02 Transpo Compiled Digests. 3C. Atty.

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CONTENTS

III. 3RD WEEK (COMMON CARRIERS; CARRIAGE OF GOODS)........................2

Keep v. Chan Gioco, 14 Phil 5 –Puno..................................................................2
Phil American Gen Insurance v. MCG Marine Services , 378 SCRA 650 –Sanchez 3
Phil American Gen Insurance v. CA, 222 SCRA 155 -Nathan Oducado.4
Maersk Line v. CA, 222 SCRA 108 –Bascara....................................................5
Compania Maritima v. CA, 164 SCRA 658 –Aquino.....................................7
Southern Lines, Inc. v. CA, 4 SCRA 258 –Benedicto.....................................8
Ganzon v. CA, 161 SCRA 646 (read dissent) –Chan...................................10
1 Compania Maritima v. Insurance Company, 12 SCRA 213 –Cortez. 11
2 Servando v. Phil Steam Navigation Co., 117 SCRA 832.........................14
3 Samar Mining Co., v. Nordeutscher Lloyd, 132 SCRA 529 -Dela Paz17
4 Lu Do v. Binamira, 101 Phil 120 –Geraldez...............................................19
5 Eastern Shipping v. CA, 190 SCRA 512 –King...........................................20
6 Macam v. CA, 313 SCRA 77 –Lagos................................................................23
7 Metro Port Service, Inc. v. CA, 131 SCRA 365 –Lopa..............................25
8 Firemen's Fund Insurance Co. v. Metro Port Service, Inc., 182 SCRA 455 –Lucenario 26
9 H.E. Heacock Co. v. Macondray & Co., 42 Phil 205 –Magtagnob........29
10 St. Paul Fire & Marine Insurance v. Macondray, 70 SCRA 122 –Muti30
11 Sea Land Service, Inc. v. IAC, 153 SCRA 552 –Narvasa.......................32
12 Citadel Lines, Inc. v. CA, 184 SCRA 544 -Perez de Tagle....................34
13 Everett Steamship Corp. v. CA, 297 SCRA 496 –Razon.......................36
14 Regional Container v. Netherlands Insurance, 598 SCRA 304 –Santos 38
15 Mindanao Terminal v. Phoenix Assurance, 587 SCRA 429 –Superable 40
END OF ASSIGNMENT FOR FRIDAY, 29 NOV 2013.........................................42
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I I I . 3 R D W E E K ( C O M M O N C A R R I E R S ; C AR R I A G E O F G O O D S )
1 KEEP V. CHAN GIOCO, 14 PHIL 5 –PUNO
CHAN KEEP et al v. LEON CHAN GIOCO, ANASTASIO ATREGENIO (Patron/Captain) et al.
G.R. No. L-No. 4378 August 18, 1909 Carson, J.
SHIPPER: Chan Keep
COMMON CARRIER: Leon Chan Gioco et al
DESCRIPTION OF GOODS: 120 cavanes of rice
WHO WON? Keep, shipper
EMERGENCY RECIT
Keep contracted Gioco to transport by boat rice from Luna to San Fernando, La Union at
the rate of P0.25/cavan. The boat sank and Keep instituted an action to recover the
value of the rice. CFI La Union found Gioco liable. Gioco appealed to the SC alleging that
the sinking was due to a strong wind which is an unavoidable accident (Caso Fortuito) or
an Act of God (Fuerza Mayor). The SC held that the testimony of the agent from the
Weather Bureau that there was no heavy wind or violent storm had more weight than
the testimony of Captain Atregenio (a co-defendant) and one member of the crew. The
burden of proof lies with the common carrier to establish the defense of caso fortuito or
fuerza mayor. Failing to establish this defense, Gioco et al liable to Keep for the payment
of the value of the goods.
CASE SUMMARY
FACTS
Keep contracted Gioco to transport by boat 120 cavanes of rice from Luna to San
Fernando, La Union in consideration of P0.25/cavan. On April 8, 1907, about 10pm,
while entering the port of San Fernando, the boat sank. Keep instituted an action for
recovery of sum of money for the value of the lost rice in the CFI of La Union.
In the lower court, Gioco denied entering into a transportation contract. However,
evidence was presented which upon evaluation showed the existence of the contract.
Gioco et al also alleged that the sinking was due to a strong wind which was a result of
an act of God (fuerza mayor) or an unavoidable accident (caso fortuíto). They cited
Article 1602 of the Civil Code which states:
"Carriers (by land or sea) are also responsible for looses and damages
of the articles intrusted to them, unless they prove that the loss or
damage was the result of unavoidable accident (caso fortuíto) or an
act of God (fuerza mayor)."
The CFI decided in favour of Keep. It found that the rice was lost through negligence,
carelessness and lack of due precaution and ordered Gioco et al to pay Keep.
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All Gioco presented in support of his contention was the testimony of Captain Atregenio,
a co-defendant, and one of the crew members. The captain testified that while the boat
was in front of the buoy just outside the harbour, the wind was strong and while
changing the boat’s course, the wind blew the boat over on one side so that so much
water slipped onboard that the crew were compelled to strike sail, cast anchor, and
escape to shore by swimming with the aid of the oars, and that having been abandoned
in that condition, the tide aided the wind in throwing the boat upon one side and the sea
swamped it completely.
ISSUE: W/ Gioco is liable for the value of the loss
Held: Yes. The loss was not due to caso fortuito or fuerza mayor.
Ratio: The SC affirmed the decision of the CFI stating that the evidence supporting the
defense of Gioco was insufficient and failed to satisfactorily establish his claim. As
appears in the code, the burden of proof rested upon the defendant Gioco. Both Gioco’s
witness admitted that when the boat sank there was no storm raging nor were the seas
running dangerously high.
In contrast, an agent of the Weather Bureau of San Fernando said that that, while there
may have been a strong wind blowing that night, there was no such heavy wind or
violent storm blowing as would unavoidably swamp a boat manned by a capable crew,
commanded by a careful navigator, and properly equipped for sailing the high seas.
The court noted that it not having been otherwise expressly stipulated, it is to be
presumed that the owner of the boat, Leon Chan Gioco, when he contracted to transport
the rice in question over the high seas, obligated himself to furnish a boat suitable for
the work which he undertook to perform, and a capable crew to man her. The mere fact
that a strong wind was blowing when the boat changed its course is not in itself
sufficient to excuse her owners for losses incurred. It cannot be justly said that the
sinking of the boat was the result of an act of God or of an unavoidable accident since the
blowing of strong winds must always be anticipated by men who go down into the sea in
ships.
In the absence of evidence of some unusual intervening cause, the court held that the
exercise of due diligence in the performance of their duty by the patron and the
members of his crew, had they been reasonably expert as seafaring men, could have and
would have avoided the accident which actually occurred, provided the boat was suited
to the work required of her.
Losses resulting from an accident caused by a sudden and unexpected gust of wind have
under some circumstances been held to be attributable to an act of God but it will be
found that in all such cases the evidence introduced at the trial sustains a finding that
the loss was due to exceptional circumstances or conditions, beyond the control of those

who would otherwise be responsible for the loss, notwithstanding the exercise of due
diligence, foresight, pains and care to avoid it; and, as has been said, mere proof that a
strong wind is blowing when a properly manned and equipped sailing boat tacks its
course is not sufficient to sustain such a finding.
2 PHIL AMERICAN GEN INSURANCE V. MCG MARINE SERVICES , 378 SCRA
650 –SANCHEZ
THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., petitioner, vs. MGG
MARINE SERVICES, INC. and DOROTEO GAERLAN, respondents.
Shipper - San Miguel Corporation
Carrier – Dorotego Gaerlan
Ship’s name - M/V Peatheray Patrick-G
Agent of Carrier – MGG Marine Services
Insurer – Philippine American General insurance
Who won – MGG Marine Services and Doroteo Gaerlan
ER: San Miguel Corporation insured several beer bottle cases with an amount of around
5.8 Million with PhilamGen. The vessel left the port of Mandaue for Bislig, Surigao.
However, the weather was terrible which caused the ship to sink at Cawit Point, Surigao.
After investigation, Philamgen paid SMC the 5.8 Million. Philamgen now sues MGG
Marine Services and Gaerlan as subrogee of SMC. The Board of Marine Inquiry made an
investigation, which concluded that there was a fortuitous instance. RTC: Philamgen
wins, it ordered MGG and Gaerlan to pay it 5.8 Million. MGG and Gaerlan appealed to the
CA, which reversed the decision. Philamgen now appeals to the Supreme Court. Issue:
WON there was a fortuitous event which was the cause of the loss, therefore
absolving the common carrier from liability? (YES). The SC held that there was a
fortuitous event that was the only cause of the loss. The results of the Board’s
investigation as embodied in its decision on the administrative case clearly indicate that
the loss of the cargo was due solely to the attendance of strong winds and huge waves
which caused the vessel accumulate water,  tilt to the port side and to eventually keel
over.
Facts:
- On March 1, 1987, San Miguel Corporation insured several beer bottle cases with an
aggregate value of P5,836,222.80 with petitioner Philippine American General
Insurance Company. The vessel left the port of Mandaue for Bislig, Surigao del Sur.
o The cargo were loaded on board the M/V Peatheray Patrick-G to be
transported from Mandaue City to Bislig, Surigao del Sur.
- On March 3, the vessel sank off Cawit Point, Surigao. The cargo belonging to SMC
was lost.
- SMC claimed the amount of loss from Philamgen insurance.
- Philamgen requested a certain Mr. Sayo to survey the circumstances of the loss of
cargo. In his report, the vessel was structurally sound and that he did not see any
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damage or crack thereon.  He concluded that the proximate cause of the listing and
subsequent sinking of the vessel was the shifting of ballast water from starboard to
portside.
- SMC was paid in full of the amount 5.8 Million php because of the insurance
contract.
- Philamgen sued MGG Marine Services and Gaerlan as subrogee of San Miguel at
Makati RTC Branch 134.
- Meanwhile, the Board of Marine Inquiry made an investigation and declared that
the cause of sinking was a fortuitous event, and that the captain and the crew
should not be liable administratively.
- The RTC held in favour of PhilamGen.
- MGG and Gaerlan appealed to the CA, which reversed the decision of the RTC,
because of the fortuitous event which absolves them from any liability.
- PhilamGen appeals to the Supreme Court.
Issue: Whether or not MGG and Gaerlan are liable, despite the fortuitous event. (NO)
Held: WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED
and the petition is hereby DENIED.
Ratio:
- 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. [7] Owing to this 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 transported by them are
lost, destroyed or if the same deteriorated
- In order that a common carrier may be absolved from liability where the loss,
destruction or deterioration of the goods is due to a natural disaster or calamity, it
must further be shown that the such natural disaster or calamity was the proximate
and only cause of the loss;[9] there must be “an entire exclusion of human agency
from the cause of the injury of the loss.”
- The parties do not dispute that on the day the M/V Peatheray Patrick-G sunk, said
vessel encountered strong winds and huge waves ranging from six to ten feet in
height. 
- The presence of a crack in the ill-fated vessel through which water seeped in was
confirmed by the Greutzman Divers who were commissioned by the private
respondents to conduct an underwater survey and inspection of the vessel to
determine the cause and circumstances of its sinking.  In its report, Greutzman
Divers stated that “along the port side platings, a small hole and two separate
cracks were found at about midship.” [14]
- The findings of the Board of Marine Inquiry indicate that the attendance of strong
winds and huge waves while the M/V Peatheray Patrick-G was sailing through
Cortes, Surigao del Norte on March 3, 1987 was indeed fortuitous. A fortuitous
event has been defined as one which could not be foreseen, or which though
foreseen, is inevitable.

- The vessel was also seaworthy. It had 3 diesel engines, 3 operational propellers,
and had a captain and the chief mates had been commanding the vessel for more
than 3 years.
Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur on
March 3, 1987 was shown to be the proximate and only cause of the sinking of the M/V
Peatheray Patrick-G and the loss of the cargo belonging to San Miguel Corporation,
private respondents cannot be held liable for the said loss.
3 PHIL AMERICAN GEN INSURANCE V. CA, 222 SCRA 155 -NATHAN
ODUCADO
Phil. American General Insurance v. Court of Appeals and Transpacific Towage
Inc.
Shipper:
Insurer:
Consignee:
Common Carrier:
Goods:
Doctrine: The appellate court ruled that the lost of cargo in the present case was due
solely to typhoon "Saling" and that private respondent had shown that it had observed due
diligence before, during and after the occurrence of "Saling"; hence, it should not be liable
under Article 1739.
Emergency Recit:
Davao Union contracted Transpacific Towage for the shipment of 9,750 GI sheets and
86,860 bags of cement to CamSur. The cargo was loaded to M/V Crazy Horse and
consigned to Bicol Union. The ship arrived on September 7, however, the cargo cannot
be unloaded immediately due to: 1) Buoys had to be installed because the port was
shallow and rocky; 2) The discharge permit was secured by the consignee on September
13; 3) A catwalk had to be installed, and completed only on September 26; 4) Rains and
the fiesta of the Virgin of Penafrancia hampered the continuous discharging of the
goods. 59,625 bags and 26 crates of sheets were discharged. Typhoon Saling entered the
country and Paasco Port (where the ship was) was placed under Storm Signal No. 3. The
shipmaster tried to avoid the damage to the ship by moving it seaward, but the winds
were strong. He also asked for help from the police when the engine broke down to
prevent pilferage. Phil-Am General paid Davao Union, as its insurer, and commenced the
present suit. The lower court ordered a mitigated award in favor of Phil-Am General but
this was completely reversed by the CA. The issue in this case is whether or not
Transpicific is liable, because there was negligent delay on its part, to Phil-Am General.
No.
Neither party committed negligent delay, as cited in the preceding paragraph.Moreover,
private respondent through its shipmaster exercised due negligence to prevent or
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minimize the loss of the cargo under (1740) by moving the vessel to avoid further
damage; asking for assistance after abandoning the ship.
Facts:
1. On September 4, 1985 the Davao Union Marketing Corporation shipped on board the
vessel M/V "Crazy Horse" operated by the Transpacific Towage, Inc. cargo of GI sheets
and sacks of cement.
 9,750 sheets of union brand GI sheets with a declared value of P1,086,750.00
 86,860 bags of union Pozzolan and union Portland Cement with a declared
value of P4,300,000.00.
2. The cargo was consigned to the Bicol Union Center of Pasacao, Camarines Sur, with a
certain Pedro Olivan as the "Notify-Party." Phil-American General insured the cement
for the value of 3.4M.
3. Upon arrival, on September 7, 1985, of M/V Crazy Horse in Pasacao port, it notified
Bicol Union (consignee). However, the discharging cannot be effected immediately and
continuously because:
 First, the buoys were installed only on September 11;
 Second, the discharge permit was secured by the consignee only on September
13;
 Third a wooden catwalk had to be installed, which was completed only on
September 26;
 Fourth, the discharging was not continuous because there were intermittent
rains and the stevedores supplied by the consignee did not work during the
town fiesta
4. On October 16, super typhoon “Saling” was expected to hit the country (240/kph
winds). In fact, Pasacao was placed under storm signal number 3. The discharging of the
cargos had to be suspended because of the strong winds and sea turbulence. They were
able to discharge before suspension:
 a total of 59,625 bags of cement and 26 crates of GI sheets.
5. In preparation for the typhoon, the crew loaded it with 22 tons of water and 3,000
liters of fuel. The shipmaster further ordered that the ship be moved 300 meters
seaward to avoid hitting the catwalk and the rocks.
6. At about 5:20 A.M. of October 18, when the shipmaster ordered the maneuvering of
the vessel but it could not be steered on account of the strong winds and rough seas.
 The vessel's lines snapped, causing her to be dragged against the rocks, and the
anchor chain stopper gave way.
 The shipmaster ordered that the ship be abandoned and thereafter he sought
the assistance of the local government to save the pilferage. He was unable to
get any assistance.
 When they returned, a lot of people were already looting its cargo.
 The ship kept on hitting the rocks which caused the vessel to break into two
(2) parts and to sink partially

