern monsoon at the time. The PAGASA, testified that a
thunderstorm occurred in the midst of a southwest monsoon at
the time of the voyage. Nonetheless, to our mind it would not be
sufficient to categorize the weather condition at the time as a
storm within the absolutory causes enumerated in the law.
Significantly, no typhoon was observed within the Philippine area
of responsibility during that period. Even if the weather
encountered by the ship is to be deemed a natural disaster under securely in place. Each pile of logs should have been lashed
Article 1739 of the Civil Code, petitioner failed to show that such together by cable wire, and the wire fastened to the side of the
natural disaster or calamity was the proximate and only cause of hold. Considering the strong force of the wind and the roll of the
the loss. Human agency must be entirely excluded from the cause waves, the loose arrangement of the logs did not rule out the
of injury or loss. In other words, the damaging effects blamed on possibility of their shifting. By force of gravity, those on top of the
the event or phenomenon must not have been caused, pile would naturally roll towards the bottom of the ship.
contributed to, or worsened by the presence of human
participation. The defense of fortuitous event or natural disaster
cannot be successfully made when the injury could have been
avoided by human precaution.
Hence, if a common carrier fails to exercise due diligence -- or
that ordinary care that the circumstances of the particular case
demand -- to prevent or minimize the loss before, during and
after the occurrence of the natural disaster, the carrier shall be
deemed to have been negligent. The loss or injury is not, in a
legal sense, due to a natural disaster under Article 1734(1).
No reason to disturb the CAs finding that the loss of the vessel
was caused not only by the southwestern monsoon, but also by
the shifting of the logs in the hold. Such shifting could have been
due only to improper stowage. The fact that the vessel proceeded
through the first southwestern monsoon without any mishap,
and that it began to list only during the second monsoon
immediately after the logs had shifted and seawater had entered
the hold. In the hold, the sloshing of tons of water back and forth
had created pressures that eventually caused the ship to sink.
Had the logs not shifted, the ship could have survived and
reached at least the port of El Nido. In fact, there was another
motor launch that had been buffeted by the same weather
condition within the same area, yet it was able to arrive safely at
El Nido. The manner of stowage in the lower hold was not
sufficient to secure the logs in the event the ship should roll in
heavy weather. Notably, they were of different lengths ranging
from 3.7 to 12.7 meters. Being clearly prone to shifting, the round
logs should not have been stowed with nothing to hold them
EVERETT STEAMSHIP CORP. VS. CA AND HERNANDEZ TRADING
297 SCRA 496
FACTS:
Hernandez Trading (Hernandez) imported three crates of
bus spare parts (labelled Marco 12, 13, 14) from its supplier,
Maruman Trading in Japan. The ships were transported to Manila
on board ADELFAEVERETTE, a vessel owned by petitioner’s
principal, Everett Orient Lines. A bill of lading was issued for the
crates. When the vessel arrived in Manila, it was discovered that
Marco 14 was missing. Petitioner admitted and confirmed the
loss in a letter. Hernandez made a claim of Y1,552,500, the
amount shown in the invoice. Petitioner claims its liability was
only limited to Y100,000, which was the maximum limit on its
liability as stated in Clause 18 of the Bill of Lading. Hernandez
filed a collection suit against petitioner with the RTC of Caloocan.
The RTC ruled in favour of Hernandez, making petitioner liable for
Y1,552,500 plus attorney’s fees and cost of the suit. RTC ruled
that Everett categorically admitted to its fault. It failed to
overcome the presumption of negligence. The limitation clause
was in fine print at the back of the bill of lading. CA affirmed the
ruling of the RTC. It added that Hernandez was not bound by the
conditions of the bill of lading because it was not a privy to the
contract of carriage between Everett and Maruman Trading, the
shipper named in the bill of lading. Everett never overcame the
presumption of negligence.
ISSUES:
Whether or not the consent of the consignee to the bill of
lading is necessary to make the terms and conditions therein
binding upon him; Whether or not the limited liability under
Clause 18 applies to this case.
RULING:
The Supreme Court ruled in favor of petitioner. Article 1749
states that a stipulation limiting the carrier’s liability to value of
the goods in the bill of lading is valid, unless the shipper or owner
declares a higher value. Article 1750 states that a contract fixing
the sum of what the owner or shipper may recover for the loss of
the goods is valid, if it is just and reasonable under the
circumstances and is freely and fairly agreed upon. The limited-
liability clause has constantly been sustained by the Court in
numerous cases. The bill of lading expressly provided that the
liability of the carrier shall be limited to Y100,000 unless a higher
amount is declared in writing by the shipper in the bill of lading,
and extra freight is paid. The stipulation is reasonable and just.
Maruman Trading had the option of declaring a higher value, yet
it failed to do so. Contracts of adhesion are not invalid per se. The
other party is free to accept or reject it in its entirety. Ignorance is
not an excuse because the shipper, owner, or consignee has the
responsibility to fully comprehend the contract. Maruman
trading, the shipper is extensively engaged in the trading
business, and is presumed to be aware of the terms and
conditions of shipping transactions. Consignee is bound by the
transaction, even if the shipping contract was between shipper
and carrier. The relationship between consignee and shipper is
one of agency, or his status as some stranger in whose favor
some stipulation is made in the contract. He automatically
becomes a party thereto the moment he enforces and demands
the fulfilment of that stipulation. When Hernandez formally
claimed reimbursement for the missing goods based on the very
same bill of lading, it accepted the provisions of the contract and
consequently became bound by it. It is thus estopped from
rejecting the limited–liability clause in the bill of lading.
 CRUZ V. SUN HOLIDAYS properly considered ancillary thereto. The constancy of
respondents ferry services in its resort operations is underscored
Facts: by its having its own Coco Beach boats. And the tour packages it
Spouses Dante and Leonora Cruz lodged a Complaint offers, which include the ferry services, may be availed of by
against Sun Holidays, Inc. for damages arising from the death of anyone who can afford to pay the same. These services are thus
their son Ruelito C. Cruz who perished with his wife on board the available to the public. That respondent does not charge a
boat M/B Coco Beach III that capsized en route to Batangas from separate fee or fare for its ferry services is of no moment. It
Puerto Galera, Oriental Mindoro where the couple had stayed at would be imprudent to suppose that it provides said services at a
Coco Beach Island Resort owned and operated by respondent. loss. The Court is aware of the practice of beach resort operators
Eight passengers, including petitioner’s son and his wife, died offering tour packages to factor the transportation fee in arriving
during the incident. Petitioners demanded indemnification from at the tour package price. That guests who opt not to avail of
respondent for the death of their son but denied any liability on respondents ferry services pay the same amount is likewise
the ground of fortuitous event. Petitioners then filed a complaint inconsequential. These guests may only be deemed to have
alleging that respondent, as a common carrier, was guilty of overpaid.
negligence in allowing M/B Coco Beach III to sail notwithstanding
storm warning bulletins issued by PAGASA. They added that
respondent is a common carrier since by its tour package; the
transporting of its guests is an integral part of its resort business.
On the other hand, respondent contends that petitioners failed to
present evidence to prove that it is a common carrier alleging
that its boats are not available to the general public as they only
ferry Resort guests and crew members, that the Resorts ferry
services for guests cannot be considered as ancillary to its
business as no income is derived therefrom; that it exercised
extraordinary diligence; that the incident was caused by a
fortuitous event without any contributory negligence on its part.

Issue:
Whether or not respondent is a common carrier

Ruling:
Yes. Petitioners correctly rely on De Guzman v. Court of
Appeals in characterizing respondent as a common carrier. Its
ferry services are so intertwined with its main business as to be
 SOUTHERN LINES VS CA
FACTS:
In 1948, the City of Iloilo requisitioned for rice from the National Rice and
Corn Corporation (hereafter referred to as NARIC) in Manila. On August 24 of
the same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice
consigned to the City of Iloilo on board the SS "General Wright" belonging to
the Southern Lines, Inc. Each sack of rice weighed 75 kilos and the entire
shipment as indicated in the bill of lading had a total weight of 129,450 kilos.
According to the bill of lading, the cost of the shipment was P63,115.502.
NARIC shipped 1,726 sacks of rice on board a vessel owned by Southern
Lines (SS Gen Wright)
After paying for the shipment, it was noted at the foot of the bill of lading that
the City of Iloilo received the above mentioned merchandise apparently in
same condition as when shipped, save as noted below: actually received
1685 sacks with a gross weight of 116,131 kilos upon actual weighing.
Held:
YES. The SC held that the contention of Southern Lines with
respect to the improper packing is untenable. Under Art. 361 of
the Code of Commerce, the carrier, in order to free itself from
liability, was only obliged to prove that the damages suffered by
the goods were “by virtue of the nature or defect of the
articles.” Under Art. 362, the plaintiff, in order to hold the
defendant liable, was obliged to prove that the damages to the
goods is by virtue of their nature, occurred on account of its
negligence or because the defendant did not take the
precaution adopted by careful persons. It held that if the fact of
improper packing is known to the carrier or his servants, or
apparent upon ordinary observation, but it accepts the goods
notwithstanding such condition, it is not relieved of liability for
loss or injury resulting therefrom.

Total shortage ascertained 13,319 kilos." The shortage was equivalent to 41

sacks of rice with the proportionate value of which was P6, 486.353. City filed
a case against NARIC and Southern Lines for the recovery of the amount lost.
Southern Lines' contention: it is exempt from liability because the shortage in
the shipment of rice was due to such factors as the shrinkage, leakage or
spillage of the rice on account of the bad condition of the sacks at the time it
received the same and the negligence of the agents of respondent City of
Iloilo in receiving the shipment.

The lower court ordered Southern Lines to pay, and NARIC was absolved
of liability. The Court of Appeals affirmed lower court ruling. Hence, this
petition.