7. The total number of cement bags damaged and/or lost was 26,424 costing
P1,056,960.00 while there were 4,000 pieces of the GI sheets unrecovered, the cost of
which was P454,250.00. Because the cargo was insured by it the Philippine American
General Insurance  it paid Davao Union and thus, subrogated to its rights.
8. Phil-Am General sent their demand to Transpacific, the latter however refused to pay.
The lower court ruled that Davao Union was partly liable, thus mitigating its claim to ¾
of the value. CA reversed this and ordered that it was solely due to a fortuitous event,
hence the present petition.
Issue:
W/N Transpacific is liable to the insured cargo. No.
Held:
WHEREFORE, the petition is DENIED. The appealed decision of the Court of Appeals,
dated 31 July 1991, rendered in CA-G.R. CV No. 21252, is hereby AFFIRMED
Ratio:
 Typhoon Saling caused the ship to sink
 The following facts are not contested: (1) that the cargo-carrying
vessel was wrecked and partially sank on 18 October 1985 due to
typhoon "Saling"; (2) that typhoon "Saling" was a fortuitous event;
and (3) that at the time said vessel sank, the remaining undischarged
cargo, were still on board the vessel.
 Differing opinions of the lower courts
 At the time when Pasacao was placed under Signal No. 3, the
unloading was still unfinished despite the lapse of 40 days from the
time it arrived or 34 days after it started unloading.
 The Lower Court ruled that the lapse of 34 days already constituted
as an unreasonable delay. Under 1740 of the CC, if the carrier incurs
negligent delay, a natural disaster shall not excuse him from liability.
 CA, however, said that it was not solely attributable to human factors.
It ruled that the loss was due to the typhoon and that 1739 (due
diligence before, during and after) were exhibited Transpacific.
 Delay not due to negligence of either party
 Transpacific argues that it had already delivered the goods by
notifying the consignee. Phil-Am General argues that Transpacific had
the duty to unload.
 The wharf where the vessel had to dock was shallow and rocky,
hence it had to drop anchor some distance away. Buoys had to be
constructed in order that the vessel may properly moored.
 A catwalk and wooden stage had to be constructed, a crane was
needed for this and the crane was not immediately available.
 Apart from these preparations and constructions that had to be
made, the weather was not cooperative. Even before the typhoon
struck there were intermittent rains, hence the unloading was not
continuous.
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 It was the fiesta of the Virgin of Penafrancia and the stevedores
refused to work during the celebration.
 Transpacific is exempt from liability for the loss of the cargo, pursuant to
Article 1740 of the Civil Code.
 Transpacific through its shipmaster exercised due negligence to
prevent or minimize the loss of the cargo.
 shipmaster tried to maneuver the vessel amidst strong
winds and rough seas;
 when water started to enter and later the engine broke
down, the shipmaster ordered the ship to be abandoned, but
he sought police assistance to prevent loss;
 the shipmaster reported the incident to the Philippine Coast
Guard but nothing can be done.
Sub-issue on res judicata
 the Board of Marine Inquiry rendered a decision dated 11 April 1988 holding
that said shipmaster was not guilty of "negligence as the proximate cause of
the grounding and subsequent wreckage of M/S "Crazy Horse", hence,
recommending that the captain, his officers and crew be absolved from any
administrative liability arising out of the subject incident.
 It is not res judicata since the requisites are wanting (identity of parties, same
cause of action, etc).
4 MAERSK LINE V. CA, 222 SCRA 108 –BASCARA
MAERSK LINE VS CA
Shipper: Eli Lilly Inc.
Insurer: -
Common Carrier: Maersk Line
Consignee: Efren Castillo
Description of goods (if applicable): 600,000 empty gelatin capsules
EMERGENCY RECIT
Efren ordered from Eli Lilly 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products. Maersk Line undertook to ship the goods
to the Philippines via Oakland, California. Through a Memorandum of Shipment, Eli Lilly,
Inc. advised Efren that the empty gelatin capsules were already shipped on board MV
"Anders Maerskline”. The specified date of arrival in the memorandum was April 3,
1977. The goods were misshipped and finally arrived on June 10, 1977 (2 months from
date stated in memorandum). Efren filed an action for rescission of contract with
damages alleging gross negligence and undue delay. Maersk maintains that it cannot be
held for damages since it acted in good faith and there was no special contract under
which the carrier undertook to deliver the shipment on or before a specific date

ISSUE: Whether or not Maersk should be held liable for damages for the delay in the
delivery of goods- 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, Maersk,
nevertheless, was very well aware of the specific date when the goods were expected to
arrive as indicated in the bill of lading itself. In this regard, there arises no need to
execute another contract for the purpose as it would be a mere superfluity. In the case
before us, we find that a delay in the delivery of the goods spanning a period of two (2)
months and seven (7) days falls was beyond the realm of reasonableness.
Petitioner Maersk Line is a common carrier. Its general agent is Compania General de
Tabacos de Filipinas.
Private respondent Efren Castillo is the proprietor of Ethegal Laboratories, a firm that
manufactures pharmaceutical products.
Efren ordered from Eli Lilly. Inc. of Puerto Rico through the latter’s agent in the
Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture
of his pharmaceutical products. The capsules were placed in six (6) drums of
100,000 capsules each valued at US $1,668.71.
Through a Memorandum of Shipment, Eli Lilly, Inc. advised Efren that the empty gelatin
capsules were already shipped on board MV "Anders Maerskline" for shipment to
the Philippines via Oakland, California.
 Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.
For reasons unknown, goods 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 in the
memorandum.
Efren refused to take delivery of the goods on account of its failure to arrive on time.
 Alleging gross negligence and undue delay in the delivery of
the goods, he filed an action before the court for rescission
of contract with damages against Maersk Line and Eli Lilly,
Inc.
Denying that it committed breach of contract, Maersk alleged in its that answer that the
subject 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
Eli Lilly, Inc., on the other hand, filed its answer with compulsory and cross-claim. In its
cross-claim, it alleged that the delay in the arrival of the goods was due solely to the
gross negligence of petitioner Maersk Line.
02 Transpo Compiled Digests. 3C. Atty. 7
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Efren moved for the dismissal of the complaint against Eli Lilly, Inc.on the ground that
the evidence on record shows that the delay in the delivery of the shipment was
attributable solely to Maersk
The TC dismissed the complaint against Eli Lilly, Inc. Correspondingly, Eli Lilly withdrew
its cross-claim against Maersk.
The TC ruled in favor of Efren and ordered Maersk to pay P369,000 as unrealized
profits plus other damages and cost of suit
On appeal, the CA1 modified the TC decision and ordered Maersk to pay Efren
compensatory damages of P11, 680.97 plus other damages
Issue: Whether or not Maersk should be held liable for damages for the delay in the
delivery of goods- YES!
Maersk maintains that it cannot be held for damages for the alleged delay in the delivery
of the goods since it acted in good faith and there was no special contract under
which the carrier undertook to deliver the shipment on or before a specific date
On the other hand, Efren claims that during the period before the specified date of
arrival of the goods, he had made several commitments and contract of adhesion.
Therefore, Maersk can be held liable for the damages suffered by Efren for the
cancellation of the contracts he entered into.
It is not disputed that the aforequoted provision 2 at the back of the bill of lading, in fine
print, is a contract of adhesion. Generally, contracts of adhesion are considered void
since almost all the provisions of these types of contracts are prepared and drafted
only by one party, usually the carrier. The only participation left of the other party in
such a contract is the affixing of his signature thereto, hence the term "Adhesion"
Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited.
One who adheres to the contract is in reality free to reject it in its entirety; if he
adheres, he gives his consent.
It is presumed that the stipulations of the bill of lading were, in the absence of fraud,
concealment or improper conduct, known to the shipper, and he is generally bound by
his acceptance whether he reads the bill or not.
 However, the aforequoted ruling applies only if such
contracts will not create an absurd situation as in the case at
bar. The questioned provision in the subject bill of lading
1 Judgment is hereby rendered ordering defendant-appellant Maersk Line to pay plaintiff-appellee (1)
compensatory damages of P11,680.97 at 6% annual interest from filing of the complaint until fully paid, (2) moral
damages of P50,000.00, (3) exemplary damages of P20,000,00, (3) attorney's fees, per appearance fees, and
litigation expenses of P30,000.00, (4) 30% of the total damages awarded except item (3) above, and the costs of
suit.
2 (1) The Carrier does not undertake that the goods shall arive at the port of discharge or the place of delivery at
any particular time or to meet any particular market or use and save as is provided in clause 4 the Carrier shall in
no circumstances be liable for any direct, indirect or consequential loss or damage caused by delay. If the Carrier
should nevertheless be held legally liable for any such direct or indirect or consequential loss or damage caused
by delay, such liability shall in no event exceed the freight paid for the transport covered by this Bill of Lading.

has the effect of practically leaving the date of arrival of the
subject shipment on the sole determination and will of the
carrier.
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,
Maersk, nevertheless, was very well aware of the specific date when the goods were
expected to arrive as indicated in the bill of lading itself. In this regard, there arises
no need to execute another contract for the purpose as it would be a mere
superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning a period
of two (2) months and seven (7) days falls was beyond the realm of reasonableness.
Described as gelatin capsules for use in pharmaceutical products, subject shipment
was delivered to, and left in, the possession and custody of Maersk for transport to
Manila via Oakland, California. But through Maersk's negligence was mishipped to
Richmond, Virginia. Maersk's insistence that it cannot be held liable for the delay
finds no merit.
WHEREFORE, with the modification regarding the deletion of item 4 3 of respondent
court`s decision, the appealed decision is is hereby AFFIRMED in all respects.
5 COMPANIA MARITIMA V. CA, 164 SCRA 658 –AQUINO
COMPANIA MARITIMA, petitioner, vs. COURT OF APPEALS and VICENTE CONCEPCION,
respondents.
Shipper:
Insurer:
Consignee:
Common Carrier:
Goods:
Emergency Recit: Concepcion had to ship construction equipment to Cagayan de Oro.
Compania shipped the equipment. While unloading the equipment, the payloader fell,
causing extensive damage to it. Concepcion demanded replacement from Compania but
the latter denied the claim because Concepcion misstated the weight of the payloader in
3 However, we find item 4 in the dispositive portion of respondent court`s decision which awarded thirty (30)
percent of the total damages awarded except item 3 regarding attorney`s fees and litigation expenses in favor of
private respondent, to be unconscionable, the same should be deleted.
02 Transpo Compiled Digests. 3C. Atty. 8
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the Bill of Lading. The payloader was 5 tons heavier than what was agreed upon. RTC
ruled in favor of Compania. CA reversed. The SC held that generally, 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 the loss, destruction or deterioration of the goods, common
carriers must prove that they observed extraordinary diligence as required in Article
1733 of the Civil Code. Compania was not able to prove extraordinary diligence. Also,
while the act of Concepcion in furnishing Compania with an inaccurate weight of the
payloader cannot successfully be used as an excuse by latter to avoid liability to the
damage thus caused, said act constitutes a contributory circumstance to the damage
caused on the payloader, which mitigates the damages that may be awarded to
Concepcion.
Facts:
 Vicente E. Concepcion, a civil engineer doing business under the name and style of
Consolidated Construction had a contract with the Civil Aeronautics Administration
(CAA) for the construction of the airport in Cagayan de Oro City (CDO).
 Being a Manila-based contractor, Vicente E. Concepcion had to ship his construction
equipment to CDO.
 Concepcion negotiated with Compania, thru its collector, Pacifico Fernandez for the
shipment to CDO of one (1) unit payloader 4, four (4) units 6x6 Reo trucks and two
(2) pieces of water tanks. He was issued Bill of Lading 113 on the same date upon
delivery of the equipment at the Manila North Harbor.
 These equipment were loaded aboard the MV Cebu in its Voyage No. 316. The Reo
trucks and water tanks were safely unloaded within a few hours after arrival.
 The payloader was about two (2) meters above the pier in the course of unloading.
The swivel pin of the heel block of the port block of Hatch No. 2 gave way, causing
the payloader to fall. The payloader was damaged and was thereafter taken to
petitioner’s compound in CDO.
 Consolidated Construction wrote Compañ ia Maritima to demand a replacement of
the payloader which it was considering as a complete loss because of the extent of
damage. Consolidated Construction likewise notified petitioner of its claim for
damages.
4

 Meanwhile, Compania shipped the payloader to Manila where it was weighed at the
San Miguel Corporation. Finding that the payloader weighed 7.5 tons and not 2.5
tons as declared in the Bill of Lading, Compania denied the claim for damages of
Consolidated Construction contending that had Vicente E. Concepcion declared the
actual weight of the payloader, damage to their ship as well as to his payloader
could have been prevented.
 Consolidated Construction in the meantime bought a new payloader from
Bormaheco, Inc. Vicente E. Concepcion filed an action for damages against
Compania with the CFI.
 CFI Manila dismissed the complaint stating that the proximate cause of the fall of
the payloader was Vicente E. Concepcion’s act or omission in having
misrepresented the weight of the payloader which underdeclaration was intended
to defraud Compañ ia Maritima of the payment of the freight charges.
 The Court of Appeals reversed the trial court decision.
Issue: Whether or not the act of Concepcion in furnishing Compañ ia Maritima with an
inaccurate weight was the proximate and only cause of the damage when the payloader
fell while being unloaded by Compania’s crew, as would absolutely exempt Compania
from liability for damages under paragraph 3 of Article 1734 of the Civil Code, which
provides:
“Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only:
x x x     x x x     x x x
“(3) Act or omission of the shipper or owner of the goods.” – NO.
Held: WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the
Court of Appeals is hereby AFFIRMED.
Ratio:
 The general rule under Articles 1735 and 1752 of the Civil Code is that 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 the loss, destruction or deterioration of the goods
under Article 1735, the common carriers must prove that they observed
extraordinary diligence as required in Article 1733 of the Civil Code.
 It is incumbent upon the common carrier to prove that the loss, deterioration or
destruction was due to accident or some other circumstances inconsistent with its
liability.
 In the instant case, Compania seems to have overlooked the extraordinary diligence
required of common carriers in the vigilance over the goods transported by them
by virtue of the nature of their business, which is impressed with a special public
02 Transpo Compiled Digests. 3C. Atty. 9
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duty.
 Article 1733 of the Civil Code provides:
o “Art. 1733. Common carriers, from the nature of their business and for
reason of public policy, are bound 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.
o “Such extraordinary diligence in the vigilance over the goods is futher
expressed in Articles 1734, 1735 and 1745, Nos. 5, 6 and 7, x x x”
 Under Article 1736 of the Civil Code, the responsibility to observe extraordinary
diligence commences and 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 the right to receive them without prejudice to the provisions of
Article 1738.
 Compania upon the testimonies of its own crew, failed to take the necessary and
adequate precautions for avoiding damage to, or destruction of, the payloader
entrusted to it for safe carriage and delivery to Cagayan de Oro City. It cannot be
reasonably concluded that the damage caused to the payloader was due to the
alleged misrepresentation of private respondent Concepcion as to the correct and
accurate weight of the payloader.
 It must be noted that the weight submitted by Concepcion was entered into the bill
of lading by
 Compania thru its company collector, without seeing the equipment to be shipped.
The company never checked the information entered in the bill of lading.
 The weights stated in a bill of lading are prima facie evidence of the amount
received and the fact that the weighing was done by another will not relieve the
common carrier where it accepted such weight and entered it on the bill of lading.
 The damage caused to the machinery could have been avoided by the exercise of
reasonable skill and attention on its part in overseeing the unloading of such heavy
equipment.
 Concepcion’s act of furnishing petitioner with an inaccurate weight of the payloader
cannot be used by said Compania as an excuse to avoid liability for the damage
caused, as the same could have been avoided had Compania utilized the “jumbo”
lifting apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes.
 While the act of Concepcion in furnishing Compania with an inaccurate weight of
the payloader cannot successfully be used as an excuse by petitioner to avoid
liability to the damage thus caused, said act constitutes a contributory circumstance
to the damage caused on the payloader, which mitigates the liability for damages of
petitioner in accordance with Article 1741 of the Civil Code, to wit:
“Art. 1741. If the shipper or owner merely contributed to the loss, destruction or
deterioration of the goods, the proximate cause thereof being the negligence of the
common carrier, the latter shall be liable in damages, which however, shall be equitably
reduced.”
6 SOUTHERN LINES, INC. V. CA, 4 SCRA 258 –BENEDICTO

SOUTHERN LINES, INC., petitioner, vs.COURT OF APPEALS and CITY OF ILOILO,
respondents.
G.R. No. L-16629             January 31, 1962 Ponente: J. De Leon
EMERGENCY DIGEST: Shipper - NARIC; Carrier - Southern Lines, Inc.; Consignee - City
of Iloilo
 City of Iloilo requisitioned for rice from NARIC. On Aug 24, 1948, NARIC shipped
1726 sacks of rice consigned to the City of Iloilo on board SS "General Wright"
belonging to Southern Lines. Each sack weighed 75 kilos and the entire weight
based on the bill of lading weighed 129,450 kilos. The total cost of shipment was
P63115.50. When the City received the shipment on Sept. 3, there was a total
shortage of 13,319 kilos equivalent to 41 sacks with a value of P6486.35. The City
filed a complaint in the CFI of Iloilo to recover the amount of money from NARIC and
Southern. CFI ruled in favor of the City but absolving NARIC. CA affirmed. Issue: Is
Southern liable for loss of the rice shipped? SC held that Southern is liable. SC
affirmed the findings of the CA that Southern admitted that the strings that tied the
bags of rice were broken; some bags were with holes and plenty of rice were spilled
inside the hull of the boat, and that the personnel of the boat collected no less than
26 sacks of rice which they had distributed among themselves This admission shows
that the shortage resulted from the negligence of Southern Lines. Using Art 361, and
Art 362 of the Code of Commerce, SC held that Southern Lines is liable because given
the fact that there was defect in the packing of goods, and such was apparent to the
carrier, Southern failed to take the precaution adopted by careful persons.
COMPLETE DIGEST
On August 24, 1948, the National Rice and Corn Corporation (NARIC) shipped 1,726
sacks of rice consigned to the City of Iloilo on board the SS "General Wright" belonging
to 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 P63,115.50 itemized and computed as follows: .
Unit Price per bag P36.25 P62,567.50
Handling at P0.13 per bag 224.38
Trucking at P2.50 per bag 323.62
T o t a l . . . . . .. . . . . 63,115.50
 On September 3, 1948, the City of Iloilo received the shipment and paid the amount
of P63,115.50. However, it was noted that 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. Total shortage ascertained 13,319
kilos." The shortage was equivalent to 41 sacks of rice, the proportionate value of
02 Transpo Compiled Digests. 3C. Atty. 10
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which was P6,486.35.
 On February 14, 1951 the City of Iloilo filed a complaint in the CFI of Iloilo against
NARIC and Southern for the recovery of the amount of P6,486.35 representing the
value of the shortage of the shipment of rice. After trial, the lower court absolved
NARIC from the complaint, but sentenced Southern to pay the amount of P4,931.41
which is the difference between the sum of P6,486.35 and P1,554.94 representing
the latter's counterclaim for handling and freight. CA affirmed the judgment.
Issues: 
W/N Southern Lines is liable for the loss or shortage of the rice shipped - YES
Held: Judgment affirmed and petition for certiorari denied.
 Article 361 of the Code of Commerce provides:
ART. 361. — The merchandise shall be transported at the risk and venture of the
shipper, if the contrary has not been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods may suffer during
the transportation by reason of fortuitous event, force majeure, or the inherent nature
and defect of the goods, shall be for the account and risk of the shipper.
Proof of these accidents is incumbent upon the carrier.
 Article 362 of the same Code provides:
ART. 362. — Nevertheless, the carrier shall be liable for the losses and damages
resulting from the causes mentioned in the preceding article if it is proved, as against
him, that they arose through his negligence or by reason of his having failed to take the
precautions which usage his established among careful persons, unless the shipper has
committed fraud in the bill of lading, representing the goods to be of a kind or quality
different from what they really were.
If, notwithstanding the precautions referred to in this article, the goods transported run
the risk of being lost, on account of their nature or by reason of unavoidable accident,
there being no time for their owners to dispose of them, the carrier may proceed to sell
them, placing them for this purpose at the disposal of the judicial authority or of the
officials designated by special provisions.
 Under Art 361, in order to free itself from liability, defendant was only obliged to
prove that the damages suffered by the goods were "by virtue of the nature or defect
of the articles." Under the provisions of Article 362, in order to hold the defendant
liable, the plaintiff was obliged to prove that the damages to the goods by virtue of
their nature, occurred on account of defendant's negligence or because the it did not
take the precaution adopted by careful persons. (Government v. Ynchausti & Co., 40
Phil. 219, 223).
 Southern claims exemption from liability by saying that 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 City of Iloilo in receiving the shipment. 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 from such fact. (9 Am Jur. 869).
 The CA held that Southern admitted that the strings that tied the bags of rice were
broken; some bags were with holes and plenty of rice were spilled inside the hull of
the boat, and that the personnel of the boat collected no less than 26 sacks of rice
which they had distributed among themselves This admission shows that the
shortage resulted from the negligence of Southern Lines.
 Southern invokes Art. 366 of the Code of Commerce and the bill of lading to argue
that City of Iloilo is precluded from filing an action for damages on account of its
failure to present a claim within 24 hours from receipt of the shipment. It also cites
the cases of Government v. Ynchausti & Co., 24 Phil. 315 and Triton Insurance Co. v.
Jose, 33 Phil. 194, ruling to the effect that the requirement that the claim for damages
must be made within 24 hours from delivery is a condition precedent to the accrual
of the right of action to recover damages. These two cases are not applicable to the
case at bar. In the first cited case, the plaintiff never presented any claim at all before
filing the action. In the second case, there was payment of the transportation charges
which precludes the presentation of any claim against the carrier. (See Article 366,
Code of Commerce.)
The record shows that Southern Lines failed to plead this defense in its answer to City of
Iloilo's complaint and, therefore, the same is deemed waived (Section 10, Rule 9, Rules
of Court), and cannot be raised for the first time at the trial or on appeal. (Maxilom v.
Tabotabo, 9 Phil. 390.) Moreover, as the CA observed that the records reveal that the
City filed the present action, within a reasonable time after the short delivery in the
shipment of the rice was made. The present action is one for the refund of the amount
paid in excess, and not for damages or the recovery of the shortage; for admittedly the
City had paid the entire value of the 1726 sacks of rice, subject to subsequent
adjustment, as to shortages or losses. The bill of lading does not at all limit the time for
filing an action for the refund of money paid in excess.
7 GANZON V. CA, 161 SCRA 646 (READ DISSENT) –CHAN
Ganzon vs CA
G.R. No. L-48757
May 30, 1988
Shipper: Gelacio Tumambing
Common Carrier: Mauro B. Ganzon (ship name: BATMAN)
Goods transported: 305 tons of scrap iron
EMERGENCY RECIT (Please take note of Justice Melencio-Herrera’s dissent at the end of
this digest.)
02 Transpo Compiled Digests. 3C. Atty. 11
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Tumambing contracted the services of Ganzon, who owned the lighter LCT Batman. The
contract was that Ganzon should haul 305 tons of scrap iron from Mariveles, Bataan to
the port of Manila. Tumambing delivered the scrap iron to Filomena Niza, captain of
Batman. The scraps were loaded on the same day. While loading, Mayor Advincula
arrived and demanded payment of 5k from Tumambing. After a heated argument, Mayor
Advincula shot Tumambing, who still lived but was treated in a hospital. After a while,
the scraps were continued to be loaded. However, Acting Mayor Rub went, along with 3
policemen, to order that dumping of the scrap iron. The rest was brought to the
compound of NASSCO. CA rendered a decision ordering Ganzon to pay Tumambing.
Ganzon appealed to the SC. ISSUE: W/N CA erred in finding Ganzon guilty of breach of
contract because the scraps were already in his custordy. Also, W/N CA erred in
condemning Ganzon for acts of employees who dumped the scrap iron upon order of
Acting Mayor Rub. Answer: CA did not err.
The fact that the scraps were delivered to, and accepted by, Captain Niza shows that the
scraps were already place under the custody of Ganzon. Therefore, the duty of observing
extraordinary diligence commenced and under Art. 1736, the 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.
As to the 2nd issue, 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. Ganzon 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.
DETAILED DIGEST
FACTS
- Tumambing executed in the CFI an action against Ganzon for damages based on
culpa contractual. Antecedent facts are as follows.
- Tumambing contracted the services of Ganzon to haul 305 tons of scrap iron from
Mariveles, Bataan to the port of Manila on board the lighter LCT “Batman”
- Ganzon sent Batman to Mariveles where it docked in 3ft. of water
- Tumambing delivered the scrap iron to Filomeno Niza (captain of the lighter) for
loading, which was begun on the same date it was delivered
- When half of the scrap iron was loaded, Mayor Jose Advincula of Mariveles arrived
and demanded 5k from Tumambing. The latter resisted and after a heated
argument, Mayor Advincula shot at Tumambing who was taken to the hospital in
Balanga, Bataan for treatment
- After a while, loading was resumed. However, Acting Mayor Basilio Rub,
accompanied by 3 policemen, ordered Captain Niza and his crew to dump the scrap
iron. The rest was brought to the compound of NASSCO
- Later on, Acting Mayor Rub issued a receipt stating that the Municipality of
Mariveles had taken custody of the scrap iron.
- CA rendered a decision ordering Ganzon to pay Tumambing
ISSUE

- W/N CA erred in finding Ganzon guilty of breach of contract of transportation
because the scrap was placed in his custody and control. NO!!!
- W/N CA erred in condemning Ganzon for acts of employees dumping the scrap into
the sea despite the fact that it was ordered by the local government official. NO!!!
- W/N CA failed to consider that the loss of the scrap was due to a fortuitous event.
NO!!!
HELD - WHEREFORE, the petition is DENIED; the assailed decision of the Court of
Appeals is hereby AFFIRMED. Costs against the petitioner.
RATIO
- As to the issue wherein Ganzon denies that the scrap had been placed
unconditionally under his custody and control
o The scrap was, indeed, placed under his custody and control
o He agrees with the CA’s finding that Tumambing delivered the scraps to
Captain Niza and that the scraps were freely admitted. The scraps were
also immediately loaded on the same day
o By the act of delivery, the scraps were unconditionally placed in the
possession of control of the common carrier. Upon receipt, the contract of
carriage was deemed perfected.
o Consequently, Ganzon’s extraordinary responsibility commenced and
pursuant to Art. 1736, the 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.
o Ganzon also failed to show that the loss of the scraps was due to any of the
causes enumerated in Article 1734 of the Civil Code. Hence, he is
presumed to have acted negligently. Ganzon could have been exempted
from liability had he been able to prove that he observed extraordinary
diligence
- As to the 2nd issue, which states that the loss of the scraps was due to an “order or
act of competent public authority,” the SC disagrees
o 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.
o Ganzon 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.
- As to the issue wherein Ganzon claims that the loss of the scraps was due mainly to
the intervention of the municipal officials which constitutes a caso fortuito, the SC
finds that there was no caso fortuito
o The intervention of the municipal officials was not In any case, of a
character that would render impossible the fulfillment by the carrier of its
obligation.
o The petitioner was not duty bound to obey the illegal order to dump into
the sea the scrap iron.
02 Transpo Compiled Digests. 3C. Atty. 12
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o Moreover, there is absence of sufficient proof that the issuance of the
same order was attended with such force or intimidation as to completely
overpower the will of the petitioner's employees. The mere difficulty in
the fulfillment of the obligation is not considered force majeure
______________
MELENCIO-HERRERA, J., dissenting:
Petitioner can not be held liable in damages for the loss and destruction of the scrap
iron. The loss of said cargo was due to an excepted cause an “order or act of competent
public authority.” The loading of the scrap iron on the lighter had to be suspended
because of Municipal Mayor Jose Advincula's intervention, who was a "competent public
authority." Ganzon had no control over the situation as, in fact, Tumambing himself, the
owner of the cargo, was impotent to stop the "act' of said official and even suffered a
gunshot wound on the occasion.
When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by
three policemen, who ordered the dumping of the scrap iron into the sea right where the
lighter was docked in three feet of water. Again, could the captain of the lighter and his
crew have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the
performance of a contractual obligation was rendered impossible.
8 COMPANIA MARITIMA V. INSURANCE COMPANY, 12 SCRA 213 –CORTEZ
Compania Maritima vs Insurance Company of North America (G.R. No. L-18965, October
20, 1964)
SHIPPER: Macleod and Company of the Philippines (Macleod)
COMMON CARRIER: Compania Maritima (Compania)
INSURER: Insurance Company of North America
GOODS: Bales of Hemp
ROUTE: Davao to Manila; then Manila to Boston, USA.
* NOTE: a “Lighter” is a large usually flat-bottomed barge used especially in unloading or
loading ships (in this case, it seemed that “lighter” and “barge” were used
interchangeably)
EMERGENCY DIGEST: Sometime in October 1952, Macleod contracted, by telephone,
Compania, a shipping corporation, for the shipment of 2,645 bales of hemp. The course
of the travel would be from Macleod’s pier at Davao to Manila, then for transhipment to
Boston. Compania sent 2 lighters (with LCT Nos. 1023 and 1025) and the hemp was
loaded there which later on will be transferred to the carrier’s ship for shipment.

However, on October 29, LCT No. 1025 sank which resulted to the damage or loss of
1,162 bales of hemp. The damaged hemp was brought to a plantation in Davao in order
to save what was left of it; and due to this, Macleod incurred a loss totalling to
P60,421.02. The cargo on the barge was insured so Macleod collected from the
insurance company. The insurance company paid Macleod and was subrogated to the
latter’s rights. It then went after the carrier in order to collect what they have paid
Macleod. Compaia refused. Thus, this case.
ISSUE: W/N there’s a contract of carriage even though there’s no bill of lading (YES) and
W/N the sinking of the barge was due to fortuitous event (NO)
HELD & RATIO: CA decision AFFIRMED. The liability and responsibility of the carrier
under a contract for the carriage of goods commence on their actual delivery to, or
receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a
vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good
delivery and binds the vessel receiving the freight, the liability commencing at the time
of delivery to the lighter The liability of the carrier as common carrier begins with the
actual delivery of the goods for transportation, and not merely with the formal execution
of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete
delivery and acceptance. Even where it is provided by statute that liability commences
with the issuance of the bill of lading, actual delivery and acceptance are sufficient to
bind the carrier. The mishap that caused the damage or loss was due, not to force
majeure, but to lack of adequate precautions or measures taken by the carrier to prevent
the loss. The fact that, as admitted by appellant's (Compania) own witness, the ill-fated
barge had cracks on its bottom which admitted sea water in the same manner as rain
entered "thru tank man-holes", according to the patron of LCT No. 1023— conclusively
showing that the barge was not seaworthy — it should be noted that on the night of the
nautical accident there was no storm, flood, or other natural disaster or calamity.
FACTS:
Sometime in October 1952, Macleod and Company of the Philippines (Macleod)
contracted by telephone the services of Compania Maritima (Compania), a shipping
corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier
at Davao City to Manila and for their subsequent transhipment to Boston,
Massachusetts, USA, on board the S.S. Steel Navigator.
 This oral contract was later on confirmed by a formal and written booking
issued by Macleod's branch office in Sasa and handcarried to Compania
Maritima's branch office in Davao.
In compliance with the contract, Compania sent Macleod 2 lighters (with LCT Nos. 1023
and 1025) and the hemp was loaded there.
 The loading of the hemp was completed on October 29, 1952. The lighters
were manned by a patron and an assistant.
 The patrons of both barges issued the corresponding carrier receipts.
02 Transpo Compiled Digests. 3C. Atty. 13
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o The 2 loaded barges proceeded to the government's marginal wharf
in order to wait for S.S. Bowline Knot (belonging to Compania) on
which the hemp was to be loaded.
 On the night of October 29, or early October 30, LCT No. 1025 sank.
 This resulted in the damage or loss of 1,162 bales of hemp. Macleod promptly
notified Compania's main office in Manila and its Davao branch advising it of
its liability.
 The damaged hemp was brought to Odell Plantation in Davao for cleaning,
washing, reconditioning, and redrying.
o After reclassification, the reconditioned hemp's value was reduced
from P116,835 to P84,887.27, or a loss of P31,947.72.
 Macleod also incurred other expenses on the course of
reconditioning the hemp thus, the total loss added up to
P60,421.02.
All of Macleod's abaca shipments, including the bales of hemp loaded on Compania's LCT
No. 1025 were insured with the Insurance Company of North America against all losses
and damages.
 Macleod filed a claim for loss with the insurance company which the latter paid
the former for its losses.
 There was a subrogation agreement between them so as a result, Macleod
assigned to the insurance company its rights over the insured and damaged
cargo.
o The insurance company sought Compania in order to recover but
they failed in doing so thus, an action was filed in court.
 The lower court ruled in favor of the insurance company and ordered the
carrier to pay the insurance company the sum of P60,421.02, representing the
losses incured.
 This judgment was affirmed by the Court of Appeals.
ISSUES (related to transportation law):
1) W/N there was already an a contract of carriage even if the loss occurred when the
hemp was loaded on a barge owned by the carrier, and no bill of lading was issued (YES,
there’s already a contract)
2) W/N the the sinking of the barge was due to fortuitous event, storm, or natural
disaster (NO, not due to fortuitous event)
3) W/N refusal to check accounts is deemed as an implied admission on the part of the
carrier that the shipper's documents are correct
HELD: CA judgment is AFFIRMED.
RATIO:

The fact that Compania sent its lighters free of charge to take the hemp from Macleod's
wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way
impair the contract of carriage already entered into between the carrier and the shipper,
for that preparatory step is but part and parcel of said contract of carriage.
 The lighters were merely employed as the first step of the voyage, but once
that step was taken and the hemp delivered to the carrier's employees, the
rights and obligations of the parties attached thereby subjecting them to the
principles and usages of the maritime law.
 In other words, here we have a complete contract of carriage the
consummation of which has already begun: the shipper delivering the cargo to
the carrier, and the latter taking possession thereof by placing it on a lighter
manned by its authorized employees, under which Macleod became entitled to
the privilege secured to him by law for its safe transportation and delivery, and
the carrier to the full payment of its freight upon completion of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the
contract to carry and deliver, and if actually no goods are received there can be
no such contract. The liability and responsibility of the carrier under a
contract for the carriage of goods commence on their actual delivery to, or
receipt by, the carrier or an authorized agent. ... and delivery to a lighter in
charge of a vessel for shipment on the vessel, where it is the custom to
deliver in that way, is a good delivery and binds the vessel receiving the
freight, the liability commencing at the time of delivery to the lighter. ... and,
similarly, where there is a contract to carry goods from one port to another, and
they cannot be loaded directly on the vessel and lighters are sent by the vessel to
bring the goods to it, the lighters are for the time its substitutes, so that the bill of
landing is applicable to the goods as soon as they are placed on the lighters. (80
C.J.S., p. 901)
...Whenever the control and possession of goods passes to the carrier and
nothing remains to be done by the shipper, then it can be said with
certainty that the relation of shipper and carrier has been established. On
the other hand, the authorities are to the effect that a bill of lading is not
indispensable for the creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage. — As to the issuance of a
bill of lading, although article 350 of the Code of Commerce provides that "the
shipper as well as the carrier of merchandise or goods may mutua-lly demand
that a bill of lading is not indispensable. As regards the form of the contract of
carriage it can be said that provided that there is a meeting of the minds and
from such meeting arise rights and obligations, there should be no limitations as
to form." The bill of lading is juridically a documentary proof of the
stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-
315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not
02 Transpo Compiled Digests. 3C. Atty. 14
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demand, as necessary requisite in the contract of transportation, the
delivery of the bill of lading to the shipper, but gives right to both the
carrier and the shipper to mutually demand of each other the delivery of
said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial
Laws, Vol. II, Revised Edition, pp. 12-13)
The liability of the carrier as common carrier begins with the actual
delivery of the goods for transportation, and not merely with the formal
execution of a receipt or bill of lading; the issuance of a bill of lading is not
necessary to complete delivery and acceptance. Even where it is provided
by statute that liability commences with the issuance of the bill of lading,
actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p.
288)
Compania disclaims responsibility for the damage of the cargo in question shielding
itself behind the claim of force majeure or storm which occurred on the night of October
29, 1952. But the evidence fails to bear this out.
Rather, it shows that the mishap that caused the damage or loss was due, not to force
majeure, but to lack of adequate precautions or measures taken by the carrier to prevent
the loss as may be inferred from the following findings of the Court of Appeals:
 Aside from the fact that, as admitted by appellant's (Compania) own witness,
the ill-fated barge had cracks on its bottom which admitted sea water in the
same manner as rain entered "thru tank man-holes", according to the patron of
LCT No. 1023— conclusively showing that the barge was not seaworthy — it
should be noted that on the night of the nautical accident there was no storm,
flood, or other natural disaster or calamity.
 The marine surveyors’ report also confirmed this fact. Their report said that
the sinking of the lighter was attributed to the 'non-water-tight conditions of
various buoyancy compartments’
 Certainly, winds of 11 miles per hour, although stronger than the average 4.6
miles per hour then prevailing in Davao on October 29, 1952, cannot be
classified as storm.
o For according to Beaufort's wind scale, a storm has wind velocities of
from 64 to 75 miles per hour;
o and by Philippine Weather Bureau standards winds should have a
velocity of from 55 to 74 miles per hour in order to be classified as
storm
*SIDE ISSUE (just in case it will be asked): Has the Court of Appeals erred in regarding
Exhibit NNN-1 (case did not mention what exactly this was) as an implied admission by
the carrier of the correctness and sufficiency of the shipper's statement of accounts
contrary to the burden of proof rule?

It should be recalled in connection with this issue that during the trial of this case the
carrier asked the lower court to order the production of the books of accounts of the
Odell Plantation containing the charges it made for the loss of the damaged hemp for
verification of its accountants, but later it desisted therefrom on the claim that it finds
their production no longer necessary. This desistance notwithstanding, the shipper
however presented other documents to prove the damage it suffered in connection with
the cargo and on the strength thereof the court a quo ordered the carrier to pay the sum
of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that
the desistance of the carrier from producing the books of accounts of Odell Plantation
implies an admission of the correctness of the statements of accounts contained therein,
petitioner now contends that the Court of Appeals erred in basing the affirmance of the
award on such erroneous interpretation.
There is reason to believe that the act of petitioner in waiving its right to have the books
of accounts of Odell Plantation presented in court is tantamount to an admission that the
statements contained therein are correct and their verification not necessary because its
main defense here, as well as below, was that it is not liable for the loss because there
was no contract of carriage between it and the shipper and the loss caused, if any, was
due to a fortuitous event. Hence, under the carrier's theory, the correctness of the
account representing the loss was not so material as would necessitate the presentation
of the books in question. At any rate, even if the books of accounts were not produced,
the correctness of the accounts cannot now be disputed for the same is supported by the
original documents on which the entries in said books were based which were
presented by the shipper as part of its evidence. And according to the Court of Appeals,
these documents alone sufficiently establish the award of P60,412.02 made in favor of
respondent.
9 SERVANDO V. PHIL STEAM NAVIGATION CO., 117 SCRA 832 -CRUZ
NENZO
Servando v Phil Steamship
[G.R. Nos. L-36481-2. October 23, 1982.]
Consignees
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,  vs.  
Common Carrier
PHILIPPINE STEAM NAVIGATION CO., defendant-PSN.
Shipper:
Insurer:
Consignee:
Common Carrier:
Goods:
02 Transpo Compiled Digests. 3C. Atty. 15
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SYNOPSIS / Emergency Digest
(Appellees) Clara Uy Bico and Amparo Servando loaded their respective cargoes on
board (appellant’s) Philippine Steam Navigation’s (PSN) vessel for carriage from Manila
to Negros Occidental. Upon arrival of the vessel at the place of destination, the cargoes
were discharged, complete and in good order, into the warehouse of the Bureau of
Customs.
After appellee Uy Bico had taken delivery of a portion of her cargoes, the warehouse was
razed by fire of unknown origin, destroying the rest of the two appellees' (Uy Bico and
Servando) cargoes. Uy Bico and Servando filed their claims from PSN for the recovery of
the value of the goods destroyed by fire.
PSN rejected the claims but the trial court ruled in favor of Uy Bico and Servando and
ordered payment of their claims, stating that since the burning of the warehouse
occurred before actual or constructive delivery of the goods to the appellees, the loss is
chargeable against the PSN.
On review, the Supreme Court held that PSN, as obligor, is exempt from liability for non-
performance because the burning of the warehouse containing appellees' goods, which
is the immediate and proximate cause of the loss, is a fortuitous event or force majeure
which could not have been foreseen by PSN.
Additional arguments used by the SC to buttress their decision:
 Parties agreed to limit responsibility “ …nor shall carrier be responsible for
loss or damage caused by force majeure… “
 PSN did not delay in performing their obligation,
 nor were they negligent
Judgment appealed from, set aside
Separate Opinion: Concurring ( Actually might be the point why assigned )
Art 1738 : extraordinary liability of the common carrier continues to be operative even
during the time the goods are stored in the warehouse of the carrier at the place of
destination, until
the consignee has been advised of the arrival of the goods and
 has had reasonable opportunity thereafter to remove them or otherwise
dispose of them.'
Consignees had already been advised had reasonable opportunity to remove the goods.
In fact they already removed half.
Moreover PSN no longer had control of and responsibility of the goods having been
deposited already
FACTS

Consignee v CC
On November 6, 1963, appellees (Consignees)
 Clara Uy Bico and
 Amparo Servando
loaded on board the PSN's vessel (Carrier), FS-176, for, carriage from Manila to
Pulupandan, Negros Occidental.
The following (Cargoes), to wit (as evidenced by the corresponding bills of lading
issued by the PSN):
 Clara Uy Bico
o 1,528 cavans of rice valued at P40,907.50;
 Amparo Servando
o 44 cartons of colored paper, toys and general
merchandise valued at P1,070.50;
Delivered , partially withdrawn , warehouse razed
Upon arrival of the vessel at Pulupandan
 in the morning of November 18, 1963, the cargoes were discharged, complete
and in good order, unto the warehouse of the Bureau of Customs.
 At about 2:00 in the afternoon of the same day, said warehouse was razed by a
fire of unknown origin, destroying appellees cargoes.
Before the fire, however, appellee Uy Bico was able to take delivery of 907 cavans of
rice. Appellees' claims for the value of said goods were rejected by the PSN.
Lower court : PSN loses
On the bases of the foregoing facts, the lower court PSN to pay.
 plaintiff Amparo C. Servando the aggregate sum of P1,070.50 with
legal interest thereon from the date of the filing of the complaint until
fully paid, and to pay the costs.
 Clara Uy Bico the aggregate sum of P16,625.00 with legal interest
thereon from the date of the filing of the complaint until fully paid,
and to pay the costs."
Issue
WON PSN should be liable for the razed goods :
02 Transpo Compiled Digests. 3C. Atty. 16
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 despite having discharged, complete and in good order onto the warehouse
without negligence and after giving notice and reasonable opportunity to
withdraw goods of consignees which were soon thereafter destroyed. NO
RATIO
Extraordinary Diligence required of CCs / Art. 1736
Article 1736 of the Civil Code imposes upon common carriers the duty to observe
extraordinary diligence from the moment the goods are unconditionally placed in their
possession "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, without prejudice to the
provisions of Article 1738."
The (lower) court a quo held that the delivery of the shipment in question to
the warehouse of the Bureau of Customs is not the delivery contemplated by
Article 1736; and since the burning of the warehouse occurred before actual or
constructive delivery of the goods to the appellees, the loss is chargeable
against the PSN.
HOWEVER Parties agreed to limit responsibility against FORCE MAJEURE (In Bills
of Lading)
It should be pointed out, however, that in the bills of lading issued for the cargoes in
question, the parties agreed to limit the responsibility of the carrier for the loss or
damage that may be caused to the shipment by inserting therein the following
stipulation:
 "Clause 14. Carrier shall not be responsible for loss or damage to
shipments billed 'owner's risk' unless such loss or damage is due to
negligence of carrier. Nor shall carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea or
other waters; war; public enemies; . . . fire . . . "
Stipulation valid
A stipulation by the parties in the bills of lading issued for the cargoes in question,
limiting the responsibility of the carrier for the lost or damage that may be caused
to the shipment is valid where there is nothing therein that is contrary to law,
moral or public policy, and is binding upon the parties even if written on the back of
the bill of lading and not signed by the parties.
 
Which is a basic principle of law anyway (Art 1174)
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of
the basic principle of law written in Article 1174 of the Civil Code:

 "Article 1174.Except in cases expressly specified by the law, or when
it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which should not be foreseen, or which,
though foreseen, were inevitable."
Thus, where fortuitous event or force majeure is the immediate and proximate cause of
the loss, the obligor is exempt from liability for non-performance.
In a legal sense and, consequently, also in relation to contracts, a 'caso fortuito'
presents the following essential characteristics
(1) the cause of the unforeseen and unexpected occurrence, or of the failure of
the debtor to comply with his obligation, must be independent of the human
will;
(2) it must be impossible to foresee the event which constitutes the 'caso
fortuito', or if it can be foreseen, it must be impossible to avoid;
(3) the occurrence must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner; and
(4) the obligor must be free from any participation in the aggravation of the
injury resulting to the creditor." In the case at bar, the burning of the customs
warehouse was an extraordinary event which happened independently of the
will of the PSN. The latter could not have foreseen the event.
Nor did the CC delay performance : on time and partially withdrawn already
There is nothing in the record to show that PSN carrier incurred in delay in the
performance of its obligation. It appears that PSN had not only notified appellees of the
arrival of their shipment, they had demanded that the same be withdrawn.
 In fact, pursuant to such demand, appellee Uy Bico had taken delivery of 907
cavans of rice before the burning of the warehouse.
No negligence by CC either : warehouse not owned by them
Nor can the PSN or its employees be charged with negligence. The storage of the goods
in the Customs warehouse pending withdrawal thereof by the appellees was
undoubtedly made with their knowledge and consent. Since the warehouse belonged to
and was maintained by the government, it would be unfair to impute negligence to the
PSN, the latter having no control whatsoever over the same.  SAMAR MINING COMPANY, INC., plaintiff-appellee, vs.NORDEUTSCHER LLOYD and
YU BIAO case not applicable here
The lower court in its decision relied on the ruling laid down in Yu Biao Sontua
vs. Ossorio 6 , where this Court held the defendant liable for damages arising
02 Transpo Compiled Digests. 3C. Atty. 17
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from a fire caused by the negligence of the defendant's employees while
loading cases of gasoline and petroleum products. But unlike in the said case,
there is not a shred of proof in the present case that the cause of the fire that
broke out in the Custom's warehouse was in any way attributable to the
negligence of the PSN or its employees. Under the circumstances, the PSN is
plainly not responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No costs.
SO ORDERED.
Makasiar, Concepcion Jr., Guerrero, Abad Santos and De Castro, JJ., concur.
Separate Opinions
AQUINO, J., concurring:
Common carriers; extent of extraordinary liability. (this could actually be the point
why this case was assigned )
Under Article 1738 of the Civil Code "the extraordinary liability of the common carrier
continues to be operative even during the time the goods are stored in the warehouse of
the carrier at the place of destination, until the consignee has been advised of the arrival
of the goods and has had reasonable opportunity thereafter to remove them or
otherwise dispose of them.''
Non-liability for loss of goods due to fortuitous event;
It would not be legal and just to hold the carrier liable to the consignee for the loss of the
goods, where from the time the goods in question were deposited in the Bureau of
Customs' warehouse in the morning of their arrival up to two o'clock in the afternoon of
the same day, when the warehouse was burned, Amparo C. Servando and Clara Uy Bico,
the consignees, had reasonable opportunity to remove the goods. Clara had removed
more than one-half of the rice consigned to her. Moreover, the shipping company had no
more control and responsibility over the goods after they were deposited in the customs
warehouse by the arrastre and stevedoring operator. No amount of extraordinary
diligence on the part of the carrier could have prevented the loss of the goods by fire
which was of accidental origin. The consignee should bear the loss which was due to a
fortuitous event.
10 SAMAR MINING CO., V. NORDEUTSCHER LLOYD, 132 SCRA 529 -DELA
PAZ
C.F. SHARP & COMPANY, INC., defendants-appellants.
Shipper:
Insurer:
Consignee:
Common Carrier:

Goods:
Emergency Digest:
Samar Mining imported one (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 COMPANY, INC. Upon arrival of
the aforesaid vessel at the port of Manila, the aforementioned 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.
Upon failure of the letters of complaint, Samar filed a claim against Norduetscher. The
CFI ordered Norduetscher to pay the claim. Norduetscher and CF Sharp appealed the
decision of the RTC through certiorari before this court.
Bill of Lading Details:
Port of loading : Bremen, Germany
Port of discharge: Manila
Destination of the goods – Davao : There is an undertaking of M/S SCHWABENSTEIN
only up to the port of discharge from ship in Manila. The goods were to be
transshipped5 by the carrier to the port of discharge of the goods in Davao.
Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are
valid stipulations between the parties insofar as they exempt the carrier from
liability for loss or damage to the goods while the same are not in the latter's
actual custody.The responsibility as a common carrier ceased the moment the goods were
unloaded in Manila and in the matter of transshipment, acted merely as an agent of the
shipper and consignee.
Furthermore, NORDEUTSCHER cannot be made answerable for the value of the missing
goods. It is true that the transshipment of the goods, which was the object of the agency,
was not fully performed. However, NORDEUTSCHER had commenced said performance,
the completion of which was aborted by circumstances beyond its control. An agent who
carries out the orders and instructions of the principal without being guilty of
negligence, deceit or fraud, cannot be held responsible for the failure of the principal to
accomplish the object of the agency,
DECISION: NORDUETSCHER NOT LIABLE. STIPULATIONS IN THE BILL OF LADING
VALID.
Complete Digest:
Facts
5 to transfer for further transportation from one ship or conveyance to another
02 Transpo Compiled Digests. 3C. Atty. 18
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SAMAR MINING COMPANY, INC., imported one (1) crate Optima welded wedge wire
sieves through the M/S SCHWABENSTEIN a vessel owned by defendant-appellant
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 COMPANY, INC. Upon arrival of the aforesaid vessel at the port of
Manila, the aforementioned 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.
SAMAR SENT letters of complaint sent to NORDUETSCHER however they failed to elicit
the desired response, SAMAR then, 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. Hence, the filing of the instant suit to enforce payment. NORDUETSCHER brought
in AMCYL as third party defendant.
CFI : ordered NORDUETSCHER to pay the amount of P1,691.93 plus attorney's fees and
costs. However, the Court stated that defendants may recoup whatever they may pay
plaintiff 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.
Bill of Lading No. 18 sets forth that one (1) crate of Optima welded wedge wire sieves
was received by the carrier NORDEUTSCHER LLOYD at the "port of loading" which is
Bremen, Germany, while the freight had been prepaid up to the port of destination or
the "port of discharge of goods in this case, Davao, the carrier undertook to transport the
goods in its vessel, M/S SCHWABENSTEIN only up to the "port of discharge from ship-
Manila. Thereafter, the goods were to be transshipped by the carrier to the port of
destination or "port of discharge of goods”
Bill of Lading No. 18 limiting the carrier’s liability in the transshipment of the goods are
contained in the following provisions:
SECTION 1, PARA 3 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 ... (Emphasis
supplied)
SECTION 11: Whenever the carrier or master may deem it advisable or in any case
where the goods are placed at carrier's disposal at or consigned to a point where the ship
does not expect to load or discharge, the carrier or master may, without notice, forward
the whole or any part of the goods before or after loading at the original port of
shipment, ... 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 and at risk and expense of the goods and the
carrier shall not be liable for detention nor responsible for the acts, neglect, delay or
failure to act of anyone to whom the goods are entrusted or delivered for storage,
handling or any service incidental thereto (Emphasis supplied)
NORDEUTSCHER now shirk liability 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.
Issue: WON the Stipulations in the Bill of Lading exempting the carrier from liability
arising from loss of goods not in its actual custody are valid? YES
Held: WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's
complaint is hereby DISMISSED.
RATIO:
- 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 in
PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674
(1968). “The short form Bill of Lading ( ) states in no uncertain terms that the
port of discharge of the cargo is Manila, but that the same was to be
transshipped beyond the port of discharge to Davao City. Pursuant to the terms
of the long form 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. ... (Emphasis supplied) “ [CD: Same facts as the present case –
discharge in Manila, destination in Davao]
- It is clear, then, 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 the goods
from Manila to their port of destination-Davao.
- Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof
are valid stipulations between the parties insofar as they exempt the carrier from
liability for loss or damage to the goods while the same are not in the latter's
actual custody.
The liability of the common carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is governed primarily by the New
02 Transpo Compiled Digests. 3C. Atty. 19
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Civil Code. 6
However, Article 1736 is applicable to the instant suit. There is actual delivery in
contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to remove
the goods. There was actual delivery to the consignee through its duly authorized agent,
the carrier.
Two undertakings appeared embodied and/or provided for in the Bill of Lading in
question. The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila
as a carrier. The second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to
Davao, with appellant acting as agent of the consignee.
At the hiatus between these two undertakings of appellant which is the
moment when the subject goods are discharged in Manila, its personality
changes from that of carrier to that of agent of the consignee. Thus, the
character of appellant's possession also changes, from possession in its own
name as carrier, into possession in the name of consignee as the latter's agent .
Such being the case, there was, in effect, actual delivery of the goods from
appellant as carrier to the same appellant as agent of the consignee. Upon such
delivery, the appellant, as erstwhile carrier, ceases to be responsible for any
loss or damage that may befall the goods from that point onwards.
But even as agent of the consignee, NORDEUTSCHER cannot be made answerable for the
value of the missing goods. It is true that the transshipment of the goods, which was the
object of the agency, was not fully performed. However, NORDEUTSCHER had
commenced said performance, the completion of which was aborted by circumstances
beyond its control. An agent who carries out the orders and instructions of the principal
without being guilty of negligence, deceit or fraud, cannot be held responsible for the
failure of the principal to accomplish the object of the agency,
The records fail to reveal proof of negligence, deceit or fraud committed by appellant or
by its representative in the Philippines. Neither is there any showing of notorious
incompetence or insolvency on the part of AMCYT, which acted as NORDEUTSCHER
substitute in storing the goods awaiting transshipment.
6 Article 1736. 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, without prejudice to the provisions of article 1738.
Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of
the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of
them.