Issue:
Whether Southern Lines is liable for the loss or shortage of the
rice shipped.
4. Duration of Responsibility
MITUSI LINES V. COURT OF APPEALS,
G.R. NO. 119571, MARCH 11, 1998.
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. As petitioner denied private
respondent's claim, the latter filed a case in the RTC. Petitioner
filed a motion to dismiss alleging that the claim against it had
prescribed under the Carriage of Goods by Sea Act. The RTC
denied petitioner's motion as well as its subsequent motion for
reconsideration. On petition for certiorari, the CA sustained the
RTC’s orders.
ISSUE: Whether private respondent's action is for "loss or
damage" to goods shipped, within the meaning of §3(6) of the
Carriage of Goods by Sea Act (COGSA).
HELD:
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. Said one-year period of
limitation is designed to meet the exigencies of maritime hazards.
In a case where the goods shipped were neither lost nor
damaged in transit but were, on the contrary, delivered in port to
someone who claimed to be entitled thereto, the situation is
different, and the special need for the short period of limitation
in cases of loss or damage caused by maritime perils does not
obtain. In the case at bar, there is neither deterioration nor
disappearance nor destruction of goods caused by the carrier's
breach of contract. Whatever reduction there may have been in
the value of the goods is not due to their deterioration or
disappearance because they had been damaged in transit.
 SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO-TAISHO
INSURANCE CORPORATION, respondent.
DECISION
FACTS: Taiyo Yuden Philippines, Inc. (owner of the goods) and
Delbros, Inc. (shipper) entered into a contract, for Delbros, Inc. to
transport a shipment of goods consisting of three (3) wooden
crates.
For the carriage of said shipment from Cebu City to Manila,
Delbros, Inc. engaged the services of the vessel M/V Philippine
Princess, owned and operated by petitioner Sulpicio Lines, Inc.
(carrier/subcontracted vessel). The vessel arrived at the North
Harbor, Manila, on 24 February 1992.
During the unloading of the shipment, one crate fell and
contents were damaged beyond use.
Owners claimed from Sulpicio but was denied. They then
went after respondent FLPI (First Lepanto) for recovery and
payment. FLPI then went after Delbros and Sulpicio upon being
subrogated to the rights of the owner. Delbros answered that the
negligence lay upon Sulpicio for damaging the cargo. RTC
dismissed the complaint of insurer against Sulpicio but CA
reversed decision hence the appeal to SC.
ISSUE: respondent-insurers predecessor-in-interest, did incur
damages, and if so, whether or not petitioner-carrier is liable for
the same.
RULING: It cannot be denied that the shipment sustained damage
while in the custody of petitioner-carrier.
Petitioner-carrier contends that its liability, if any, is only to
the extent of the cargo damage or loss and should not include
the lack of fitness of the shipment for transport to Singapore due
to the damaged packing. This is erroneous. Petitioner-carrier
seems to belabor under the misapprehension that a distinction
must be made between the cargo packaging and the contents of
the cargo. According to it, damage to the packaging is not
tantamount to damage to the cargo. It must be stressed that in
the case at bar, the damage sustained by the packaging of the
cargo while in petitioner-carriers custody resulted in its unfitness
to be transported to its consignee in Singapore. Such failure to
ship the cargo to its final destination because of the ruined
packaging, indeed, resulted in damages on the part of the owner
of the goods.
The falling of the crate during the unloading is evidence of
petitioner-carriers negligence in handling the cargo. As a common
carrier, it is expected to observe extraordinary diligence in the
handling of goods placed in its possession for transport. Thus,
when the shipment suffered damages as it was being unloaded,
petitioner-carrier is presumed to have been negligent in the
handling of the damaged cargo. Under Articles 1735 [17] and
1752[18] of the Civil Code, common carriers are presumed to have
been at fault or to have acted negligently in case the goods
transported by them are lost, destroyed or had deteriorated. To
overcome the presumption of liability for loss, destruction or
deterioration of goods under Article 1735, the common carrier
must prove that they observed extraordinary diligence as
required in Article 1733[19] of the Civil Code.[20]
Petitioner-carrier miserably failed to adduce any shred of
evidence of the required extraordinary diligence to overcome
the presumption that it was negligent in transporting the cargo.
 Coming now to the issue of the extent of petitioner-carriers
liability, it is undisputed that respondent-insurer paid the owner
of the goods under the insurance policy the amount of
P194,220.31 for the alleged damages the latter has incurred. The
question then is: To what extent is Sulpicio Lines, Inc., as common
carrier, liable for the damages suffered by the owner of the
goods?
Upon respondent-insurers payment of the alleged amount of
loss suffered by the insured (the owner of the goods), the insurer
is entitled to be subrogated pro tanto to any right of action
which the insured may have against the common carrier whose
negligence or wrongful act caused the loss
As found by the Court of Appeals, the falling of the crate was
negligence on the part of Sulpicio Lines, Inc. for which it cannot
exculpate itself from liability because it failed to prove that it
exercised extraordinary diligence.[27]
Hence, we uphold the ruling of the appellate court that
herein petitioner-carrier is liable to pay the amount paid by
respondent-insurer for the damages sustained by the owner of
the goods.
COASTWISE LIGHTERAGE V. CA
245 SCRA 796
FACTS: Pag-asa Sales 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. Upon
reaching Manila Bay, one of the barges struck an unknown
sunken object. The forward buoyancy compartment was
damaged and the molasses at the cargo tanks were contaminated
and rendered unfit for the use it was intended
Pag-asa Sales rejected the shipment of molasses as total loss.
Pag-asa then filed a formal claim with the insurer of its lost cargo,
Philippine General Insurance Company and against Coastwise
Lighterage. PhilGen paid Pag-asa P700K. PhilGen filed an action
against Coastwise Lighterage seeking to recover the amount paid
to Pag-asa. PhilGen claims to be subrogated to all the contractual
rights and claims which the consignee may have against the
carrier.
Coastwise stresses the fact that it contracted with Pag-asa Sales
to transport the shipment of the molasses and refers to this
contract as a “charter agreement”; it claims therefore to be a
private carrier citing Home INSURENACE Company v. America
Steamship Agencies ruling “… a common carrier undertaking to
carry a special cargo or chartered to a special person only
becomes a private carrier.”
Moreover, Coastwise contends that subrogation does not apply
in this case.
ISSUE:
(1) WON Coastwise was transformed into a private carrier, by
virtue of the contract of affreightment which it entered into
with the consignee.
(2) WON the insurer was subrogated into the rights of the
consignee against the carrier, upon payment of the insurer of
the value of consignee’s goods lost
HELD:
(1) Petitioner’s reliance of the case is misplaced. The conclusions
of the court is that “the charter party contract is one of
affreightment over the whole vessel, rather than a demise. As
such, the liability of the ship owner for acts or negligence of
its captain and crew, would remain in the absence of
stipulation.” Although a charter party may transform a
common carrier into a private one, the same is not true in a
contract of affreightment on account of the distinctions
between the two. By the contract of affreigtment, Coastwise
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.
(2) 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.
PHILIPPINES FIRST INSURANCE CO., INC. (PFI), petitioner
v.
WALLEM PHILS. SHIPPING, INC., UNKNOWN CHARTERER OF THE
VESSEL M/S “OFFSHORE MASTER”, AND SHANGHAI FAREAST
SHIP BUSINESS COMPANY, respondents
 
Facts:
On or about 02 October 1995,  a shipment of 10,000 bags of
sodium sulphate anhydrous 99 PCT Min. was loaded on board the
M/S Offshore Master for consignee L.G. Atkimson Import-Export,
Inc. The shipper of the shipment is Shanghai Fareast Ship
Business Company. Wallem Philippines Shipping, Inc (Wallem). is
the local ship agent of shipper and the unknown owner and
charterer of M/S Offshore Master. On 16 October 1995, the
shipment arrived at Manila. It was discovered that 2,426 bags
were in bad order and condition; and around 120,000 kilograms
of the total 500,000 kilograms of shipment had been exposed and
contaminated, resulting in losses due to depreciation and
downgrading. Petitioner PFI paid consignee for the damages that
the latter suffered and in the exercise of its right of subrogation,
sent a demand letter to respondent Wallem for recovery of the
amount paid to consignee, which Wallem did not pay. An action
before the Regional Trial Court was filed, which ordered Wallem
to pay PFI. The RTC attributed the damage and losses sustained
by the shipment to the arrastre operator’s mishandling in its
discharge; and held Wallem and arrastre operator solidarily
liable. The Court of Appeals reversed the RTC decision, holding
the arrastre operator solely liable to consignee, hence this
petition.
 
Issue:
Whether or not Wallem, as common carrier, is obligated to safely
discharge the cargo from the vessel and be held liable for the
damages suffered by consignee.
 
Held:
Yes. Article 1736 of the Civil code provides that 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.
Although the damage was attributed to mishandling of the
stevedores of the arrastre operator, the stevedores were 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.
Samar Mining v. Nordeutscher Lloyd (supra),
G.R. No. L-28673. October 23, 1984
FACTS: The case arose from an importation made by Samar
Mining Co. Inc. of 1 crate Optima welded wedge wire sieves
through the M/S Schwabenstein, a vessel owned by
Nordeutscher Lloyd, (represented in the Philippines by its agent,
C.F. Sharp & Co., Inc.), which shipment is covered by Bill of Lading
No. 18 duly issued to consignee Samar Mining. Upon arrival of the
vessel at the port of Manila, the importation was unloaded and
delivered in good order and condition to the bonded warehouse
of AMCYL. The goods were however never delivered to, nor
received by, the consignee at the port of destination — Davao.
When the letters of complaint sent to Nordeutscher Lloyd failed
to elicit the desired response, Samar Mining filed a formal claim
for P1,691.93, the equivalent of $424.00 at the prevailing rate of
exchange at that time, against the former, but neither paid.
Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd
and CF Sharp & Co. brought in AMCYL as third party defendant.
The trial court rendered judgment in favor of Samar Mining,
ordering Nordeutscher Lloyd, et. al. to pay the amount of
P1,691.93 plus attorney’s fees and costs. However, the Court
stated that Nordeutscher Lloyd, et. al. may recoup whatever they
may pay Samar Mining by enforcing the judgment against third
party defendant AMCYL, which had earlier been declared in
default. Nordeutscher Lloyd and C.F. Sharp & Co. appealed from
said decision.
Notes
The following are the pertinent ports, as provided in the bill of
lading:
Port of Loading: Bremen, Germany
Port of discharge from ship: Manila
Port of destination/Port of discharge of the goods: Davao
As plainly indicated on the face of the bill, the vessel M/S
Schwabenstein is to transport the goods only up to Manila.
Thereafter, the goods are to be transshipped by the carrier to the
port of destination.
ISSUE: Whether or not a stipulation in the bill of lading exempting
the carrier from liability for loss of goods not in its actual custody
(i.e., after their discharge from the ship) is valid.
HELD: YES! It is clear that in discharging the goods from the ship
at the port of Manila, and delivering the same into the custody of
AMCYL, the bonded warehouse, appellants were acting in full
accord with the contractual stipulations contained in Bill of Lading
No. 18. The delivery of the goods to AMCYL was part of
appellants' duty to transship (meaning to transfer for further
transportation from one ship or conveyance to another) the
goods from Manila to their port of destination-Davao.
The extent of appellant carrier's responsibility and/or liability in
the transshipment of the goods in question are spelled out and
delineated under Section 1, paragraph 3 of Bill of Lading No. 18,
to wit: “the carrier shall not be liable in any capacity whatsoever
for any delay, loss or damage occurring before the goods enter
ship's tackle to be loaded or after the goods leave ship's tackle to
be discharged, transshipped or forwarded”. Further, in Section 11
of the same bill, it was provided that “this carrier, in making
arrangements for any transshipping or forwarding vessels or
means of transportation not operated by this carrier shall be
considered solely the forwarding agent of the shipper and
without any other responsibility whatsoever even though the
freight for the whole transport has been collected by him…
Pending or during forwarding or transshipping the carrier may
store the goods ashore or afloat solely as agent of the shipper…”
We find merits in Nordeutscher’s contention that they are not
liable for the loss of the subject goods by claiming that they have
discharged the same in full and good condition unto the custody
of AMCYL at the port of discharge from ship — Manila, and
therefore, pursuant to the aforequoted stipulation (Sec. 11) in
the bill of lading, their responsibility for the cargo had ceased.The
validity of stipulations in bills of lading exempting the carrier from
liability for loss or damage to the goods when the same are not in
its actual custody has been upheld by Us in PHOENIX ASSURANCE
CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968), ruling
that “pursuant to the terms of the Bill of Lading, appellee's
responsibility as a common carrier ceased the moment the goods
were unloaded in Manila and in the matter of transshipment,
appellee acted merely as an agent of the shipper and consignee”
 G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,  dumping of the scrap iron into the sea was due to the order of a
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Facts:
Gelacio Tumambing contracted the services of Mauro B. Ganzon
to haul 305 tons of scrap iron from Mariveles, Bataan, to the port
of Manila on board the lighter LCT "Batman". Ganzon sent his
lighter to Mariveles. Tumambing delivered the scrap iron to
Filomeno Niza, captain of the lighter, for loading and on the same
day, the loading commenced. When about half of the scrap iron
was already loaded, Mayor Jose Advincula of Mariveles, Bataan,
arrived and demanded P5,000.00 from Tumambing. The latter
resisted the shakedown and after a heated argument between
them, Mayor Advincula drew his gun and fired at Tumambing.
The gunshot was not fatal. Tumambing was taken to the hospital
for treatment.
After sometime, the loading of the scrap iron was resumed. But
sometime later, Acting Mayor Basilio Rub, accompanied by three
policemen, ordered captain Niza and his crew to dump the scrap
iron. Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron.
Tumambing an instituted an action against Ganzon for damages
based on culpa contractual before the CFI which did not rule in its
favor. On appeal, the CA reversed and set aside the decision of
the CFI, ordering that Ganzon should pay Tumambing for
damages.
The petitioner, in a Petition for Review, alleged that the CA erred
in finding that there was breach of contract (commencing from
the scrap iron was placed into the petitioner’s custody and
control), that it condemned the petitioner despite the fact the
local government official, and that it did not consider the such
loss was due to a fortuitous event.
Issue:
Whether or not the scrap iron was placed unconditionally under
the custody and control of the petitioner to make him liable
Ruling:
The private respondent delivered the scraps to Captain Niza for
loading in the lighter and the petitioner, thru his employees,
actually received the scraps. By the said act of delivery, the scraps
were unconditionally placed in the possession and control of the
common carrier, and upon their receipt by the carrier for
transportation, the contract of carriage was deemed perfected.
Consequently, the petitioner-carrier's extraordinary responsibility
for the loss, destruction or deterioration of the goods
commenced. Pursuant to Art. 1736, such extraordinary
responsibility would cease only upon the delivery, actual or
constructive, by the carrier to the consignee, or to the person
who has a right to receive them. The fact that part of the
shipment had not been loaded on board the lighter did not impair
the said contract of transportation as the goods remained in the
custody and control of the carrier, albeit still unloaded.
Hence, the petitioner is presumed to have been at fault or to
have acted negligently. By reason of this presumption, the court
is not even required to make an express finding of fault or
negligence before it could hold the petitioner answerable for the
breach of the contract of carriage. Still, the petitioner could have
been exempted from any liability had he been able to prove that
he observed extraordinary diligence in the vigilance over the
goods in his custody, according to all the circumstances of the
case, or that the loss was due to an unforeseen event or to force
majeure. As it was, there was hardly any attempt on the part of
the petitioner to prove that he exercised such extraordinary
diligence.
*Ung ibang issues:
We cannot sustain the theory of caso fortuito. before the
appellee Ganzon could be absolved from responsibility on the
ground that he was ordered by competent public authority to
unload the scrap iron, it must be shown that Acting Mayor Basilio
Rub had the power to issue the disputed order, or that it was
lawful, or that it was issued under legal process of authority. The
appellee failed to establish this. Indeed, no authority or power of
the acting mayor to issue such an order was given in evidence.
Neither has it been shown that the cargo of scrap iron belonged
to the Municipality of Mariveles. What we have in the record is
the stipulation of the parties that the cargo of scrap iron was
accilmillated by the appellant through separate purchases here
and there from private individuals. The fact remains that the
order given by the acting mayor to dump the scrap iron into the
sea was part of the pressure applied by Mayor Jose Advincula to
shakedown the appellant for P5,000.00. The order of the acting
mayor did not constitute valid authority for appellee Mauro
Ganzon and his representatives to carry out.
SALUDO v. CA
G.R. No. 95536, March 23, 1992
FACTS:
After the death of plaintiffs' mother, Crispina Galdo
Saludo, in Chicago, Illinois, (on) October 23, 1976, Pomierski and
Son Funeral Home of Chicago, made the necessary preparations
and arrangements for the shipment of the remains from Chicago
to the Philippines. On October 26, 1976, Pomierski brought the
remains to C.M.A.S. (Continental Mortuary Air Services) at the
airport (Chicago) which made the necessary arrangements such
as flights, transfers, etc. C.M.A.S. booked the shipment with PAL,
with Pomierski F.H. as the shipper and Mario (Maria) Saludo as
the consignee. PAL Airway Bill No. 079- 01180454 Ordinary was
issued wherein the requested routing was from Chicago to San
Francisco on board Trans World Airlines (TWA) Flight 131 of
October 27, 1976, and from San Francisco to Manila on board PAL
Flight No. 107 of the same date, and from Manila to Cebu on
board PAL Flight 149 of October 29, 1976. When petitioners
arrived at the Chicago Airport, they were informed that their
mother’s remains were on a place to Mexico City, that there were
two bodies at the terminal, and somehow they were switched.
The following day, October 28, 1976, the shipment of the remains
of Crispina Saludo arrived in San Francisco from Mexico, and was
then transferred to or received by PAL. The shipment arrived in
Manila on October 30, 1976, a day after its expected arrival on
October 29, 1976. Petitioner then filed a damage suit against
TWA and PAL. The court below absolved the two respondent
airline companies of liability. The Court of Appeals affirmed the
decision of the lower court in toto, and in a subsequent
resolution, denied herein petitioners' motion for reconsideration
for lack of merit.
ISSUE:
 Whether or not private respondents failed to exercise delivery of the cargo subject of the contract of carriage. Only
extraordinary diligence required by law which resulted in the when such fact of delivery has been unequivocally established
switching and/or misdelivery of the remains of Crispina Saludo to can the liability for loss, destruction or deterioration of goods in
Mexico. the custody of the carrier, absent the excepting causes under
RULING: Article 1734, attach and the presumption of fault of the carrier
No. On October 26, 1976, the cargo containing the under Article 1735 be invoked.
casketed remains of Crispina Saludo was booked for PAL Flight
Number PR-107 leaving San Francisco for Manila on October 27,
1976. PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the Cargo on October 26, 1976,
but merely as a confirmation of the booking thus made for the
San Francisco-Manila flight scheduled on October 27, 1976.
Actually, it was not until October 28, 1976 that PAL received
physical delivery of the body at San Francisco, as duly evidenced
by the Interline Freight Transfer Manifest of the American Airline
Freight System and signed for by Virgilio Rosales at 1945H, or
7:45 P.M. on said date. Explicit is the rule under Article 1736 of
the Civil Code that the extraordinary responsibility of the
common carrier begins from the time the goods are delivered to
the carrier. This responsibility remains in full force and effect
even when they are temporarily unloaded or stored in transit,
unless the shipper or owner exercises the right of stoppage in
transitu, and terminates only after the lapse of a reasonable time
for the acceptance of the goods by the consignee or such other
person entitled to receive them. 30 And, there is delivery to the
carrier when the goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier for the
purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by
the carrier, the liability of the common carrier commences eo
instanti. Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to be observed by the
carrier instantaneously commences upon delivery of the goods
thereto, for such duty to commence there must in fact have been
 BENITO MACAM V CA
Facts:
Benito Macam, doing business under name Ben-Mac
Enterprises, shipped on board vessel Nen-Jiang, owned and
operated by respondent China Ocean Shipping Co. through local
agent Wallem Philippines Shipping Inc., 3,500 boxes of
watermelon and 1,611 boxes of fresh mangoes covered by 2
separate Bills of Lading. The bills covered the provision that it
must be surrendered and duly indorsed for the exchange of the
delivered goods. The shipment was bound for Hongkong with
PAKISTAN BANK as consignee and Great Prospect Company of
Rowloon (GPC) as notify party. Upon arrival in Hongkong,
shipment was delivered by respondent WALLEM directly to GPC,
not to PAKISTAN BANK and without the required bill of lading
having been surrendered. Subsequently, GPC failed to pay
PAKISTAN BANK, such that the latter, still in possession of original
bill of lading, refused to pay petitioner thru SOLIDBANK. Since
SOLIDBANK already pre-paid the value of shipment, it demanded
payment from respondent WALLEM but was refused. MACAM
constrained to return the amount paid by SOLIDBANK and
demanded payment from WALLEM but to no avail. WALLEM
submitted in evidence a telex dated 5 April 1989 as basis for
delivering the cargoes to GPC without the bills of lading and bank
guarantee. The telex instructed delivery of various shipments to
the respective consignees without need of presenting the bill of
lading and bank guarantee per the respective shipper’s request
since “for prepaid shipt ofrt charges already fully paid.” MACAM,
however, argued that, assuming there was such an instruction,
the consignee referred to was PAKISTAN BANK and not GPC.
Issue:
W/N respondents are liable to petitioners for releasing the goods
without the bills
Held:
It is a standard maritime practice when immediate delivery is of
the essence, for shipper to request or instruct the carrier to
deliver the goods to the buyer upon arrival at the port of
destination without requiring presentation of bill of lading as that
usually takes time. Thus, taking into account that subject
shipment consisted of perishable goods and SOLIDBANK pre-paid
the full amount of value thereof, it is not hard to believe the
claim of respondent WALLEM that petitioner indeed requested
the release of the goods to GPC without presentation of the bills
of lading and bank guarantee. To implement the said telex
instruction, the delivery of the shipment must be to GPC, the
notify party or real importer/buyer of the goods and not the
PAKISTANI BANK since the latter can very well present the
original Bills of Lading in its possession. Likewise, if it were the
PAKISTANI BANK to whom the cargoes were to be strictly
delivered, it will no longer be proper to require a bank guarantee
as a substitute for the Bill of Lading. To construe otherwise will
render meaningless the telex instruction. After all, the cargoes
consist of perishable fresh fruits and immediate delivery thereof
the buyer/importer is essentially a factor to reckon with. We
emphasize that the extraordinary responsibility of the common
carriers lasts until actual or constructive delivery of the cargoes to
the consignee or to the person who has a right to receive them.
PAKISTAN BANK was indicated in the bills of lading as consignee
whereas GPC was the notify party. However, in the export
invoices GPC was clearly named as buyer/importer. Petitioner
also referred to GPC as such in his demand letter to respondent
WALLEM and in his complaint before the trial court. This premise
draws us to conclude that the delivery of the cargoes to GPC as
buyer/importer which, conformably with Art. 1736 had, other
than the consignee, the right to receive them was proper.
1. Stipulation Limiting Carrier’s Liability
G.R. No. 92501 March 6, 1992
PHILIPPINE AIR LINES, petitioner vs. HON. COURT OF APPEALS
and ISIDRO CO, respondents.
Facts: At about 5:30 a.m. on April 17, 1985, plaintiff [Co] with his
wife and son, arrived at the Manila International Airport aboard
defendant airline's PAL Flight No. 107 from San Francisco,
California. Plaintiff proceeded to the baggage retrieval and found
eight of his luggage, but despite diligent search, he failed to
locate ninth luggage, with claim check number 729113 which is
the one in question in this case. Plaintiff then immediately
notified defendant company through its employee, Willy
Guevarra, who filled up the printed form known as a Property
Irregularity Report  acknowledging one of the plaintiff's luggages
to be missing. Plaintiff's invoices evidencing their purchases show
their missing personal effects to be worth US$1,243.01, in
addition to the presents entrusted to them by their friends which
plaintiffs testified to be worth about US$500.00 to US$600.00