The actions of appellant carrier and of its representative in the Philippines being
in full faith with the lawful stipulations of Bill of Lading No. 18 and in conformity
with the provisions of the New Civil Code on common carriers, agency and
contracts, they incur no liability for the loss of the goods in question.
11 LU DO V. BINAMIRA, 101 PHIL 120 –GERALDEZ
LU DO & LU YM CORPORATION vs. I. V. BINAMIRA (1957) - Geraldez
Shipper:
Insurer:
Consignee:
Common Carrier:
Goods:
ER: Delta shipped 6 cases of film and photo supplies to consignee Binarmina. Petioner
Lu Do, agent of carrier, hired Cebu Stevedoring to unload. It was received by Visayan
Cebu, arrastre operator. Both stevedoring and arrastre had checkers for bad cargo.
Neither one made any record of bad cargo. When received by respondent Binarmina,
there were signs of pilferage. Is carrier liable? Nope. Although the extraordinary
diligence of a Common Carrier extends up to the time the goods are delivered to the
consignee, such diligence can be subject of stipulation that limits liability during the
time when goods are not under the control of the carrier. Here, there was such a
stipulation in the Bill of Lading. It stipulated that upon reaching customs authorities,
carrier shall not be liable.
Shipper: Delta Photo
Agent of Carrier: Lu Do (Petitioner)
Consignee: Binamira,
Who won: Lu Do.
Facts:
1. On August 10, 1951, the Delta Photo Supply Company of New York shipped on
board the M/S "Fernside" at New York, U.S.A., six cases of films and/or
photographic supplies.
a. It was consigned to the order of respondent I. V. BINARMINA.
b. For this shipment, Bill of Lading No. 29 was issued.
02 Transpo Compiled Digests. 3C. Atty. 20
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c. The ship discharged her cargo on September 23, and 24, 1951, including
the shipment in question, placing it in the possession and custody of the
arrastre operator of said port, the Visayan Cebu Terminal Company, Inc.
2. Petitioner, LU DO, as agent of the carrier, hired the Cebu Stevedoring Company, Inc.
to unload its cargo.
a. It prepared a separate list of good order cargo and bar order cargo.
b. It had a designated checker to do this (Villamor)
3. All the cargo unloaded was received by Visayan Cebu Terminal Company, Inc., the
arrastre operator.
a. This company also had it’s checker (Quijano)
b. It also prepared separate lists of good and bad cargo.
4. This shipment in question was not included in the report of bad order cargo of both
checkers, indicating that it was discharged from the ship in good order and
condition.
5. Three days after the unloading from the ship, respondent Binarmina took delivery
of his six cases of photographic supplies from the arrastre operator.
a. He discovered that the cases showed signs of pilferage and, consequently,
he hired marine surveyors, R. J. del Pan & Company, Inc., to examine them.
b. The surveyors examined the cases and made a physical count of their
contents in the presence of representatives of petitioner Lu Do,
respondent Binarmina and the stevedoring company.
c. The finding of the surveyors showed that some films and photographic
supplies were missing valued at P324.63.
Issue: W/N the carrier is responsible for the loss considering that the same occurred
after the shipment was discharged from the ship and placed in the possession and
custody of the customs authorities?
Ratio:
The Court of Appeals found for the affirmative, making on this point the following
comment:
we believe delivery to the customs authorities is not the delivery contemplated
by Article 1736, supra, in connection with second paragraph of Article 1498,
supra, because, in such a case, the goods are then still in the hands of the
Government and their owner could not exercise dominion whatever over them
until the duties are paid. In the case at bar, the presumption against the carrier,
represented appellant as its agent, has not been successfully rebutted.
It is now contended that the Court of Appeals erred in its finding not only because it
made wrong interpretation of the law on the matter, but also because it ignored the
provisions of the bill of lading covering the shipment wherein it was stipulated
that the responsibility of the carrier is limited only to losses that may occur while
the cargo is still under its custody and control.

We believe this contention is well taken. It is true that, as a rule, a common carrier is
responsible for the loss, destruction or deterioration of the goods it assumes to carry
from one place to another unless the same is due to any to any of the causes mentioned
in Article 1734 on the new Civil Code, and that, if the goods are lost, destroyed or
deteriorated, for causes other that those mentioned, the common carrier is presumed to
have been at fault or to have acted negligently, unless it proves that it has observed
extraordinary diligence in their care (Article 1735, Idem.), and that this extraordinary
liability lasts from the time the goods are placed in the possession of the carrier until
they are delivered to the consignee, or "to the person who has the right to receive them"
(Article 1736, Idem.), but these provisions only apply when the loss, destruction or
deterioration takes place while the goods are in the possession of the carrier, and
not after it has lost control of them.
The reason is obvious. While the goods are in its possession, it is but fair that it exercise
extraordinary diligence in protecting them from damage, and if loss occurs, the law
presumes that it was due to its fault or negligence. This is necessary to protect the
interest of the owner who is at its mercy. The situation changes after the goods are
delivered to the consignee.
We believe however that the parties may agree to limit the liability of the carrier
considering that the goods have still to through the inspection of the customs
authorities before they are actually turned over to the consignee. This is a
situation where we may say that the carrier losses control of the goods because of
a custom regulation and it is unfair that it be made responsible for what may
happen during the interregnum. And this is precisely what was done by the parties
herein. In the bill of lading that was issued covering the shipment in question, both the
carrier and the consignee have stipulated to limit the responsibility of the carrier for the
loss or damage that may because to the goods before they are actually delivered by
inserting therein the following provisions:
1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay,
nondelivery or misdelivery, or loss of or damage to the goods occurring while
the goods are not in the actual custody of the Carrier. . . . (Emphasis ours.)
2. . . . The responsibility of the Carrier in any capacity shall altogether cease and
the goods shall be considered to be delivered and at their own risk and
expense in every respect when taken into the custody of customs or other
authorities. The Carrier shall not be required to give any notification of
disposition of the goods. . . . (Emphasis ours.)
3. Any provisions herein to the contrary notwithstanding, goods may be . . . by
Carrier at ship's tackle . . . and delivery beyond ship's tackle shall been entirely
at the option of the Carrier and solely at the expense of the shipper or
consignee.
02 Transpo Compiled Digests. 3C. Atty. 21
Ampil
It therefore appears clear that the carrier does not assume liability for any loss or
damage to the goods once they have been "taken into the custody of customs or other
authorities", or when they have been delivered at ship's tackle. These stipulations are
clear. They have been adopted precisely to mitigate the responsibility of the carrier
considering the present law on the matter, and we find nothing therein that is contrary
to morals or public policy that may justify their nullification. We are therefore
persuaded to conclude that the carrier is not responsible for the loss in question, it
appearing that the same happened after the shipment had been delivered to the customs
authorities.
12 EASTERN SHIPPING V. CA, 190 SCRA 512 –KING
G.R. No. 80936 October 17, 1990
EASTERN SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS, HONGKONG &
SHANGHAI BANKING CORPORATION, AND CONSOLIDATED MINES, INC., respondents.
Quisumbing, Torres & Evangelista for petitioner.
Belo, Abiera & Associates for respondent HSBC.
 Shipper: Nanyo Corporation
Common Carrier: Eastern Shipping Lines, Inc.
Consignee: Battle between Consolidated Mines, Inc. and HSBC (HSBC was in truth the
financier)
Description of goods: five (5) packages of supplies and materials for "1200 W x 2500
LMM Apron Feeder and 200 W x 5850 LMM Apron Feeder," (machinery materials and
supplies for a mining)
Emergency Recit:
Mining machines and supplies were transported by Eastern Shipping (ESL). In the
warehouse, it was claimed by Consolidated Mining (CMI) without presenting bill of
lading. But it showed proof of ownership such as receipts of the purchase of the goods.
Subsequent to the release of the goods, HSBC claimed ownership of the goods. They
sued ESL for releasing it to CMI without their consent. (It appears that HSBC was the
financier of CMI and HSBC was not paid for the goods). ESL denies liability by stating
that they did not know who the owner is. Bill of lading showed to “Shipper’s Order”.
Hence, they are not required to look beyond the bill of lading to determine who the real
owner is. Also, CMI made it appear that they were the consignees.
Issue: Who is the consignee? CMI
Ratio:

Nowhere did the Bill of Lading refer to respondent HSBC as the consignee or the one to
be notified. CMI was able to show receipts, making it appear that they are persons who
have the right to receive the goods.
HSBC pinpoints liability to the ESL by relying on the provisions of Article 1736 7 (time to
exercise extraordinary diligence) of the Civil Code of the Philippines.
Respondent HSBC wittingly or unwittingly overlooked the fact that the same article uses
the conjunction "or" in reference to whom the goods may be delivered, that is, to the
consignee, or to the person who has a right to receive them.
HSBC is the more negligent party as against ESL. It allowed CMI to be designed in the
bills of lading as the party to be notified, it allowed the latter to be designated as the
consignee in the Consular, the original of which was directly furnished to respondent
Consolidated Mines, Inc. by and as certified to by the shipper Nanyo Corporation.
Facts:
 On February 24, 1980, the Nanyo Corporation of Kobe, Japan shipped a cargo
consisting of five (5) packages of supplies and materials for "1200 W x 2500 LMM
Apron Feeder and 200 W x 5850 LMM Apron Feeder," covered by a bill of lading.
 The cargo was loaded on board the S/S Eastern Adventure destined for Manila. The
vessel is operated by herein petitioner-carrier Eastern Shipping Lines (ESL).
 The bill of lading was consigned to "Shipper's Order", with "Address Arrival
Notice to Consolidated Mines Inc. 6799 Ayala Avenue, Makati, Metro Manila,
Philippines". (it does not say if its CMI or HSBC)
 Consolidated Mines Inc. (CMI) is one of the private respondents herein.
 The cargo arrived in Manila on March 4, 1980.
 A few days later, on the basis of an Undertaking for Delivery of Cargo but without
the surrender of the original bill of lading presented by CMI, ESL released the
shipment in question to CMI.
 In said guaranty, CMI undertook to indemnify ESL "harmless from all demands,
claiming liabilities, actions and expenses".
 About five (5) and a half months later, or specifically on August 19, 1980, ESL
received from Hongkong and Shanghai Bank (HSBC) co-respondent of CMI in the
case at bar, a letter stating thus:
o Basically they were claiming that the goods were theirs already. They
wanted the bills of lading. Also, that after releasing it to CMI, they cannot
now find it.
7 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, without prejudice
to the provisions of Article 1738.
02 Transpo Compiled Digests. 3C. Atty. 22
Ampil
 Considering that there was no reply from ESL, HSBC wrote another demand letter
through counsel dated October 29, 1980 in contemplation of a legal action against
ESL should it not make good HSBC's claim.
 On December 23, 1980 CMI wrote a letter to HSBC admitting that they received the
shipment in question due to a guarantee executed by them, and requested HSBC
that legal action be held off for at least thirty (30) days, promising to settle its
account with HSBC from the funds it was expecting from Benguet Corporation.
 On January 14, 1981 ESL wrote a reply to HSBC as follows:
o ESL was saying sorry for releasing it without HSBC’s consent. However,
they justified the release on the representation and guarantee of CMI that
they will be taking care of their obligation with HSBC.
 CMI having failed to fulfill its promise, HSBC filed a complaint before the CFI Rizal
against ESL praying for actual and compensatory damages in the amount of
$168,521.16 representing the value of the goods covered by the Bill of Lading,
exemplary damage in the amount deemed just by the court and P50,000 attorney's
fees plus expenses of litigation and judicial costs.
 After two motions for extensions, the ESL filed its answer with counterclaim:
o They admit releasing the goods without presentation of the bill of lading.
However, they also allege that such presentation is not necessary. CMI had
proof of its ownership (receipts that they had purchased the goods).
Hence, they were persons who had the right to receive the goods.
o Plus they executed the guarantee
o They were not aware that HSBC is the consignee bank as the bill of lading
only bears to "SHIPPER'S ORDER" and when the shipment arrived Manila
on March 4, 1980 or even before its arrival, HSBC did not notify ESL that
they have a lien over the shipment;
o That ESL only became aware of that fact that HSBC is the consignee bank
sometime on August 19, 1980 thru their letter dated August 11, 1980, to
which such notice was received by the ESL several months after the
shipment in question was released to the consignee Consolidated Mines,
Inc.;
o That answering defendant released the shipment in question to
Consolidated Mines, Inc. pursuant to the provision of the last paragraph of
Article 353 of the Code of Commerce which provide as follows:
 In case the consignee, upon receiving the goods, cannot return
the bill of lading subscribed by the carrier because of its loss or
any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return of
the bill of lading. (Emphasis supplied.)
o They allege negligence on the part of HSBC because it was they who had
control of the situation knowing the true nature of the transaction
regarding the goods. HSBC did notify even once, before the goods were
released, that they were the consignees.
o HSBC is in bad faith because they filed a case against us without
impleading CMI.
 On August 15, 1981, the ESL filed a third party complaint against CMI seeking
reimbursement in case of a judgment against them.