Plaintiff on several occasions unrelentingly called at defendant's
office in order to pursue his complaint about his missing luggage
but no avail. Thus, on April 15, 1985, plaintiff through his lawyer
wrote a demand letter to defendant company though Rebecca V.
Santos, its manager, Central Baggage Services, who replied, "that
to date we have been unable to locate your client's (plaintiff's)
baggage despite our careful search" and requesting plaintiff's
counsel to "please extend to him our sincere apologies for the
inconvenience he was caused by this unfortunate incident".
Despite the letter, however, defendants never found plaintiff's
missing luggage or paid its corresponding value. Consequently, on
May 3, 1985, plaintiff filed his present complaint against said
defendants. Co sued the airline for damages. The Regional Trial
Court of Pasay City found the defendant airline (now petitioner)
liable for: 1) P42,766.02 by way of actual damages; 2) P20,000.00
by way of exemplary damages; 3) P10,000.00 as attorney's fees;
all in addition to the costs of the suit. Defendants' counterclaim is
dismissed for lack of merit. Petitioner contends that under the
Warsaw Convention, its liability, if any, cannot exceed US $20.00
based on weight as private respondent Co did not declare the
contents of his baggage nor pay traditional charges before the
flight.
Issue: Whether petitioner’s liability is limited to $20.00 under the
Warsaw Convention?
Held: No. The provisions of the New Civil Code on common
carriers are Articles 1733, 1735 and 1753 shall govern. Art. 1753.
The law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss,
destruction or deterioration. Since the passenger's destination
in this case was the Philippines, Philippine law governs the
liability of the carrier for the loss of the passenger's luggage. In
this case, the petitioner failed to overcome, not only the
presumption, but more importantly, the private respondent's
evidence, proving that the carrier's negligence was the proximate
cause of the loss of his baggage. Furthermore, petitioner acted in
bad faith in faking a retrieval receipt to bail itself out of having to
pay Co's claim. (Art. 1735) The Court of Appeals therefore did not
err in disregarding the limits of liability under the Warsaw
Convention. The award of exemplary damages and attorney's
fees to the private respondent was justified.
Additional Note: (if ever lang itanong)
Plaintiff’s lost luggage was a Samsonite suitcase 62 inches in
length, worth about US$200.00 and containing personal effects
purchased by plaintiff and his wife and similar other items sent by
their friends abroad to be given as presents to relatives in the
Philippines.
In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World
Airways, Inc. vs. IAC 164 SCRA 268), the Warsaw Convention
limiting the carrier's liability was applied because of a simple loss
of baggage without any improper conduct on the part of the
officials or employees of the airline, or other special injury
sustained by the passengers. The petitioner therein did not
declare a higher value for his luggage, much less did he pay an
additional transportation charge. – (used by petitioner to support
their contention)
CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF
APPEALS and TOMAS L. ALCANTARA, respondents.
BELLOSILLO, J p:
FACTS:
On 19 October 1975, Tomas L. Alcantara was a first class
passenger of Cathay Pacific Airways, Ltd. (CATHAY for brevity) on
its Flight No. CX-900 from Manila to Hongkong and onward from
Hongkong to Jakarta on Flight No. CX-711. The purpose of his trip
was to attend the following day, 20 October 1975, a conference
with the Director General of Trade of Indonesia, Alcantara being
the Executive Vice-President and General Manager of Iligan
Cement Corporation, Chairman of the Export Committee of the
Philippine Cement Corporation, and representative of the
Cement Industry Authority and the Philippine Cement
Corporation. He checked in his luggage which contained not only
his clothing and articles for personal use but also papers and
documents he needed for the conference.
Upon his arrival in Jakarta, respondent discovered that his
luggage was missing. When he inquired about his luggage from
CATHAY's representative in Jakarta, Alcantara was told that his
luggage was left behind in Hongkong. For this, he was offered
$20.00 as "inconvenience money" to buy his immediate personal
needs until the luggage could be delivered to him. His luggage
finally reached Jakarta more than twenty four (24) hours after his
arrival. However, it was not delivered to him at his hotel but was
required by CATHAY to be picked up by an official of the
Philippine Embassy.
Alcantara filed his complaint against CATHAY with the CFI of
Lanao del Norte praying for temperate, moral and exemplary
damages, plus attorney's fees. The trial court rendered its
decision ordering CATHAY to pay Plaintiff P20,000.00 for moral
damages, P5,000.00 for temperate damages, P10,000.00 for
exemplary damages, and P25,000.00 for attorney's fees, and the
costs.
Both parties appealed to the CA. CATHAY assailed the conclusion
of the trial court that it was accountable for breach of contract
and questioned the non-application by the court of the Warsaw
Convention as well as the excessive damages awarded on the
basis of its finding that respondent Alcantara was rudely treated
by petitioner's employees during the time that his luggage could
not be found. For his part, Alcantara assigned as error the failure
of the trial court to grant the full amount of damages sought in
his complaint.
CA rendered its decision affirming the findings of fact of the trial
court but modifying its award by increasing the moral damages to
P80,000.00, exemplary damages to P20,000.00 and temperate or
moderate damages to P10,000.00. The award of P25,000.00 for
attorney's fees was maintained. Hence, this petition.
ISSUES:
Whether or not Cathay is liable to Alcantara for moral, exemplary
and temperate damages as well as attorney's fees?
Whether or not the Warsaw Convention on the libility of a carrier
to its passngers is applicable in the instant case?
HELD:
1. YES, Cathay is liable to Alcantara for damages except for
temperate damages.
A. Moral Damages
Moral damages predicated upon a breach of contract of carriage
may only be recoverable in instances where the mishap results in
death of a passenger, or where the carrier is guilty of fraud or bad
faith.
In the case at bar, both the CFI and CA found that CATHAY was
grossly negligent and reckless when it failed to deliver the
luggage of Alcantara at the appointed place and time. CATHAY
alleges that as a result of mechanical trouble, all pieces of luggage
on board the first aircraft bound for Jakarta were unloaded and
transferred to the second aircraft which departed an hour and a
half later. Yet, as the CA noted, CATHAY was not even aware that
it left behind Alcantara's luggage until its attention was called by
the Hongkong Customs authorities. More, bad faith or otherwise
improper conduct may be attributed to the employees of
CATHAY. While the mere failure of CATHAY to deliver
respondent's luggage at the agreed place and time did not ipso
facto amount to willful misconduct since the luggage was
eventually delivered to private respondent, albeit belatedly, We
are persuaded that the employees of CATHAY acted in bad faith.
-The duty officer told Alcantara: 'What can we do, the baggage is
missing. I cannot do anything.' something like it. 'Anyhow you can
buy anything you need, charged to Cathay Pacific.' 'You can buy
anything chargeable to Cathay Pacific'. The duty officer would like
to dismiss the affair as soon as possible by saying indifferently
'Don't worry. It can be found.'
Indeed, the aforequoted testimony shows that the language and
conduct of CATHAY's representative towards Alcantara was
discourteous or arbitrary to justify the grant of moral damages.
The CATHAY representative was not only indifferent and
impatient; he was also rude and insulting. He simply advised
Alcantara to buy anything he wanted. But even that was not
sincere because the representative knew that the passenger was
limited only to $20.00 which, certainly, was not enough to
purchase comfortable clothings appropriate for an executive
conference.
Considering that Alcantara was not only a revenue passenger but
even paid for a first class airline accommodation and
accompanied at the time by the Commercial Attache of the
Philippine Embassy who was assisting him in his problem,
CATHAY or its agents should have been more courteous and
accommodating to private respondent, instead of giving him a
curt reply, "What can we do, the baggage is missing. I cannot do
anything . . . Anyhow, you can buy anything you need, charged to
Cathay Pacific." CATHAY's employees should have been more
solicitous to a passenger in distress and assuaged his anxieties
and apprehensions. To compound matters, CATHAY refused to
have the luggage of Alcantara delivered to him at his hotel;
instead, he was required to pick it up himself and an official of the
Philippine Embassy. Under the circumstances, it is evident that
petitioner was remiss in its duty to provide proper and adequate
assistance to a paying passenger, more so one with first class
accommodation.
B. Temperate Damages
However, Alcantara is not entitled to temperate damages,
contrary to the ruling of the court a quo, in the absence of any
showing that he sustained some pecuniary loss. It cannot be
gainsaid that Alcantara's luggage was ultimately delivered to him
without serious or appreciable damage.
2. NO, the Warsaw Convention is not applicable in the instant
case.
Although the Warsaw Convention has the force and effect of law
in this country, being a treaty commitment assumed by the
Philippine government, said convention does not operate as an
exclusive enumeration of the instances for declaring a carrier
liable for breach of contract of carriage or as an absolute limit of
the extent of that liability. The Warsaw Convention declares the
carrier liable for damages in the enumerated cases and under
certain limitations. However, it must not be construed to
preclude the operation of the Civil Code and other pertinent laws.
It does not regulate, much less exempt, the carrier from liability
for damages for violating the rights of its passengers under the
contract of carriage, especially if wilfull misconduct on the part of
the carrier's employees is found or established, which is clearly
the case before Us. For, the Warsaw Convention itself provides in
Art. 25 that —
"(1) The carrier shall not be entitled to avail himself of the
provisions of this convention which exclude or limit his liability, if
the damage is caused by his wilfull misconduct or by such default
on his part as, in accordance with the law of the court to which
the case is submitted, is considered to be equivalent to wilfull
misconduct."
(2) Similarly the carrier shall not be entitled to avail himself of the
said provisions, if the damage is caused under the same
circumstances by any agent of the carrier acting within the scope
of his employment."
When petitioner airline misplaced Alcantara's luggage and failed
to deliver it to its passenger at the appointed place and time,
some special species of injury must have been caused to him. For
sure, the latter underwent profound distress and anxiety, and the
fear of losing the opportunity to fulfill the purpose of his trip. In
fact, for want of appropriate clothings for the occasion brought
about by the delay of the arrival of his luggage, to his
embarrassment and consternation respondent Alcantara had to
seek postponement of his pre-arranged conference with the
Director General of Trade of the host country.
In one case, this Court observed that a traveller would naturally
suffer mental anguish, anxiety and shock when he finds that his
luggage did not travel with him and he finds himself in a foreign
land without any article of clothing other than what he has on.
 TRANS-ASIA SHIPPING LINES v COURT OF APPEALS and ATTY.
RENATO T. ARROYO
G.R. No. 118126 March 4, 1996
DAVIDE, JR., J.
Facts: Atty. Renato Arroyo, a public attorney, bought a ticket from
petitioner a corporation engaged in inter-island shipping, for the
voyage of M/V Asia Thailand vessel to Cagayan de Oro City from
Cebu City. Upon boarding, he noticed that some repair works [sic]
were being undertaken on the engine of the vessel. The vessel
departed at around 11:00 in the evening with only one (1) engine
running. After an hour of slow voyage, the vessel stopped near
Kawit Island and dropped its anchor thereat. After half an hour of
stillness, some passengers demanded that they should be
allowed to return to Cebu City for they were no longer willing to
continue their voyage to, Cagayan de Oro City. The captain
acceeded [sic] to their request and thus the vessel headed back
to Cebu City. At Cebu City, plaintiff together with the other
passengers who requested to be brought back to Cebu City, were
allowed to disembark. Thereafter, the vessel proceeded to
Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia
Japan for its voyage to Cagayan de Oro City, likewise a vessel of
defendant. On account of this failure of defendant to transport
him to the place of destination on November 12, 1991, plaintiff
filed before the trial court a complaint for damages against
defendant.
After due trial, the trial court rendered its decision and ruled that
the action was only for breach of contract, with Articles 1170,
1172, and 1173 of the Civil Code as applicable law — not Article
2180 of the same Code.
On appeal, the Court of Appeals reversed the trial court's decision
by applying Article 1755 in relation to Articles 2201, 2208, 2217,
and 2232 of the Civil Code and, accordingly, awarded
compensatory, moral, and exemplary damages. Petitioner knew
from the very start of the voyage knew for a fact that the vessel
was not yet in its sailing condition because the second engine was
still being repaired. He may call him a very "panicky passenger" or
a "nervous person", but this will not relieve it from the liability it
incurred for its failure to exercise utmost diligence. As discussed,
petitioner in sailing to Cagayan de Oro City with only one engine
and with full knowledge of the true condition of the vessel, acted.
in bad faith with malice, in complete disregard for the safety of
the passengers and only for its own personal
advancement/interest. Moral damages are recoverable in a
damage suit predicated upon a breach of contract of carriage
where it is proved that the carrier was guilty of fraud or bad faith
even if death does not result. When entitlement to moral
damages has been established, the award of exemplary damages
is proper.
Issue: WON Petitioner observed extraordinary diligence in
ensuring the safety of its passengers
Held: NO. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of carriage is
a clear breach of its duty prescribed in Article 1755 of the Civil
Code. Before commencing the contracted voyage, the petitioner
undertook some repairs on the cylinder head of one of the
vessel's engines. But even before it could finish these repairs, it
allowed the vessel to leave the port of origin on only one
functioning engine, instead of two. Moreover, even the lone
functioning engine was not in perfect condition as sometime after
it had run its course, it conked out. This caused the vessel to stop
and remain a drift at sea, thus in order to prevent the ship from
capsizing, it had to drop anchor. Plainly, the vessel was
unseaworthy even before the voyage began. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew.
*On issue of damages: Affirmed. (No actual damages since no
evidence of delay. Any further delay then in the private
respondent's arrival at the port of destination was caused by his
decision to disembark. Had he remained on the first vessel, he
would have reached his destination at noon of 13 November
1991, thus been able to report to his office in the afternoon. He,
therefore, would have lost only the salary for half of a day. But
actual or compensatory damages must be proved, which the
private respondent failed to do. There is no convincing evidence
that he did not receive his salary for 13 November 1991 nor that
his absence was not excused.)
SWEET LINES, INC., petitioner, vs.HON. BERNARDO TEVES,
Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO
TANDOG, JR., and ROGELIO TIRO, respondents.
TOPIC: Stipulation Limiting Carrier’s Liability
FACTS:
Private respondents Atty. Tandog and Tiro bought tickets for
Voyage at the branch office of petitioner, a shipping company
transporting inter-island passengers and cargoes, at Cagayan de
Oro City. Respondents were to board petitioner's vessel bound
for Tagbilaran City via the port of Cebu. Upon learning that the
vessel was not proceeding to Bohol, since many passengers were
bound for Surigao, private respondents per advice, went to the
branch office for proper relocation to another vessel. Because the
said vessel was already filled to capacity, they were forced to
agree "to hide at the cargo section to avoid inspection of the
officers of the Philippine Coastguard." Private respondents
alleged that they were, during the trip," "exposed to the
scorching heat of the sun and the dust coming from the ship's
cargo of corn grits," and that the tickets they bought at Cagayan
de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. In view thereof, private
respondents sued petitioner for damages and for breach of
contract of carriage before Court of First Instance of Misamis
Oriental. Petitioner moved to dismiss the complaint on the
ground of improper venue. This motion was premised on the
condition printed at the back of the tickets, Condition No. 14,
which reads: “It is hereby agreed and understood that any and all
actions arising out of the conditions and provisions of this ticket,
irrespective of where it is issued, shall be filed in the competent
courts in the City of Cebu.” The motion was denied hence the
instant petition.

ISSUE: WON Condition No. 14 printed at the back of the
petitioner's passage tickets purchased by private respondents,
which limits the venue of actions arising from the contract of
carriage to the Court of First Instance of Cebu, valid and
enforceable
HELD:
No. Considered in the light of circumstances prevailing in the
inter-island shipping industry in the country today, the SC held
that Condition No. 14 printed at the back of the passage tickets
should be held as void and unenforceable for the following
reasons: First, under circumstances obligation in the inter-island
shipping industry, it is not just and fair to bind passengers to the
terms of the conditions printed at the back of the passage tickets,
on which Condition No. 14 is Printed in fine letters, and Second,
Condition No. 14 subverts the public policy on transfer of venue
of proceedings of this nature, since the same will prejudice rights
and interests of innumerable passengers located in different
places of the country who, under Condition No. 14, will have to
file suits against petitioner only in the City of Cebu. Considering
the expense and trouble a passenger residing outside of Cebu
City would incur to prosecute a claim in the City of Cebu, he
would most probably decide not to file the action at all. The
condition will thus defeat, instead of enhance, the ends of justice.
Upon the other hand, petitioner has branches or offices in the
respective ports of call of its vessels and can afford to litigate in
any of these places. Hence, the filing of the suit in the CFI of
Misamis Oriental, as was done in the instant case, will not cause
inconvenience to, much less prejudice, petitioner.
2. Amount of Liability
YSMAEL v BARRETTO
G.R. No. 28028. November 25, 1927.
FACTS:
In this action plaintiff, a domestic corporation, seeks to
recover from the defendants P9,940.95 the alleged value of four
cases of merchandise which it delivered to the steamship Andres
on October 25, 1922, at Manila to be shipped to Surigao, but
which were never delivered to Salomon Sharuff, the consignee, or
returned to the plaintiff. The original complaint was amended to
include Gabino Barretto and P. E. Soon as members of the limited
partnership of Gabino Barretto & Company, Limited. In their
amended answers defendants make a specific denial of all of the
material allegations of the complaint, and as a special defense
allege that the four cases of merchandise in question were never
delivered to them, and that under the provisions of paragraph 7
of the printed conditions appearing on the back of the bill of
lading, plaintiff's right of action is barred for the reason that it
was not brought within sixty days from the time the cause of
action accrued. The defendant Soon did not answer the
complaint, and the defendants further alleged: "I. That under and
by virtue of provision 12 of the bill of lading referred to in
plaintiff's amended complaint, the defendants are not liable in
excess of three hundred pesos (P300) for any package of silk
unless the value and contents of such packages are correctly
declared in the bill of lading at the time of shipment, etc." The
evidence was taken upon such issues, and the lower court
rendered judgment for the plaintiff for the full amount of its
claim, from which the defendants Andres H. Limgengco and
Vicente Javier appeal and assign this error among others: "the
lower court erred in rendering judgment against appellants in the
sum of P9,940.95."
ISSUE: limit of defendants' liability for each case of silk "for loss or
Whether or not the lower court erred in rendering damage from any cause or for any reason" would put it in the
judgment against appellants in the sum of P9,940.95. power of the defendants to have taken the whole cargo of 164
RULING: cases of silk at a valuation of P300 for each case, or less than one-
No. Appellants rely on clause 12 of the bill of lading, which eighth of its actual value. If that rule of law should be sustained,
is as follows: "It is expressly understood that carrier shall not be no silk would ever be shipped from one island to another in the
liable for loss or damage from any cause or for any reason to an Philippines. Such a limitation of value is unconscionable and void
amount exceeding three hundred pesos (P300) Philippine as against public policy.
currency for any single package of silk or other valuable cargo,
nor for an amount exceeding one hundred pesos (P100)
Philippine currency for any single package of other cargo, unless
the value and contents of such packages are correctly declared in
this bill of lading at the time of shipment and freight paid in
accord with the actual measurement or weight of the cargo
shipped." That condition is printed on the back of the bill of
lading. In disposing of that question, the lower court points out
that the conditions in question "are not printed on the triplicate
copies which were delivered to the plaintiff," and that by reason
thereof they "are not binding upon the plaintiff." The clause in
question provides that the carrier shall not be liable for loss or
damage from any cause or for any reason to an amount in excess
of P300 "for any single package of silk or other valuable cargo."
The ship in question was a common carrier and, as such, must
have been operated as a public utility. It is a matter of common
knowledge that large quantities of silk are imported in the
Philippine Islands, and that after being imported, they are sold by
the merchants in Manila and other large seaports, and then
shipped to different points and places in the Islands. Hence, there
is nothing unusual about the shipment of silk. In truth and in fact,
it is a matter of usual and ordinary business. There was no fraud
or concealment in the shipment in question. Clause 12 above
quoted places a limit of P300 "for any single package of silk." The
evidence shows that 164 "cases" were shipped, and that the
value of each case was very near P2,500. In this situation, the
PARMANAND SHEWARAM, plaintiff and appellee, vs.PHILIPPINE
AIR LINES, INC., defendant and appellant.
G.R. No. L-20099 July 7, 1966
ZALDIVAR, J.
Amount of Liability
This is an appeal from the CFI Zamboanga Decision
eliminating exemplary damages and modifying MTC Zamboanga’s
Decision ordering PAL to pay actual damages, exemplary
damages, attorney’s fees and cost of suit to Shewaram.
FACTS
Parmanand Shewaram - passenger
Philippine Air Lines, Inc. (PAL)- carrier
On November 23, 1959, Parmanand Shewaram, was a
paying passenger on PAL’s aircraft from Zamboanga City bound
for Manila. On the same day, he checked in 3 baggages – a
suitcase and 2 other pieces. The suitcase was mistagged with
“I.G.N.” (for Iligan) instead of MNL (for Manila) by PAL personnel
in Zamboanga. The suitcase was then sent to Iligan and thus did
not arrive with Shewaram. The PAL station agent in Iligan caused
to send the suitcase for delivery to Manila which arrived on
November 24, 1959.
Prior to having his suitcase returned, Shewaram was offered
another similar suitcase which was the only baggage left for the
flight on November 23, 1959. This apparently belonged to a
certain Del Rosario who was bound for Iligan in the same flight
with Shewaram. The said suitcase was nevertheless opened to
ascertain if such belonged to Shewaram without the permission
and presence of Mr. Del Rosario. Shewaram rejected the suitcase
as it contained a pistol instead of his Transistor Radio 7 (Php
176.00) and Rollflex Camera (Php 373.00). Moreover, there was a
space in the suitcase where the two items in question could have
been placed. PAL admitted that the two items could not be found
inside the suitcase. There was no evidence on record sufficient to
show that Shewaram’s suitcase was never opened during the
time it was placed in PAL’s possession and prior to its recovery by
the Shewaram. However, PAL had presented evidence that it had
authority to open passengers' baggage to verify and find its
ownership or identity.
Shewaram instituted an action to recover damages suffered by
him due to PAL’s failure to observe extraordinary diligence in the
vigilance and carriage of his luggage. This was lodged before the
MTC Zamboanga.
MTC Zamboanga Decision
It ordered PAL to pay Shewaram Php 373.00 as actual
damages, Php 100.00 as exemplary damages, Php 150.00 as
attorney's fees, and the costs of the action.
PAL appealed to CFI Zamboanga.