 During trial, CMI filed a Motion to Stay Action in view of the pendency of
involuntary insolvency proceedings commenced against it in the meantime by its
creditors which included HSBC. This motion was denied by the trial court.
 CFI Rizal rendered judgment:
o Ordered ESL to pay HSBC. ($168,521.16)
o Ordered CMI to reimburse ESL.
 CA affirmed in toto.
Issue: Who is the consignee in the bill of lading? CMI
Ratio: (arranged according to importance)
Transportation Issue:
The Bill of Lading which was issued by the carrier but contained articles furnished by
the Shipper, shows on its face that the Shipment is consigned "TO SHIPPER'S ORDER"
with "ADDRESS ARRIVAL NOTICE TO CONSOLIDATED MINES INC. 6799 AYALA AVE.
MAKATI, METRO MANILA PHILIPPINES.
Nowhere did the Bill of Lading refer to respondent HSBC as the consignee or the one to
be notified.
The foregoing information, without more, in effect makes respondent CMI for all
practical intents and purposes the party named and ordered to receive the goods.
ESL, not being privy to any transaction between HSBC and CMI, cannot be expected to
look beyond what is contained on the face of the bill of lading in question and guess
which of the many banks in Metro Manila or some other unrevealed corporation could
possibly be the consignee. To consider otherwise would not be sound business practice
as ESL would be forced to wait for the real owner of the goods to show up, perhaps in
vain.
HSBC admits even in its memorandum filed with the trial court that Consolidated Mines,
Inc. is the consignee, yet HSBC pinpoints liability to the ESL by relying on the provisions
of Article 1736 of the Civil Code of the Philippines which 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, without prejudice to the
provisions of Article 1738.
Respondent HSBC wittingly or unwittingly overlooked the fact that the same article uses
the conjunction "or" in reference to whom the goods may be delivered, that is, to the
consignee, or to the person who has a right to receive them.
02 Transpo Compiled Digests. 3C. Atty. 23
Ampil
That respondent HSBC is the more negligent party as against the petitioner-carrier
becomes more evident when aside from having allowed respondent Consolidated Mines,
Inc. to be designed in the bills of lading as the party to be notified, it allowed the latter to
be designated as the consignee in the Consular, the original of which was directly
furnished to respondent Consolidated Mines, Inc. by and as certified to by the shipper
Nanyo Corporation.
With such vast powers, akin to an agent of respondent HSBC, respondent Consolidated
Mines, Inc. acted within its authority, and even if it acted on its own; consequently,
respondent HSBC may not hold the petitioner came liable because Art. 1883 of the Civil
Code provides that:
If an agent acts in his own name, the principal has no right of action against the persons
with whom the agent has contracted neither have such persons against the principal.
In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things
belonging to the principal.
The provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent.
Other issues:
In Macondray and Company Inc. v. Acting Commissioner of Customs,  it was held that a
bill of lading is ordinarily merely a convenient commercial instrument designed to
protect the importer or consignee.
In Phoenix Assurance Co., Ltd. v. United States Lines , it was held that as a receipt, a bill
of lading recites the place and date of shipment, describes the goods as to quantity,
weight, dimensions, Identification marks, condition, quality and value.
It should likewise be noted that the shipment consisted of machinery materials and
supplies for a mining company named in the bill of lading. In the absence of contrary
instructions or at least knowledge of other facts, the carrier is not ordinarily expected to
deliver mining equipment to an unnamed or unknown party lurking for several months.
Other pieces of evidence found in the records indicate that the parties knew that
respondent CMI was indeed the owner of the goods in question, to wit:
Firstly, even respondent HSBC expressly admitted in its complaint that "pursuant to the
BILL OF LADING (Annex "A" hereof) the shipment was issued 'To Shipper's Order.'" (p.
2, Original Records) It never alleged therein that it was the consignee of the shipment in
question.

Similarly, by respondent HSBC's own documentary evidence, respondent CMI is the
buyer-owner of the shipment, to wit:
"SOLD BY ORDER AND FOR ACCOUNT AND RISK OF MESSRS. CONSOLIDATED MINES
INC. 6799 AYALA AVE. MAKATI, METRO MANILA PHILIPPINES" (Exh. A-3, NANYO
CORPORATION PACKING LIST; Exh. A-4 NANYO CORPORATION INVOICE; Exh. A-8,
NANYO CORPORATION INVOICE. (pp. 68, 71-77, Original Records)
Secondly, the Buyer referred to in the Certificate (Exh. A-5) issued by the shipper
NANYO CORPORATION should perforce refer to CMI to wit:
We hereby certify that Original Consular Invoice had been air-mailed directly to Buyer.
We also certify that advance copies of Commercial Invoice Packing List and Bill of Lading
were airmailed directly to Buyer. (p. 73, Original Records)
Thirdly, respondent HSBC has established by its own documentary evidence, more
particularly, the CONSULAR INVOICE (Exh. A-6 dated February 25, 1980, issued in
Tokyo, Japan by the Foreign Service of the Republic of the Philippines, that
the consignee of the shipment in question is respondent CONSOLIDATED MINES, INC. as
shown therein thus:
Consignee CONSOLIDATED MINES, INC.
Address 6799 AYALA AVENUE MAKATI
METRO MANILA PHILIPPINES
But assuming that CMI may not be considered consignee, the ESL cannot be faulted for
releasing the goods to CMI under the circumstances, due to its lack of knowledge as to
who was the real consignee in view of CMI's strong representations and letter of
undertaking wherein it stated that the bill of lading would be presented later.
This is precisely the situation covered by the last paragraph of Art. 353 of the
Corporation Code to wit:
If in case of loss or for any other reason whatsoever, the consignee cannot return upon
receiving the merchandise the bill of lading subscribed by the carrier, he shall give said
carrier receipt of the goods delivered, this receipt producing the same effects as the
return of the bill of lading.
In State Bonding and Ins. Co. Inc. v. Manila Port Service, it was held that the arrival of
shipment is deemed admitted by an allegation of delivery to the consignee.
02 Transpo Compiled Digests. 3C. Atty. 24
Ampil
Under the special circumstances of this case, equity favors the ESL which proved that it
was in good faith while both respondents HSBC and CMI cannot claim the same.
While the goods in question were released on March 4, 1980 the records show that
HSBC received the original bill of lading, as per testimony of its witness Ederlina
Crisostomo (TSN, p. 29, July 13, 1982), only on April 1980 or long after the goods had
been released. This circumstance goes against the claims of HSBC.
Thus HSBC in its original demand letter stated, "We are unable to locate the cargo and it
would appear that it has been released by you to Consolidated Mines, Inc." (Annex B of
Complaint, p. 8, Original Records). This proves that it had foreknowledge of the prior
release to CMI.
And to make things worse, HSBC, despite CMI's admission that it received the goods,
sued only the ESL while at the same time claiming for the value of the goods in the
involuntary insolvency proceedings of CMI which the Bank itself, together with others,
initiated. Only later developments led to this case.
13 MACAM V. CA, 313 SCRA 77 –LAGOS
BENITO MACAM doing business under the name and style BEN-MAC
ENTERPRISES, petitioner,
vs. 
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES
SHIPPING, INC.,respondents.
Shipper: Macam
Insurer:
Common Carrier: China Ocean Shipping with Agent: Wallem Philippines Shipping
Consignee: National Bank of Pakistan
Buyer/Notify Party: Great Prospect Company of Kowloon
Description of goods (if applicable): watermelons and fresh mangoes
ER:
 Benito Macam, shipped watermelons and mangoes on board the vessel Nen Jiang,
owned by China Ocean Shippipng Co., through its local agent Wallem exported
through letter of Credit issued by Pakistan Bank and covered by a bill of lading
which contained the provision: one of the bills of lading must be surrendered duly
endorsed in exhange for the goods or delivery order.
 Pakistan Bank was designated consignee and GPC was the notify party.
 The copies of the bills of lading and commercial invoices were submitted to
Macam’s depository bank (Solid bank), which paid Macam the advance total value
of the shipment.
 Upon arrival in HK, the shipment was delivered by Wallem directly to GPC, not to
Pakistan Bank and without the required bill of lading having been surrendered.
GPC failed to pay Pakistan, such that the latter also refused to pay Solid bank. Solid

bank then demanded payment from Wallem but to no avail. So Macam was
constrained to return the amount involved to Solid bank.
 Macam sought the value of the shipment from Wallem, based on delivery of the
shipment to GPC withough presentation of the bills of lading and bank guarantee.
 Wallem contended that the shipment was delivered without presentation of the
bills of lading and bank guarantee as per request thru telex by Macam because the
shipment consisted of perishable goods.
 Issue: WON there was misdelivery? None. WON China Ocean and Wallem are liable
for the value of the shipment? NO
 There was no misdelivery. The submission of Macam that the fact that the shipment
was not delivered to the consignee constitutes a misdelivery thereof is a deviation
from his cause of action before the trial court. It is clear from the allegation in his
complaint that it does not deal with misdelivery of the cargoes but of delivery to
GPC without the required bills of lading and bank guarantee.
 According to the Supreme Court, since the subject shipment consisted of perishable
goods and Solidbank pre-paid the full amount of the value thereof, it is not hard to
believe the claim of respondent Wallem that Macam indeed requested the release of
the goods to GPC without presentation of the bills of lading and bank guarantee.
Respondent Court analyzed the telex of Macam in its entirety and correctly arrived
at the conclusion that the consignee referred to was not Pakistan Bank but GPC.
Macam also failed to substantiate his claim that he returned to Solidbank the full
amount of the value of the cargoes. In view of Macam’s utter failure to establish the
liability of Wallems over the cargoes, no reversible error was committed by Wallem
court in ruling against him. The petition was denied.
Facts:
 Benito Macam, doing business under the name and style Ben-Mac Enterprises
o Shipped on board the vessel Nen Jiang, owned and operated by
respondent China Ocean Shipping Co., through local agent respondent
Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of
watermelons valued at US$5,950.00 covered by a Bill of Lading issued by
National Bank of Pakistan, Hongkong (Pakistan Bank).
o also shipped 1,611 boxes of fresh mangoes valued at US$14,273.00 and
covered by a Letter of Credit issued by the same Pakistan Bank
 The Bills of Lading contained the following pertinent provision:  "One of the Bills of
Lading must be surrendered duly endorsed in exchange for the goods or delivery
order."
 The shipment was bound for Hongkong with PAKISTAN BANK as consignee and
Great Prospect Company of Kowloon (GPC) as notify party.
 Letter of credit requirement: copies of the bills of lading and commercial invoices
were submitted to Macam's depository bank, Consolidated Banking Corporation
(now SOLIDBANK), which paid Macam in advance the total value of the shipment of
US$20,223.46.
 Upon arrival in Hongkong, the shipment was delivered by WALLEM directly to GPC,
not to PAKISTAN BANK, and without the required bill of lading having been
surrendered.   court.  This premise draws us to conclude that the delivery of the
02 Transpo Compiled Digests. 3C. Atty. 25
Ampil
 Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in
possession of the original bills of lading, refused to pay Macam through
SOLIDBANK.  Since SOLIDBANK already pre-paid Macam the value of the shipment,
it demanded payment from WALLEM through 5 letters but was refused.  Macam
was thus allegedly constrained to return the amount involved to SOLIDBANK, then
demanded payment from WALLEM in writing but to no avail.
 Macam sought collection of the value of the shipment from China Ocean and Wallem
before RTC Manila, based on delivery of the shipment to GPC without presentation
of the bills of lading and bank guarantee.
 China Ocean and Wallem contended that the shipment was delivered to GPC
without the presentation of bills of lading and bank guarantee as a request by
Macam because of the perishable nature of the goods.
 China Ocean and Wallem explained that it is a standard maritime practice, when
immediate delivery is of the essence, for the 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 the bill of lading as that usually takes time.  
 As proof thereof, China Ocean and Wallem apprised the trial court that for the
duration of their two-year business relationship with Macam concerning similar
shipments to GPC, deliveries were effected without presentation of the bills of
lading. China Ocean Wallem advanced next that the refusal of PAKISTAN BANK to
pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a
Certificate of Quantity and Quality.  
 RTC: China Ocean and Wallem to pay Macam approx. Php 500,000 with interest and
atty’s fees.
o China Ocean and Wallem breached the provision in the bill of lading
requiring that "one of the Bills of Lading must be surrendered duly
endorsed in exchange for the goods or delivery order," when they
released the shipment to GPC without presentation of the bills of lading
and the bank guarantee that should have been issued by PAKISTAN BANK
in lieu of the bills of lading.
 On appeal to the CA, CA set aside the RTC order and dismissed the complaint
Issue:
 WON there was misdelivery? None
 WON Wallem is liable for the shipment? No
Held: Petition is denied. CA decision Affirmed.
Ratio:
 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.  
o However, in the export invoices GPC was clearly named as
buyer/importer.  Macam also referred to GPC as such in his demand
letter to respondent WALLEM and in his complaint before the trial

cargoes to GPC as buyer/importer which, conformably with Art. 1736
had, other than the consignee, the right to receive them was proper.
 From the testimony of Macam, we gather that he has been transacting with
GPC as buyer/importer for around 2 or 3 years already.  When mangoes and
watermelons are in season, his shipment to GPC using the facilities of
respondents is twice or thrice a week.  The goods are released to GPC.  It has
been the practice of Macam to request the shipping lines to immediately
release perishable cargoes such as watermelons and fresh mangoes through
telephone calls by himself or his “people.” In transactions covered by a letter of
credit, bank guarantee is normally required by the shipping lines prior to
releasing the goods.  But for buyers using telegraphic transfers, Macam
dispenses with the bank guarantee because the goods are already fully paid.  In
his several years of business relationship with GPC and China Ocean and
Wallem, there was not a single instance when the bill of lading was first
presented before the release of the cargoes.  He admitted the existence of the
telex of 3 July 1989 containing his request to deliver the shipment to the
consignee without presentation of the bill of lading [14] but not the telex of 5
April 1989 because he could not remember having made such request.
Court of Appeals was correct in referring to GPC as consignee and not Pakistani
Bank
 There is no mistake that the originals of the two (2) subject Bills of Lading are
still in the possession of the Pakistani Bank.  The appealed decision affirms this
fact.  Conformably, 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 to the
buyer/importer is essentially a factor to reckon with.  Besides, GPC is listed as
one among the several consignees in the telex (Exhibit 5-B) and the instruction
in the telex was to arrange delivery of A/M shipment (not any party) to
respective consignees without presentation of OB/L and bank guarantee
 Apart from the foregoing obstacles to the success of Macam’s cause, Macam
failed to substantiate his claim that he returned to SOLIDBANK the full amount
of the value of the cargoes.  It is not far-fetched to entertain the notion, as did
respondent court, that he merely accommodated SOLIDBANK in order to
recover the cost of the shipped cargoes from respondents.  We note that it was
SOLIDBANK which initially demanded payment from respondents through five
(5) letters.  SOLIDBANK must have realized the absence of privity of contract
between itself and respondents.  That is why Macam conveniently took the
cudgels for the bank.
14 METRO PORT SERVICE, INC. V. CA, 131 SCRA 365 –LOPA
02 Transpo Compiled Digests. 3C. Atty. 26
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G.R. No. L-57582 August 24, 1984
METRO PORT SERVICE, INC., (Formerly E. Razon, Inc.), petitioner-appellant, vs.
COURT OF APPEALS and CHARTER INSURANCE CO., INC., respondents-appellees.
MELENCIO-HERRERA, J.:
Shipper: Union Carbide of Antwerp Belgium
Insurer: Charter Insurance Co.
Common Carrier: Universal Shipping Lines, Inc (S/S Dingalan Bay”
Consignee: Union Sales Marketing Corporation
Arrastre Services: E. Razon, Inc.
Description of goods (if applicable): 99,540 kilograms of Low Density Polyethylene
Emergency Digest: This is basically an argument between the common carrier and the
arrastre service operator. 1,050 bags out of 4,000 bags were delivered to the consignee
in bad condition. Insurer paid the Consignee the amount of P35,709 for the damage and
loss. Insurer is now subrogated to the rights of the consignee. Insurer sues both the
common carrier and the arrastre. TC said they were both responsible. CA said only the
arrastre operator was liable.
SC held: 619 bags were discharged by the common carrier to the arrastre in bad order
condition as evidenced by the original and duplicate copies of the Cargo Receipts issued
by the carrier to the arrastre and signed by their respective representatives. Since the
619 bags were discharged in bad order condition, it follows that the remaining 431 bags
were damaged while in the arrastre’s custody for which they should be held liable.
Facts:
Transpo Facts:
 April 1973 - Union Sales Marketing Corporation (UNION) ordered from Union
Carbide of Antwerp Belgium, 99,540 kilograms of Low Density Polyethylene, valued
at US $.245 per kilogram (total purchase price of US $24,417.30)
 The shipment was packed in 4,000 bags of 25 net kilograms, more or less, for each
bag, and was loaded at Antwerp Belgium, in good order condition on board the S/S
Dingalan Bay", owned and operated by Universal Shipping Lines, Inc. (CARRIER)
and consigned to UNION in Manila.
 The shipment was covered by a Marine Risk Note issued by Charter Insurance Co.
(INSURER) for P212,738.17 against all risks.
 The CARRIER arrived in Manila on June 22, 1973 and arrastre services were
handled by E. Razon, Inc. (ARRASTRE), now called Metro Port Service, Inc.
 1,050 bags were received by the consignee UNION in bad order condition
 As a consequence of the damage and loss, the INSURER paid UNION the sum of
P35,709.11 in full settlement of the claim. INSURER became the subrogee of all of
UNION's rights to recover from the parties concerned.