CFI Zamboanga Decision
It modified the judgment of the inferior court by ordering
the PAL to pay the Shewaram only the sum of P373.00 as actual
damages, with legal interest from May 6, 1960 and the sum of
P150.00 as attorney's fees, eliminating the award of exemplary
damages.
Shewaram appealed to the SC on a question of law.
ISSUE
WON Shewaram was bound by the provisions of the tariff
regulations filed by PAL with the civil aeronautics board and the
conditions of carriage printed at the back of the plane ticket stub.
HELD
NO. One of the focal conditions in the Domestic Tariff Regulations
No. 2 filed with the Civil Aeronautics Board which is vital in the
case provides:
The liability, if any, for loss or damage to checked baggage or for
delay in the delivery thereof is limited to its value and, unless the
passenger declares in advance a higher valuation and pay an
additional charge therefor, the value shall be conclusively
deemed not to exceed P100.00 for each ticket.
This was printed in small letters at the back of the ticket.
PAL even admits that passengers do not sign the ticket, much less
did Shewaram herein sign his ticket when he made the flight on
November 23, 1959.
Corollary with the abovementioned condition is Art. 1750
of the NCC:
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 fairly and freely agreed upon.
Pecuniary liability of a common carrier may, by contract,
be limited to a fixed amount. It is required, however, that the
contract must be "reasonable and just under the circumstances
and has been fairly and freely agreed upon.” However,
requirements in Art. 1750 have not been met. The fact that those
conditions are printed at the back of the ticket stub in letters so
small that they are hard to read would not warrant the
presumption that the appellee was aware of those conditions
such that he had "fairly and freely agreed" to those conditions.
Also, it was clear by the admission of PAL that Shewaram did not
sign his ticket. Therefore, he is not, and can not be, bound by the
conditions of carriage found at the back of the ticket stub issued
to him when he made the flight on appellant's plane on
November 23, 1959.