Procedural Facts:
 July 1, 1974 - INSURER sued for damages with the then Court of First Instance of
Manila against the CARRIER and the ARRASTRE in the amount of P35,709.1 1, in
addition to exemplary damages and attorney's fees.
 Both defendants disclaimed liability, each one attributing the loss to the other.
 Decision of the TC:
o Universal Shipping Lines, Inc - P12,285.94 plus 12% interest per annum
from July 1, 1974 until full payment thereof.
o E. Razon, Inc - P9,763.94 plus 12% interest per annum from July 1, 1974
until full payment thereof.
o jointly and severally liable to pay plaintiff P2,000.00 as attorney's fees.
 Court of Appeals - absolved the CARRIER of any and all liability and held the
ARRASTRE solely liable. Reconsideration filed by the ARRASTRE was denied by the
Appellate Court.  15 FIREMEN'S FUND INSURANCE CO. V. METRO PORT SERVICE, INC., 182
Issues:
1. W/N CA erred in not giving credence and belief to the Arrastre’s Bad Order
Certificates. YES
2. W/N CA erred in holding the Arrastre liable. YES
Held: WHEREFORE, the appealed judgment of respondent Court of Appeals is hereby
REVERSED and SET ASIDE, and that of the Court of First Instance of Manila, Branch XI, is
hereby reinstated. No costs.
Ratio:
 Ordinarily, in a Petition for Review on Certiorari, only questions of law may be
raised. The rule is not absolute, however, and allows of exceptions, which we find
present in the case at bar in that respondent Court's findings of facts are contrary to
those of the Trial Court and are contradicted by the evidence on record.
 CA found: When the shipment was discharged from the carrying vessel, there were
443 bags of shipment which were broken at the ends. in other words, only the end-
portions of the 443 bags were torn or broken, without any showing that any
portion of the contents of these 443 bags was spilled or spoiled. ... and no loss or
spoilage of the shipment having been proved or shown to have occurred when the
shipment was under the care and custody of the vessel, then the vessel can and
should not be held liable to answer for the loss of any part of it that was found upon
the discharge of the shipment from the Arrastre Operator's care and custody into
the consignee's Broker.
o completely disregards the evidence of the CARRIER and the ARRASTRE
that 619 bags were discharged by the CARRIER to the ARRASTRE in bad
order condition, as evidenced by the original and duplicate copies of the
Cargo Receipts issued by the CARRIER to the ARRASTRE and signed by
their respective representatives
o The condition of the 619 bags before the turnover to the ARRASTRE from
the CARRIER was loss or spoilage of up to 50%, as reflected in the Survey
02 Transpo Compiled Digests. 3C. Atty. 27
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of Bad Order Cargoes, signed by the CARRIER and ARRASTRE
representatives
 Since 619 bags were discharged from the CARRIER already in bad order condition,
it follows that the remaining 431 bags were damaged while in the ARRASTRE's
custody for which it should be held liable.
 Since the Trial Court computed the liability of the ARRASTRE is at 351 bags,
notwithstanding the ARRASTRE's admission that "80 bags were not included in the
bad order cargo certificate, and the INSURER did not appeal said award by the Trial
Court in its desire to have the case terminated soonest,  the INSURER may not, in
this appeal, have the judgment modified. 
 The liability of the ARRASTRE for P9,763.94 fixed by the Trial Court is thus in order.
SCRA 455 –LUCENARIO
Firemen’s Fund Insurance Co. v. Metro Port Services, Inc.
Shipper:
Insurer:
Consignee:
Common Carrier:
Goods:
Emergency Recitation:
 VULCAN Mining imported some drilling equipment from USA and contracted with
common carrier MAERSK and COMPANIA to ship them to Manila. The goods arrived
in good condition and were received by arrastre operator METRO PORT. However,
in the next days when they were transferring the machines to a different location at
the pier, there was an accident and they were destroyed.
o How accident happened: LIBRANDO, a truck operator of METRO PORT,
was borrowed by MAERSK to drive its truck in order to transfer the
properties. However, LIBRANDO negligently forgot to check the chassis
containing the machines it was transferring if it had twist locks fastened
before he lifted it. Hence, when he lifted it, the chassis broke and the
machines fell and got broken. It turns out that the chassis had no twist
locks fastened (although take note it was MAERSK’s duty to have these
twist locks on chasses it transports)
 FIREMEN’S INSURANCE paid VULCAN Php187,500 for the damage and as subrogee
now sues MAERSK, COMPANIA, and METRO PORT for reimbursement.
 RTC held all solidarily liable. All appealed to CA.
 Subsequently, MAERSK and COMPANIA extrajudicially settled with FIREMEN’s and
hence did not pursue the appeal anymore. Only METRO PORT continued with the
appeal.
 CA reversed RTC and absolved METRO PORT. It ruled that only MAERSK was the
only responsible party since it was its truck and the proximate cause was the

absence of the twist locks it had the duty to supply. In this case, LIBRANDO is
considered an employee of MAERSK.
 Hence, FIREMEN’S appealed.
 ISSUE: W/N CA erred and METRO PORT is liable  YES. Liable.
 METRO PORT cannot be absolved because LIBRANDO was clearly its employee
(appears in its payroll). And the act of borrowing a truck operator by MAERSK was
valid because their agreement permitted such.
 The legal relationship between the consignee and the arrastre operator is akin to
that of a depositor and warehouseman. The relationship between the consignee and
the common carrier is similar to that of the consignee and the arrastre operator.
 Since it is the duty of the ARRASTRE to take good care of the goods that are in its
custody and to deliver them in good condition to the consignee, such responsibility
also devolves upon the CARRIER.
 Both the ARRASTRE and the CARRIER are therefore charged with and obligated to
deliver the goods in good condition to the consignee.
 In this case, there was a finding that LIBRANDO was negligent in performing his
duties as he forgot to follow standard procedure in checking the chassis first (to see
if there are twist locks) before lifting and transferring them. He admitted that this
was usually done but in this instance he merely forgot. Hence, METRO PORT must
be solidarily liable for the negligent acts of its employees.
FACTS:
 Vulcan Industrial and Mining Co. imported machines from the Philadelphia
USA to be brought to Manila. VULCAN contracted with common carrier was
Maersk Lines (MAERSK) and Compania General de Tabacos (COMPANIA)
which shipped them on SS Maersk Tempo.
o Machines: 1 truck mounted core drill, 1 trailer mounted core drill, 1
container of 321 pieces steel tubings, 1 container 170 steel tubings, 1
container of 13 cases, 3 crates, 2 pallets and 26 mining machinery
parts.
 June 3, 1979 – goods arrived in Manila in complete and good condition and was
received by Arrastre operator E. Razon Inc. (now METRO PORT Service Inc.,
probably changed name)
 10:20am of June 8 – Danilo LIBRANDO, truck operator employed by METRO
PORT, was borrowed by MAERSK since it did not have an available truck
operator, and was ordered to transfer the shipment to the Equipment Yard at
Pier 3
 However, while LIBRANDO was maneuvering the tractor (owned and provided
by Maersk Line) to the left, the cargo fell from the chassis and hit one of the
container vans of American President Lines. It was discovered that there were
no twist lock at the rear end of the chassis where the cargo was loaded.
 There was heavy damage to the cargo as the parts of the machineries were
broken, denied, cracked and no longer useful for their purposes. – damage
amounted to Php187,500.
02 Transpo Compiled Digests. 3C. Atty. 28
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 Firemen’s Insurance paid VULCAN and as subrogee now sues MAERSK,
COMPANIA, and METRO PORT for reimbursement in RTC.
 RTC ruled held solidarily liable.
 All defendants appeal to CA
o However, MAERSK and COMPANIA negotiated a settlement for their
liability and no longer pursued appeal.
o Only METRO PORT continued appeal.
 CA Ruling: RTC reversed. METROP PORT not liable based on the ground that
MAERSK was the only defendant liable.
 CA ratio:
o Although Librando was an employee of the METRO PORT, since he
was included in its payroll, he was technically and strictly an
employee of MAERSK in this particular instance because:
1. He drove the tractor admittedly owned by MAERSK.
2. He received instructions not from METRO PORT but from MAERSK
relative to this job.
3. He was performing a duty that properly pertained to MAERSK which, for
lack of a tractor operator, had to get or hire from the METRO PORT as per
their management contract.
o Nevertheless, Librando was not remiss in his duty as tractor-driver
considering that the proximate and direct cause of the damage was
the absence of twist locks in the rear end of the chassis which
MAERSK failed to provide.
o The respondent court thereby placed the entire burden of liability on
the owner of the Chassis which in this case was the foreign shipping
company, MAERSK.
 Hence present petition.
ISSUE: W/N METRO PORT is solidarily liable with MAERSK and COMPANIA  YES
HELD: CA decision reversed. METRO PORT liable.
RATIO:
The legal relationship between the consignee and the arrastre operator is akin to that of
a depositor and warehouseman. The relationship between the consignee and the
common carrier is similar to that of the consignee and the arrastre operator.
Since it is the duty of the ARRASTRE to take good care of the goods that are in its
custody and to deliver them in good condition to the consignee, such responsibility also
devolves upon the CARRIER.
Both the ARRASTRE and the CARRIER are therefore charged with and obligated to
deliver the goods in good condition to the consignee.

In general, the nature of the work of an arrastre operator covers the handling of cargoes
at piers and wharves. This is embodied in the Management Contract drawn between the
Bureau of Customs and E. Razon Inc., as the Arrastre Operator. The latter agreed to bind
itself, to wit:
CLAIMS AND LIABILITY FOR LOSSES AND DAMAGES
1. Responsibility and Liability for Losses and Damages;
Claims. — The CONTRACTOR shall, at its own expense handle all merchandise in the
piers and other designated places and at its own expense perform all work undertaken
by it hereunder diligently and in skillful workmanlike and efficient manner; That the
CONTRACTOR shall be solely responsible as an independent CONTRACTOR, and hereby
agrees to accept liability and to promptly pay to the s hip company, consignee, consignor
or other interested party or parties for the loss, damage, or non-delivery of cargoes to
the extent of the actual invoice value of each package…
xxx
The CONTRACTOR shall be solely responsible for any and all injury or damage that may
arise on account of the negligence or carelessness of the CONTRACTOR, its agent or
employees in the performance of the undertaking by it to be performed under the terms
of the contract, and the CONTRACTOR hereby agree to and hold the BUREAU at all times
harmless therefrom and whole or any part thereof.  negligence of its employee. With respect to the limited liability of the ARRASTRE, the
To carry out its duties, the ARRASTRE is required to provide cargo handling equipment
which includes among others trailers, chassis for containers.  16 H.E. HEACOCK CO. V. MACONDRAY & CO., 42 PHIL 205 –MAGTAGNOB
In this particular instance, the records reveal that MAERSK provided the chassis and the
tractor which carried the subject shipment. It merely requested MERO PORT to dispatch
a tractor operator to drive the tractor inasmuch as the foreign shipping line did not have
any truck operator in its employ. Such arrangement is allowed between the ARRASTRE
and the CARRIER pursuant to the Management Contract. It was clearly one of the
services offered by the ARRASTRE.
We agree with the petitioner that it is the ARRASTRE which had the sole discretion and
prerogative to hire and assign Librando to operate the tractor. It was also the
ARRASTRE's sole decision to detail and deploy Librando for the particular task from
among its pool of tractor operators or drivers. It is, therefore, inacurrate to state that
Librando should be considered an employee of Maersk Line on that specific occasion.
02 Transpo Compiled Digests. 3C. Atty. 29
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Handling cargo is mainly the principal’s work so its driver/operators, "cargadors", or
employees should observe the stand" and indispensable measures necessary to prevent
losses and damage to shipments under its custody. Since the ARRASTRE offered its
drivers for the operation of tractors in the handling of cargo and equipment, then the
ARRASTRE should see to it that the drivers under its employ must exercise due diligence
in the performance of their work. From the testimonies of witnesses presented, we
gather that driver/operator Librando was remiss in his duty. Benildez Cepeda, an
arrastre-investigator of Metro Port admitted that Librando as tractor-operator should
first have inspected the chassis and made sure that the cargo was securely loaded on the
chassis.
Again Danilo Librando also admitted that it was usually his practice to inspect not only
the tractor but the chassis as well but failed to do so in this particular instance.
It is true that Maersk Line is also at fault for not providing twist locks on the chassis.
However, we find the testimony of Manuel Heraldez who is the Motor Pool General
Superintendent of Metro Port rather significant. – testimony provided that although it is
hard to see the twist lock if the cargo is full, it may still be seen if you take a closer look.
Whether or not the twist lock can be seen by the naked eye when the cargo has been
loaded on the chassis, an efficient and diligent tractor operator must nevertheless check
if the cargo is securely loaded on the chassis.
We, therefore, find Metro Port Service Inc., solidarily liable in the instant case for the
records disclose that the value of the importation was relayed to the arrastre operator
and in fact processed by its chief claims examiner based on the documents submitted.
H.E. Heacock v Macondray
Keyword:
Topic: agreement limiting liability
Date:
Shipper- Heacock
Consignee-
Carrier- Macondray, as agent
EMERGENCY DIGEST:
Heacock delivered through the steamship Bolton Castle 4 cases of merchandise, 1 case of
which contained 12 clocks to be transported to Manila. Upon arriving in Manila, the
clocks were consigned to Macondray, which is an agent of the vessel. Neither the master
of the vessel nor Macondray delivered the clocks to Heacock.
In the bill of lading, there were stipulations limiting the liability of the carrier, to wit:
1. It is mutually agreed that the value of the goods receipted for above does not

exceed $500 per freight ton, or, in proportion for any part of a ton, unless the
value be expressly stated herein and ad valorem freight paid thereon.
9. Also, that in the event of claims for short delivery of, or damage to, cargo being
made, the carrier shall not be liable for more than the net invoice price plus
freight and insurance less all charges saved, and any loss or damage for which
the carrier may be liable shall be adjusted pro rata on the said basis.
Lower Court- ruled in favor of Heacock, ordering Macondray to pay based on Clause 9.
On appeal, Heacock questioned the validity of the stipulation limiting the liability of the
carrier, while Macondray questioned the application of Clause 9 (because clause 9
makes it liable for a bigger amount).
The SC held that there are three types of stipulations usually included in a bill of lading:
1. exempting the carrier from any and all liability for loss or damage occasioned
by its own negligence.
2. providing for an unqualified limitation of such liability to an agreed valuation.
3. limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight.
The third type, where both clauses fall under, is the only valid and enforceable type of
stipulation. Article 1255 of the Civil Code provides that "the contracting parties may
establish any agreements, terms and conditions they may deem advisable, provided they
are not contrary to law, morals or public order."
Clause 9 applies because it is an express provision (Clause 1 is implied), and the contract
was drawn by Macondray, hence it shall also be construed against him in case of
confusion.
COMPLETE DIGEST  enforceable.
 Heacock caused to be delivered on board of steamship Bolton Castle, then in the
harbor of New York, four cases of merchandise one of which contained twelve (12)
8-day Edmond clocks properly boxed and marked for transportation to Manila, and
paid freight on said clocks from New York to Manila in advance.
 The said steampship arrived in the port of Manila, consigned the goods to
Macondray as agent and representative of said vessel in said port. Neither the
master of said vessel nor Macondray, as its agent, delivered to Heacock the twelve
8-day Edmond clocks, although demand was made upon them for their delivery.
 The invoice value of the said twelve 8-day Edmond clocks in the city of New York
was P22 and the market value of the same in the City of Manila at the time when
they should have been delivered to the Heacock was P420.
 The bill of lading issued and delivered to the Heacock by the master of the said
steamship Bolton Castle contained, among others, the following clauses:
1. It is mutually agreed that the value of the goods receipted for above does not
exceed $500 per freight ton, or, in proportion for any part of a ton, unless the value
be expressly stated herein and ad valorem freight paid thereon.
9. Also, that in the event of claims for short delivery of, or damage to, cargo being
made, the carrier shall not be liable for more than the net invoice price plus freight
and insurance less all charges saved, and any loss or damage for which the carrier
may be liable shall be adjusted pro rata on the said basis.
 The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic
feet, and the freight ton value thereof was $1,480, U. S. currency.
 No greater value than $500, U. S. currency, per freight ton was declared by the
02 Transpo Compiled Digests. 3C. Atty. 30
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Heacock on the aforesaid clocks, and no ad valorem freight was paid thereon.
 Macondray tendered to Heacock P76.36, the proportionate freight ton value of the
aforesaid twelve 8-day Edmond clocks, in payment of Heacock's claim, which
tender Heacock rejected.
 Lower court- In favor of Heacock. Based on clause 9 of the bill of lading, ordered
Macondray to pay P226.02 as the invoice value of the clocks in question plus the
freight and insurance thereon, with legal interest.
ISSUE: Whether the clause limiting liability to the agreed value by the carrier is valid? –
YES!
HELD:
It follows from all of the foregoing that the judgment appealed from should be affirmed,
without any finding as to costs. So ordered.
RATIO:
 Three kinds of stipulations have often been made in a bill of lading.
o exempting the carrier from any and all liability for loss or damage occasioned
by its own negligence.
o providing for an unqualified limitation of such liability to an agreed valuation.
o limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight.
 According to an almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the third is valid and
 Clauses 1-9 fall under the third type, to wit: That a clause in a bill of lading limiting
the liability of the carrier to a certain amount unless the shipper declares a higher
value and pays a higher rate of freight, is valid and enforceable.
 If a common carrier gives to a shipper the choice of two rates, the lower of the
conditioned upon his agreeing to a stipulated valuation of his property in case of
loss, even by the carrier's negligence, if the shipper makes such a choice,
understandingly and freely, and names his valuation, he cannot thereafter recover
more than the value which he thus places upon his property. As a matter of legal
distinction, estoppel is made the basis of this ruling, — that, having accepted the
benefit of the lower rate, in common honesty, the shipper may not repudiate the
conditions on which it was obtained, — but the rule and the effect of it are clearly
established.
 It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of
lading here in question are not contrary to public order.
 Article 1255 of the Civil Code provides that "the contracting parties may establish
any agreements, terms and conditions they may deem advisable, provided they are
not contrary to law, morals or public order."
As regards which clause will be applied- Clause 9
 Clause 1 contains only an implied undertaking to settle in case of loss on the basis of
not exceeding $500 per freight ton, clause 9 contains an express undertaking to
settle on the basis of the net invoice price plus freight and insurance less all charges
saved. “Any loss or damage for which the carrier may be liable shall be adjusted pro