Moreover, the carrier cannot limit its liability for injury to
or loss of goods shipped where such injury or loss was caused by
its own negligence. PAL is undoubtedly and undisputedly a
common carrier. It was accused of being negligent because it
admittedly mistagged Shewaram’s suitcase and the some of the
contents of the said suitcase were missing under its custody. Also,
with the manner in which Mr. Del Rosario’s suitcase was
inspected without his necessary authorization and presence may
and could be applied to Shewaram’s suitcase as well. PAL is had
been remiss of its duty to observe extraordinary diligence and is
therefore liable subject to the provisions of Arts. 1734 and 1735
of the NCC:
The validity of stipulations limiting the carrier's liability is
to be determined by their reasonableness and their conformity to
the sound public policy, in accordance with which the obligations
of the carrier to the public are settled. It cannot lawfully stipulate
for exemption from liability, unless such exemption is just and
reasonable, and unless the contract is freely and fairly made. No
contractual limitation is reasonable which is subversive of public
policy.
The shipper and the common carrier are not on equal
terms; the shipper must send his freight by the common carrier,
or not at all; he is therefore entirely at the mercy of the carrier
unless protected by the higher power of the law against being
forced into contracts limiting the carrier's liability. Such contracts
are wanting in the element of voluntary assent.

ART. 1734. Common carries are responsible for the loss,

destruction, or deterioration of the goods, unless the same is due
to any of the following causes only: In view of the foregoing, the decision appealed from is affirmed,
(1) Flood, storm, earthquake, or other natural disaster or with costs against the appellant.
calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority.
ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3,
4 and 5 of the preceding article, if the goods are lost, destroyed
or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in Article 1733.
 ONG YUI V. CA
-Petitioner is a passenger of PAL in a Cebu to Butuan City flight
wherein he was scheduled to attend a trial.
-He checked in one piece of luggage, which is a blue maleta.
-upon arrival to Butuan City he claimed his luggage but it could
not be found.
-the luggage was overcarried to Manila.
-it was carried back to Cebu however its carriage to Butuan could
only be conducted the next day.
-Petitioner on the day of the maleta’s arrival wen to the airport
but did not wait for the arrival of the moring flight of the plane
which carried his luggage.
-A certain Dagorro volunteered to take the luggage to the
petitioner. He revealed the documents were lost.
-petitioner demanded PAL cebu actual and compensatory
damages as an incident of breach of contract of carriage.
ISSUE: WON PAL CEBU SHOULD BE HELD LIABLE FOR DAMAGES
HELD: NO. PAD did not act in bad faith. It exercised due diligence
in looking for petitioner’s luggage which had been miscarried.
Had petitioner waited or caused someone to wait at the airport
for the arrival of the morning flight he would have been able to
retrieve his luggage. In the absence of a wrongful act or omission
or fraud, the petitioner is entitled to moral damages. Neither is
he entitled to exemplary damages absent any proof that the
defendant acted in a wanton, fraudulent and reckless manner.
Sea-Land Service, Inc. v. Intermediate Appellate Court
Facts: Sea-Land, a foreign shipping and forwarding company
licensed to do business in the Philippines, received from
Seaborne Trading Company in California, a shipment consigned to
Sen Hiap Hing, the business name used by Paulino Cue in the
wholesale and retail trade which he operated. The shipper not
having declared the value of the shipment, NO VALUE WAS
INDICATED IN THE BILL OF LADING. The shipment was discharged
in Manila, and while awaiting transshipment to Cebu, the cargo
was stolen by pilferers and never recovered.
Paulino Cue, the consignee, made formal claim upon Sea-Land for
the value of the lost shipment allegedly amounting to
P179,643.48. Sea-Land offered to settle for US$4,000.00, or its
then Philippine peso equivalent of P30,600.00. asserting that said
amount represented its maximum liability for the loss of the
shipment under the package limitation clause in the covering bill
of lading. Cue rejected the offer and thereafter brought suit for
damages against Sea-Land in the then Court of First Instance of
Cebu
The trial court sentenced Sea-Land to pay Cue P186,048
representing the Philippine currency value of the lost cargo, P55,
814 for unrealized profit and P25,000 for attorney’s fees. CA
affirmed the trial court’s decision.
Issue: Whether or not Sea-Land is liable to pay Cue.
Held: There is no question of the right of a consignee in a bill of
lading to recover from the carrier or shipper for loss of, or
damage to, goods being transported under said bill, although that
document may have been drawn up only by the consignor and
the carrier without the intervention of the consignee.
Since the liability of a common carrier for loss of or damage to
goods transported by it under a contract of carriage is governed
by the laws of the country of destination and the goods in ART. 1749 A stipulation that the common carrier's liability is
question were shipped from the United States to the Philippines, limited to the value of the goods appearing in the bill of lading,
the liability of Sea-Land has Cue is governed primarily by the Civil unless the shipper or owner declares a greater value, is binding.
Code, and as ordained by the said Code, supplementary, in all ART. 1750. A contract fixing the sum that may be recovered by
matters not cluttered thereby, by the Code of Commerce and the owner or shipper for the loss, destruction, or deterioration of
special laws. One of these supplementary special laws is the the goods is valid, if it is reasonable and just under the
Carriage of goods by Sea Act (COGSA), made applicable to all circumstances, and has been fairly and freely agreed upon.
contracts for the carriage by sea to and from the Philippines Ports
in Foreign Trade by Comm. Act. 65. Sec. 4(5) of said Act in part Even if Section 4(5) of COGSA did not list the validity and binding
reads: effect of the liability limitation clause in the bill of lading here are
fully substantial on the basis alone of Article 1749 and 1750 of
(5) Neither the carrier nor the ship shall in any event be or the Civil Code. The justices of such stipulation is implicit in its
become liable for any loss or damage to or in connection with the giving the owner or shipper the option of avoiding accrual of
transportation of goods in an amount exceeding $500 per liability limitation by the simple expedient of declaring the value
package lawful money of the United States, or in case of goods of the shipment in the bill of lading.
not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and The stipulation in the bill of lading limiting the liability of Sea-Land
value of such goods have been declared by the shipper before for loss or damages to the shipment covered by said rule to
shipment and inserted in the bill of lading. This declaration, if US$500 per package unless the shipper declares the value of the
embodied in the bill of lading, shall be prima facie evidence, but shipment and pays additional charges is valid and binding on Cue.
shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the
carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That such
maximum shall not be less than the figure above named. In no
event shall the carrier be liable for more than the amount of
damage actually sustained.
Not only is there nothing in the Civil Code which absolutely
prohibits agreements between shipper and carrier limiting the
latter's liability for loss of or damage to cargo shipped under
contracts of carriage; it is also quite clear that said Code in fact
has agreements of such character in contemplation in providing,
in its Articles 1749 and 1750, that:
 CITADEL LINES V. CA occasioned by an excepted cause, the inescapable conclusion is
Facts: that the carrier was negligent and should be held liable therefor.
Petitioner Citadel Lines, Inc. (carrier) is the general agent of the 2. Yes. Basic is the rule, long since enshrined as a statutory
vessel Cardigan Bay/Strait Enterprise. Respondent Manila Wine provision, that a stipulation limiting the liability of the carrier to
Merchants, Inc. (consignee) is the importer of the subject the value of the goods appearing in the bill of lading, unless the
shipment of Dunhill cigarettes from England. On March 17, 1979, shipper or owner declares a greater value, is binding. Further, a
the vessel loaded on board at England 180 Filbrite cartons of contract fixing the sum that may be recovered by the owner or
mixed British manufactured cigarettes. The shipment arrived at shipper for the loss, destruction or deterioration of the goods is
the Port of Manila Pier in container vans received by E. Razon Inc valid, if it is reasonable and just under the circumstances, and has
(arrastre). Due to lack of space, the representatives of the carrier been fairly and freely agreed upon. The consignee itself admitted
kept the cigarettes in containers, padlocked and sealed. The next in its memorandum that the value of the goods shipped does not
morning, the head checker of the carrier discovered that 90 cases appear in the bills of lading. Hence, the stipulation on the carrier's
of imported British manufactured cigarettes were missing. The limited liability applies. Petitioner was ordered to pay respondent
consignee sought to recover from the carrier the market value of the sum of US$4,465.60.
the missing cargoes in the amount of Php 315,000 but the carrier
argued that the arrastre operator should be held liable as the
incident occurred in an area absolutely under the control of the
latter. The trial court and the appellate court adjudged the carrier
as the party liable for the loss of cargoes. Hence, the present
recourse by Citadel.
Issues:
1. Whether the loss occurred while the cargo in question was in
the custody of Citadel Lines
2. Whether the stipulation limiting the liability of the carrier
contained in the bill of lading is binding on the consignee
Ruling: 1. Yes. On the basis of the evidence presented, further
bolstered by the testimonies of Citadel’s Claims Manager and
Head Checker, the subject cargo which was placed in a container
van, padlocked and sealed by the representative of the carrier
was still in its possession and control when the loss occurred,
there having been no formal turnover of the cargo to the
arrastre. Considering, therefore, that the subject shipment was
lost while it was still in the custody of herein petitioner carrier,
and considering further that it failed to prove that the loss was
 BRITISH AIRWAYS (BA) V CA, GOP MAHATNI, AND PHILIPPINE
AIRLINES (PAL)
GR no 121824 ; 29 January 1998
Doctrine:
In a contract of air carriage a declaration by the passenger
of a higher value is needed to recover a greater amount. (Article
22[1] of the Warsaw Convention). American jurisprudence
provides that an air carrier is not liable for the loss of baggage in
an amount in excess of the limits specified in the tariff which was
filed with the proper authorities, such tariff being binding on the
passenger regardless of the passenger's lack of knowledge
thereof or assent thereto. This doctrine is recognized in this
jurisdiction.
Facts:
Mahtani decided to visit his relatives in Bombay, India. He
obtained the services of a certain Mr. Gumar to prepare his travel
plans. The latter, in turn, purchased a ticket from BA. Since BA
had no direct flights from Manila to Bombay, Mahtani had to take
a flight to Hongkong via PAL, and upon arrival in Hongkong he
had to take a connecting flight to Bombay on board BA. Prior to
his departure, Mahtani checked in at the PAL counter in Manila
his two pieces of luggage containing his clothings and personal
effects, confident that upon reaching Hongkong, the same would
be transferred to the BA flight bound for Bombay. Unfortunately,
when Mahtani arrived in Bombay he discovered that his luggage
was missing and that upon inquiry from the BA representatives,
he was told that the same might have been diverted to London.
After patiently waiting for his luggage for one week, BA finally
advised him to file a claim by accomplishing the "Property
Irregularity Report." Back in the Philippines, Mahtani filed his
complaint for damages and attorney's fees against BA and Mr.
Gumar before the trial court. BA filed a third party suit against
PAL. RTC : Favors Mahatni, the trial court granted the following
award as compensatory damages: "Since plaintiff did not declare
the value of the contents in his luggage and even to show
receipts of the alleged gifts for the members of his family in
Bombay, the most that can be expected for compensation of his
lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo,
or a combined value of Four Hundred ($400.00) U.S. Dollars for
Twenty kilos representing the contents plus Seven Thousand
(P7,000.00) Pesos representing the purchase price of the two (2)
suit cases."
CA: Affirms in toto BA's Contention:
• BA asserts that the award of compensatory damages in
the separate sum of P7,000.00 for the loss of Mahtani's
two pieces of luggage was without basis since Mahtani in
his complaint stated the following as the value of his
personal belongings:
1. personal belonging P10,000.00
2. gifts for his parents and relatives $5,000.00
• He failed to declare a higher valuation with respect to
his luggage, a condition provided for in the ticket.
"Liability for loss, delay, or damage to baggage is limited
unless a higher value isdeclared in advance and additional
charges are paid"
• THUS, there should have been no separate award for
the luggage and the contents thereof since Mahtani failed
to declare a separate higher valuation for the luggage, and
therefore, its liability is limited, at most, only to the
amount stated in the ticket.
ISSUE:
W/N the CA erred affirming the RTCs award for
compensatory damages.
HELD:
In determining the amount of compensatory damages in
this kind of cases, it is vital that the claimant satisfactorily prove
during the trial the existence of the factual basis of the damages
and its causal connection to defendant's acts. Admittedly, in a
contract of air carriage a declaration by the passenger of a higher
value is needed to recover a greater amount. (Article 22[1] of the
Warsaw Convention). American jurisprudence provides that an
air carrier is not liable for the loss of baggage in an amount in
excess of the limits specified in the tariff which was filed with the
proper authorities, such tariff being binding on the passenger
regardless of the passenger's lack of knowledge thereof or assent
thereto. This doctrine is recognized in this jurisdiction.
Notwithstanding the foregoing, we have, nevertheless, ruled
against blind reliance on adhesion contracts where the facts and
circumstances justify that they should be disregarded. Needless
to say, factual findings of the trial court, as affirmed by the Court
of Appeals, are entitled to great respect. Since the actual value of
the luggage involved appreciation of evidence, a task within the
competence of the Court of Appeals, its ruling regarding the
amount is assuredly a question of fact, thus, a finding not
reviewable by this Court. NOTE: Benefits of limited liability are
subject to waiver such as when the air carrier failed to raise
timely objections during the trial when questions and answers
regarding the actual claims and damages sustained by the
passenger were asked.
LOADSTAR Shipping Co. vs. CA
On 19 November 1984, LOADSTAR received on board its M/V
Cherokee (hereafter, the vessel) the following goods for
shipment: a) 705 bales of lawanit hardwood; b) 27 boxes and
crates of tilewood assemblies and others; and c) 49 bundles of
mouldings R & W (3) Apitong Bolidenized all amounting to
P6,067,178 (goods herein insured by Manila Insurance Co.
(MIC))On 20 November 1984, on its way to Manila from the port
of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank
off Limasawa Island.
On 4 February 1985, MIC filed a complaint against LOADSTAR and
PGAI, alleging that the sinking of the vessel was due to the fault
and negligence of LOADSTAR and its employees. It also prayed
that PGAI be ordered to pay the insurance proceeds from the loss
of the vessel directly to MIC, said amount to be deducted from
MICs claim from LOADSTAR.
LOADSTAR denied any liability for the loss of the shippers goods
and claimed that the sinking of its vessel was due to force
majeure. PGAI was later dropped as a party defendant after it
paid the insurance proceeds to LOADSTAR.
RTC rendered judgement in favor of MIC, which was affirmed by
the trial court.
Petitioner's (Loadstar) Contention:
1. LOADSTAR submits that the vessel was a private carrier
because it was not issued a certificate of public convenience, it
did not have a regular trip or schedule nor a fixed route, and
there was only one shipper, one consignee for a special cargo. 5. LOADSTAR goes on to argue that, being a private carrier, any
agreement limiting its liability, such as what transpired in this
While it is true that the vessel had on board only the cargo of
case, is valid. Since the cargo was being shipped at owners risk,
wood products for delivery to one consignee, it was also carrying
LOADSTAR was not liable for any loss or damage to the same.
passengers as part of its regular business. Moreover, the bills of
lading in this case made no mention of any charter party but only Private Respondent (MIC) answer:
a statement that the vessel was a general cargo carrier. Neither
1. MIC claims that LOADSTAR was liable, notwithstanding that the
was there any special arrangement between LOADSTAR and the
loss of the cargo was due to force majeure, because the same
shipper regarding the shipment of the cargo. The singular fact
concurred with LOADSTARs fault or negligence.
that the vessel was carrying a particular type of cargo for one
shipper is not sufficient to convert the vessel into a private 2. The limited liability theory is not applicable in the case at bar
carrier. because LOADSTAR was at fault or negligent, and because it
failed to maintain a seaworthy vessel. Authorizing the voyage
2. Petitioner argues that as a private carrier, it cannot be
notwithstanding its knowledge of a typhoon is tantamount to
presumed to have been negligent and the burden of proving
negligence.
otherwise devolved upon MIC.
ISSUE:
3. LOADSTAR also maintains that the vessel was seaworthy.
Before the fateful voyage, the vessel was allegedly dry docked 1. Is the M/V Cherokee a private or a common carrier?
was inspected and certified that the ship was fit to undertake a
voyage by the maritime safety engineers of the Philippine Coast 2. Did Loadstar observe due diligence in these premises?
Guard. Its crew at the time was experienced, licensed and
HELD:
unquestionably competent. Therefore it exercised the diligence
of a good father of a family in ensuring the vessels seaworthiness. 1.Yes, LOADSTAR is a common carrier. It is not necessary that the
carrier be issued a certificate of public convenience, and this
4. LOADSTAR further claims that it was not responsible for the
public character is not altered by the fact that the carriage of the
loss of the cargo, such loss being due to force majeure. It points
goods in question was periodic, occasional, episodic or
out that when the vessel left Nasipit, Agusan del Norte the
unscheduled.
weather was fine until the next day when the vessel sank due to
strong waves 2. No. M/V Cherokee was not seaworthy when it embarked on its
voyage on 19 November 1984. The vessel was not even
sufficiently manned at the time. For a vessel to be seaworthy, it
must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code.
Neither do we agree with LOADSTARs argument that the limited
liability theory should be applied in this case. The doctrine of
limited liability does not apply where there was negligence on the
part of the vessel owner or agent. LOADSTAR was at fault or
negligent in not maintaining a seaworthy vessel and in having
allowed its vessel to sail despite knowledge of an approaching
typhoon
3. Passenger’s Baggages
NORBERTO QUISUMBING, SR., and GUNTHER LOEFFLER,
petitioners,
vs.
COURT OF APPEALS and PHILIPPINE AIR LINES, INC.,
respondents.
September 14, 1990.
NARVASA, J.:
NATURE: Petition to review the decision of the Court of Appeals.
SUMMARY: A hijacking occurred onboard a PAL flight from
Mactan to Manila. The hijackers were able to rob Norberto
Quisumbing, Sr. was divested of jewelries and cash in the total
amount of P18,650.00 out of which recoveries were made
amounting to P4,550.00 and Gunther Loeffler who was divested
of a wrist watch, cash and a wallet in the total amount of
P1,700.00. Petitioners are seeking damages and indemnification
form their loss. However, the Court decided that such a hijacking
event constitutes as an exemption to the liability of a common
carrier as PAL had followed all civil aeronautic guidelines, and
that the hijacking constituted a force majeure.
DOCTRINE:
 Transportation of Goods; Passengers Baggages;
Exemption due to force majuere
FACTS:
 Norberto Quisumbing, Sr. and Gunther Loeffler were
among the passengers of (PAL’s) Fokker ‘Friendship’ PIC-
536 plane in its flight of November 6, 1968 which left
Mactan City at about 7:30 in the evening with Manila for
its destination
o After the plane had taken off, Florencio O. Villarin, a
Senior NBI Agent who was also a passenger of the said
plane, noticed a certain ‘Zaldy,’ a suspect in the killing
of Judge Valdez, seated at the front seat near the door
leading to the cockpit of the plane.
o Villarin checked the passenger’s ticket in the
possession of flight Stewardess Annie Bontigao, who
was seated at the last seat right row, revealed that
‘Zaldy’ had used the name ‘Cardente,’ one of his
aliases known to Villarin. Villarin had 3 other
companions onboard.
o “Villarin then scribbled a note addressed to the pilot
of the plane requesting the latter to contact NBI duty
agents in Manila for the said agents to ask the Director
of the NBI to send about six NBI agents to meet the
plane because the suspect in the killing of Judge
Valdez was on board. The said note was handed by
Villarin to the stewardess who in turn gave the same
to the pilot.”
o The pilot received the note. 15 minutes after take off,
the pilot of the plane, Capt. Luis Bonnevie, Jr., came
out of the cockpit and sat beside Villarin at the rear
portion of the plane and explained that he could not
send the message because it would be heard by all
ground aircraft stations.
o While the pilot and Villarin were talking, ‘Zaldy’ and
one of his companions walked to the rear and stood
behind them. Capt. Bonnevie then stood up and went
back to the cockpit. ‘Zaldy’ and his companions
returned to their seats, but after a few minutes they
moved back to the rear throwing ugly looks at Villarin
who, sensing danger, stood up and went back to his
original seat across the aisle on the second to the last
seat near the window. ‘
o an exchange of gunshots ensued between Villarin and
‘Zaldy’ and the latter’s companions. ‘Zaldy’ announced
to the passengers and the pilots in the cockpit that it
was a hold-up and ordered the pilot not to send any
SOS. The hold-uppers divested the passengers of their
belongings.
o Norberto Quisumbing, Sr. was divested of jewelries
and cash in the total amount of P18,650.00 out of
which recoveries were made amounting to P4,550.00.
Gunther Loeffler was divested of a wrist watch, cash
and a wallet in the total amount of P1,700.00.
o Zaldy’ and his three companions succeeded in
escaping
 Quisumbing and Loeffler filed for indemnity cases against
PAL for their loss, but PAL refused to pay.
 Petitioners argue that the “aforesaid loss is a result of
breach Of PAL’s contractual obligation to carry them and
their belongings and effects to their Manila destination
without loss or damage, and constitutes a serious
dereliction of PAL’s legal duty to exercise extraordinary
diligence in the vigilance over the same.
 RTC dismissed the petition of the current petitioners.
o plaintiffs “did not notify defendant or its
employees that they were in possession of the
cash, jewelries, and the wallet they are now
claiming,” the very provision of law invoked by
them, Article 1998 of the Civil Code, denies them
any recourse against PAL.
o the armed robbery that took place constitutes
force majeure
  CA dismissed the appeal of petitioners. profiles, the assignment of sky
marshals, and the weight of outraged
world opinion may have minimized
ISSUE: hijackings but all these have proved
4. Whether PAL was negligent and must indemnify ineffective against truly determined
petitioners. NO hijackers.

RATIO: DISPOSITIVE: Petition DENIED.

1. the evidence does indeed fail to prove any want of
diligence on the part of PAL
o PAL complied with applicable regulations or
universally accepted and observed procedures
to preclude hijacking
o the particular acts singled out by the
petitioners as supposedly demonstrative of
negligence were, in the light of the
circumstances of the case, not in truth
negligent acts
o PAL’s failure to take certain steps that a
passenger in hindsight believes should have
been taken is not the negligence or misconduct
which mingles with force majeure as an active
and cooperative cause.
o The Court, quoting the appellate court,
 it is illusive to assume that had these
precautions been taken, the hijacking
or the robbery would not have
succeeded. The mandatory use of the
most sophisticated electronic detection
devices and magnetometers, the
imposition of severe penalties, the
development of screening procedures,
the compilation of hijacker behavioural
 PAN AMERICAN WORLD AIRWAYS V. RAPADAS
GR. NO. 60673. MAY 19, 1992
FACTS: Private respondent Jose Rapadas was standing in line to
board the flight at the Guam airport when he was ordered by Pan
Am’s employee to check-in his Samsonite attaché case. Rapadas
protested. He stepped out of the line only to get back again at the
end of it to try if he can get through without having to register his
attaché 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 flight if he insisted, he acceded to
checking it in. He then gave his attaché case to his brother who
happened to be around but without declaring its contents or the
value of its contents. Rapadas was given a baggage claim tag.
Upon arriving in Manila, Rapadas discovered that his attaché case
was missing. Pan Am exerted efforts to locate the missing
luggage, but to no avail. Pan Am offered Mr. Rapadas the sum of
one hundred sixty dollars ($160.00) representing the petitioner’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.
Rapadas refused the settlement. He filed an action for damages.
The RTC decided in favor of Mr. Rapadas and rejected Pan Am’s
contention limiting it’s liability to $160. The Court of Appeals
affirmed.
ISSUE: Whether a passenger is bound by the terms of a passenger
ticket declaring that the limitations of liability set forth in the
Warsaw Convention shall apply in case of loss, damage or
destruction to a registered luggage of a passenger?
HELD: Yes.
The Notice and paragraph 2 of the “Conditions of Contract”
(which provides that carriage is subject to rules and limitations
established by the Warsaw Convention) should be sufficient
notice showing the applicability of the Warsaw limitation. It is not
required under the Warsaw Convention that there be a detailed
notice of baggage liability limitation in the passenger ticket.
Contracts of adhesion, such as the one involved here, are not
entirely prohibited, unless there are facts and circumstances
showing its one-sided nature. This does not obtain here.
Passengers are expected to be vigilant insofar as his luggage is
concerned. If the passenger fails to adduce evidence to overcome
the stipulations, he cannot avoid the application of the liability
limitations.
Had Mr. Rapadas not wavered in his decision to register his
luggage, he could have had enough time to disclose the true
worth of the articles in it and pay the extra charges or remove
them from the checked-in-luggage.
Unless the contents are declared, it will always be the word of a
passenger against that of the airline. If the loss of life or property
is caused by the gross negligence or arbitrary acts of the airline or
the contents of the lost luggage are proved by satisfactory
evidence other than the self-serving declarations of one party,
the Court will not hesitate to disregard the fine print in a contract
of adhesion. Otherwise, the contract would have to be enforced,
as it is the only reasonable basis to arrive at a just award.
 BRITISH AIRWAYS (BA) V CA, GOP MAHATNI, AND PHILIPPINE
AIRLINES (PAL)
GR no 121824 ; 29 January 1998
Doctrine:
The nature of an airline's contract of carriage partakes of
two types, namely: a contract to deliver a cargo or merchandise
to its destination and a contract to transport passengers to their
destination. A business intended to serve the travelling public
primarily, it is imbued with public interest, hence, the law
governing common carriers imposes an exacting standard.
Neglect or malfeasance by the carrier's employees could
predictably furnish bases for an action for damages.
Facts:
Mahtani decided to visit his relatives in Bombay, India. He
obtained the services of a certain Mr. Gumar to prepare his travel
plans. The latter, in turn, purchased a ticket from BA. Since BA
had no direct flights from Manila to Bombay, Mahtani had to take
a flight to Hongkong via PAL, and upon arrival in Hongkong he
had to take a connecting flight to Bombay on board BA. Prior to
his departure, Mahtani checked in at the PAL counter in Manila
his two pieces of luggage containing his clothings and personal
effects, confident that upon reaching Hongkong, the same would
be transferred to the BA flight bound for Bombay. Unfortunately,
when Mahtani arrived in Bombay he discovered that his luggage
was missing and that upon inquiry from the BA representatives,
he was told that the same might have been diverted to London.
After patiently waiting for his luggage for one week, BA finally
advised him to file a claim by accomplishing the "Property
Irregularity Report." Back in the Philippines, Mahtani filed his
complaint for damages and attorney's fees against BA and Mr.
Gumar before the trial court. BA filed a third party suit against
PAL.
RTC :
Favors Mahatni, the trial court granted the following
award as compensatory damages: "Since plaintiff did not
declare the value of the contents in his luggage and even to
show receipts of the alleged gifts for the members of his family
in Bombay, the most that can be expected for compensation
of his lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00)
per kilo, or a combined value of Four Hundred ($400.00) U.S.
Dollars for Twenty kilos representing the contents plus Seven
Thousand (P7,000.00) Pesos representing the purchase price
of the two (2) suit cases."
CA:
Affirms in toto BA's Contention:
• BA asserts that the award of compensatory
damages in the separate sum of P7,000.00 for the loss
of Mahtani's two pieces of luggage was without basis
since Mahtani in his complaint stated the following as
the value of his personal belongings: 1. personal
belonging P10,000.00 2. gifts for his parents and
relatives $5,000.00 2
• He failed to declare a higher valuation with
respect to his luggage, a condition provided for in the
ticket. "Liability for loss, delay, or damage to baggage is
limited unless a higher value is declared in advance and
additional charges are paid"
• THUS, there should have been no separate award
for the luggage and the contents thereof since Mahtani
failed to declare a separate higher valuation for the
luggage, and therefore, its liability is limited, at most,
only to the amount stated in the ticket.
ISSUE:
The contract of carriage of an airline.
HELD:
 The nature of an airline's contract of carriage partakes of
two types, namely: a contract to deliver a cargo or merchandise
to its destination and a contract to transport passengers to their
destination. A business intended to serve the travelling public
primarily, it is imbued with public interest, hence, the law
governing common carriers imposes an exacting standard.
Neglect or malfeasance by the carrier's employees could
predictably furnish bases for an action for damages. In the instant
case, it is apparent that the contract of carriage was between
Mahtani and BA. Moreover, it is indubitable that his luggage
never arrived in Bombay on time. Therefore, as in a number of
cases we have assessed the airlines' culpability in the form of
damages for breach of contract involving misplaced luggage.