rata on the said basis," clause 9 expressly provides.
 It seems to us that there is an irreconcilable conflict between the two clauses with
regard to the measure of Macondray's liability. It is difficult to reconcile them
without doing violence to the language used and reading exceptions and conditions
into the undertaking contained in clause 9 that are not there. This being the case,
the bill of lading in question should be interpreted against the Macondray carrier,
which drew said contract.
 "In construing a bill of lading given by the carrier for the safe transportation and
delivery of goods shipped by a consignor, the contract will be construed most
strongly against the carrier, and favorably to the consignor, in case of doubt in any
matter of construction."
17 ST. PAUL FIRE & MARINE INSURANCE V. MACONDRAY, 70 SCRA 122 –
MUTI
ST. PAUL FIRE & MARINE INSURANCE CO., vs.MACONDRAY & CO., INC., BARBER
STEAMSHIP LINES, INC., WILHELM WILHELMSEN MANILA PORT SERVICE and/or
MANILA RAILROAD COMPANY, G.R. No. L-27796 March 25, 1976
Shipper: Winthrop Products, Inc., of New York (“Winthrop NY”)
Insurer: St. Paul Fire and Marine Insurance (“St. Paul”)
Common Carrier: Wilhelm Wilhelmsen (“Wilhelm”)
Consignee: Winthrop-Stearns Inc., Manila (“Winthrop Manila”)
Goods: 218 cartons and drums of drugs and medicine
ER: There’s a shipment from NY to Manila (refer to fast details above to avoid
reiteration). The shipment was discharged complete and in good order with the
exception of one drum and several cartons which were in bad order condition.
Consignee filed a claim against carrier, its agents, and arrastre contractor (defendants in
this case), which were denied. Hence, insurer reimbursed the consignee and was
subrogated to its claims. The lower court ordered payment to insurer but insurer
demands a higher amount. Basically, insurer claims amount which it actually paid to the
consignee (NOT the CIF value) and that the exchange rate should be on the date of the
judgment (NOT the date of discharge of shipment).
HELD: A stipulation fixing or limiting the sum that may be recovered from the carrier on
the loss or deterioration of the goods is valid, provided it is (a) reasonable and just
under the circumstances, and (b) has been fairly and freely agreed upon. In the case at
bar, the liabilities of the defendants with respect to the lost or damaged shipments are
expressly limited to the C.I.F. value of the goods as per contract of sea carriage embodied
in the bill of lading. The bill of lading is valid and binding upon the parties. The insurer is
subrogated merely to the rights of the insured and therefore can necessarily recover
only that to what was recoverable by the insured (carrier). Further, the obligation of the
carrier to pay for the damage commenced on the date it failed to deliver the shipment in
good condition to the consignee. Hence, the exchange rate on that date should be
applied.
02 Transpo Compiled Digests. 3C. Atty. 31
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Facts:
 Winthrop NY shipped aboard the SS "Tai Ping", owned and operated by Wilhelm
218 cartons and drums of drugs and medicine, with the freight prepaid, which were
consigned to Winthrop Manila. Barber Steamship Lines, Inc., agent of Wilhelm
issued Bill of Lading No. 34. The shipment was insured by the shipper against loss
and/or damage with the St. Paul.
 The said shipment was discharged complete and in good order with the exception
of one (1) drum and several cartons which were in bad order condition. Because
consignee failed to receive the whole shipment and as several cartons of medicine
were received in bad order condition, the consignee filed the corresponding claim
in the amount representing the C.I.F. value of the damaged drum and cartons of
medicine with the carrier and the Manila Port Service.
 The insurance company, on the basis of such claim, paid to the consignee the
insured value of the lost and damaged goods, including other expenses in
connection therewith, in U.S. currency. The insurance company instituted with the
CFI of Manila the present action for the recovery of said amount.
 The defendants Manila Port Service and Manila Railroad Company resisted the
action, contending, among others, that
o the whole cargo was delivered to the consignee in the same condition in
which it was received from the carrying vessel
o their rights, duties and obligations as arrastre contractor at the Port of
Manila are governed by and subject to the terms, conditions and
limitations contained in the Management Contract between the Bureau of
Customs and Manila Port Service
o they are not the agents of the carrying vessel in the receipt and delivery of
cargoes in the Port of Manila
 The defendants Macondray & Co., Inc., Barber Steamship Lines, Inc. and Wilhelm
Wilhelmsen also contested the claim alleging, among others, that
o the carrier's liability for the shipment ceased upon discharge thereof from
the ship's tackle
o if any damage was sustained by the shipment while it was under the
control of the vessel, such damage was caused by insufficiency of packing,
force majeure and/or perils of the sea
o they, in good faith and for the purpose only of avoiding litigation without
admitting liability to the consignee, offered to settle the latter's claim in
full by paying the C.I.F. value but their offer was declined by the consignee
and/or the plaintiff.
 The lower court rendered judgment in favor of St. Paul. HOWEVER, St. Paul filed an
MR praying for a higher amount.
 St. Paul’s arguments in MR:

o As subrogee of the consignee, it should be entitled to recover from the
amount which it actually paid to the consignee and that the exchange rate
on the date of the judgment should have been applied by the lower court.
 Macondray, et. al. answers:
o Their liability is limited to the C.I.F. value of the goods, pursuant to
contract of sea carriage embodied in the bill of lading
o They are not insurers of the goods and as such they should not be made to
pay the insured value therefor
o Their obligation was established as of the date of discharge, hence the rate
of exchange should be based on the rate existing on that date and not the
value of the currency at the time the lower court rendered its decision
Issues:
1. WoN, in case of loss or damage, the liability of the carrier to the consignee is limited
to the C.I.F. value of the goods which were lost or damaged. YES, if stated in the bill
of lading as in this case.
2. WoN the insurer who has paid the claim in dollars to the consignee should be
reimbursed in its peso equivalent on the date of discharge of the cargo or on the
date of the decision. Date of discharge.
Ratio:
 The appeal is without merit.
 The purpose of the bill of lading is to provide for the rights and liabilities of the
parties in reference to the contract to carry. The stipulation in the bill of lading
limiting the common carrier's liability to the value of the goods appearing in the
bill, unless the shipper or owner declares a greater value, is valid and binding. This
limitation of the carrier's liability is sanctioned by the freedom of the contracting
parties to establish such stipulations, clauses, terms, or conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs and
public policy.
 A stipulation fixing or limiting the sum that may be recovered from the carrier on
the loss or deterioration of the goods is valid, provided it is (a) reasonable and just
under the circumstances, and (b) has been fairly and freely agreed upon. In the case
at bar, the liabilities of the defendants with respect to the lost or damaged
shipments are expressly limited to the C.I.F. value of the goods as per contract of
sea carriage embodied in the bill of lading 8.
8 Whenever the value of the goods is less than $500 per package or other freight unit, their value in the
calculation and adjustment of claims for which the Carrier may be liable shall for the purpose of avoiding
uncertainties and difficulties in fixing value be deemed to be the invoice value, plus frieght and insurance if paid,
irrespective of whether any other value is greater or less.
The limitation of liability and other provisions herein shall inure not only to the benefit of the carrier, its agents,
servants and employees, but also to the benefit of any independent contractor performing services including
stevedoring in connection with the goods covered hereunder. (Paragraph 17, emphasis supplied.)
02 Transpo Compiled Digests. 3C. Atty. 32
Ampil
 It is not pretended that those conditions are unreasonable or were not freely and
fairly agreed upon. The shipper and consignee are, therefore, bound by such
stipulations since it is expressly stated in the bill of lading. It is obviously for this
reason that the consignee filed its claim against the defendants on the basis of the
C.I.F. value of the lost or damaged goods.
 The insurer after paying the claim of the insured for damages under the insurance
is subrogated merely to the rights of the insured and therefore can necessarily
recover only that to what was recoverable by the insured.
 Upon payment for a total loss of goods insured, the insurer is only subrogated to
such rights of action as the assured has against 3rd persons who caused or are
responsible for the loss. The right of action against another person, the equitable
interest in which passes to the insurer, being only that which the assured has, it
follows that if the assured has no such right of action, none passes to the insurer,
and if the assured's right of action is limited or restricted by lawful contract between
him and the person sought to be made responsible for the loss, a suit by the insurer is
subject to like limitations or restrictions.
 Equally untenable is the contention of the insurer that because of extraordinary
inflation, it should be reimbursed for its dollar payments at the rate of — exchange
on the date of the judgment and not on the date of the loss or damage. The
obligation of the carrier to pay for the damage commenced on the date it failed to
deliver the shipment in good condition to the consignee.
18 SEA LAND SERVICE, INC. V. IAC, 153 SCRA 552 –NARVASA
SEA-LAND SERVICE, INC., vs. IAC and CUE, doing business under the name and style of
"SEN HIAP HING," respondents. - Narvasa
Shipper: Seaborne Trading
Common Carrier: Sea-Land
Consignee: Sen Hiap Hing or Paulino Cue
Description of goods: 8 CTNS on 2 SKIDS-FILES
ER: SeaLand received goods from Seaborne to be shipped to Cue in Cebu. Shipper did
not declare shipment value. Shipment arrived in Manila, but was stolen in the harbor.
Cue, consignee, demanded that SeaLand pay for the lost shipment (180k). SeaLand
offered to settle for $4k, 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.

Issue: Whether or not the consignee of seaborne freight is bound by stipulations
in the covering bill of lading limiting to a fixed amount the liability of the carrier
for loss or damage to the cargo where its value is not declared in the bill? Yes he is
bound.
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.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did
not exist, the validity and binding effect of the liability limitation clause in the bill
of lading here are nevertheless fully sustainable on the basis alone of the cited
Civil Code provisions. There can, therefore, be no doubt about the validity and
enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of
lading limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and inserts it into said contract or bill.
NARVASA, J.:
 Sea-Land Service, Inc. (Sea-Land for brevity), a foreign shipping and forwarding
company, received from Seaborne Trading Company in Oakland, California a
shipment consigned to Sen Hiap Hing—the business name used by Paulino Cue—in
the wholesale and retail trade which he operated out of an establishment located in
Cebu City.
 The shipper not having declared the value of the shipment, no value was indicated
in the bill of lading.
o Based on volume measurements Sea-land charged the shipper the total
amount of US$209.28 for freight age and other charges.
o The shipment was loaded on board the MS Patriot, a vessel owned and
operated by Sea-Land, for discharge at the Port Of Cebu.
 The shipment arrived in Manila and there discharged into the custody of the
arrastre contractor and the customs and port authorities.
 After the shipment had been transferred to Pier 3 in South Harbor, Manila, awaiting
trans-shipment to Cebu, it was stolen by pilferers and has never been 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.
o 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.
o Cue rejected the offer.
Trial Court
02 Transpo Compiled Digests. 3C. Atty. 33
Ampil
 Ruled in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing
the Philippine currency value of the lost cargo, P55,814.00 for unrealized profit
with one (1%) percent monthly interest from the filing of the complaint.
CA affirmed TC decision.
Issue: Whether or not the consignee of seaborne freight is bound by stipulations in
the covering bill of lading limiting to a fixed amount the liability of the carrier for
loss or damage to the cargo where its value is not declared in the bill? Yes he is
bound.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea
Act did not exist, the validity and binding effect of the liability limitation
clause in the bill of lading here are nevertheless fully sustainable on the
basis alone of the cited Civil Code provisions.
 To begin with, there is no question of the right, in principle, 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 — as in
practice it oftentimes is — drawn up only by the consignor and the carrier without
the intervention of the consignee.
SC quotes the Mendoza vs. PAL case
 But appellant now contends that he is not suing on a breach of contract but on a tort
as provided for in Art. 1902 of the Civil Code.
 We are a little perplexed as to this new theory of the appellant.
 First, he insists that the articles of the Code of Commerce should be applied:
o That he invokes the provisions of said Code governing the obligations of a
common carrier to make prompt delivery of goods given to it under a
contract of transportation.
o He says that he was never a party to the contract of transportation and
was a complete stranger to it, and that he is now suing on a tort or a
violation of his rights as a stranger (culpa aquiliana).
o If he does not invoke the contract of carriage entered into with the
defendant company, then he would hardly have any leg to stand on.
o His right to prompt delivery of the can of film at the Phil. Air Port stems
and is derived from the contract of carriage under which contract, the PAL
undertook to carry the can of film safely and to deliver it to him promptly.
Take away or ignore that contract and the obligation to carry and to
deliver and right to prompt delivery disappear.
 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 question were shipped from the United States to the
Philippines, the liability of petitioner Sea-Land to the respondent consignee is
governed primarily by the Civil Code, and as ordained by the said Code,
suppletorily, in all matters not determined thereby, by the Code of Commerce and
special laws.

 One of these suppletory special laws is the Carriage of Goods by Sea Act, U.S.
Public Act No. 521 which was made applicable to all contracts for the carriage of
goods by sea to and from Philippine ports in foreign trade by Commonwealth Act
No. 65. Sec. 4(5) of said Act in part reads:
o (5)Neither the carrier nor the ship shall in any event be or become liable
for any loss or damage to or in connection with the transportation of
goods in an amount exceeding $500 per package lawful money of the
United States, or in case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency, unless the
nature and value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This declaration, if embodied in
the bill of lading, shall be prima facie evidence, but shall not be conclusive
on the carrier.
 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.
 Clause 22, first paragraph, of the long form bill of lading customarily issued by Sea-
Land to its shipping clients is a virtual reproduction of the first paragraph of the
foregoing provision. It says:
o 22. VALUATION. In the event of any loss, damage or delay to or in
connection with goods exceeding in actual value $500 per package, lawful
money of the United States, or in case of goods not shipped in packages,
per customary freight unit, the value of the goods shall be deemed to be
$500 per package or per customary freight unit, as the case may be, and
the carrier's liability, if any, shall be determined on the basis of a value of
$500 per package or customary freight unit, unless the nature and a
higher value shall be declared by the shipper in writing before shipment
and inserted in this Bill of Lading.
 And in its second paragraph, the bill states:
o If a value higher than $500 shall have been declared in writing by the
shipper upon delivery to the carrier and inserted in this bill of lading and
extra freight paid, if required and in such case if the actual value of the
goods per package or per customary freight unit shall exceed such
declared value, the value shall nevertheless be deemed to be declared
value and the carrier's liability, if any, shall not exceed the declared value
and any partial loss or damage shall be adjusted pro rata on the basis of
such declared value.
 The Court fails to fathom the reason or justification for the Appellate Court's
pronouncement in its appealed Decision that the Carriage of Goods by Sea Act " ...
has no application whatsoever in this case.
02 Transpo Compiled Digests. 3C. Atty. 34
Ampil
 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:
o ART. 1749 A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of lading , unless
the shipper or owner declares a greater value, is binding.
o 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
fairly and freely agreed upon.
 Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already
quoted is repugnant to or inconsistent with any of the the Civil Code.
 Said section merely gives greater specificity to the rather general terms of Article
1749 and of Article 1750, to give effect to just agreements limiting carriers' liability
for loss or damage which are freely and fairly entered into.
 It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act
did not exist, the validity and binding effect of the liability limitation clause in
the bill of lading here are nevertheless fully sustainable on the basis alone of
the cited Civil Code provisions.
 That said stipulation is just and reasonable is arguable from the fact that it echoes
Art. 1750 itself in providing a limit to liability only if a greater value is not declared
for the shipment in the bill of lading.
o It gives shipper or owner the option of avoiding acrrual of liability
limitation by the simple and surely far from onerous expedient of
declaring the nature and value of the shipment in the bill of lading.
 As pointed out in Mendoza vs. PAL, the right of a party in the same situation as
respondent here, to recover for loss of a shipment consigned to him under a bill of
lading drawn up only by and between the shipper and the carrier,
o springs from either a relation of agency that may exist between him and
the shipper or consignor, or his status as a stranger in whose favor some
stipulation is made in said contract, and who becomes a party thereto
when he demands fulfillment of that stipulation, in this case the delivery
of the goods or cargo shipped.
o In neither capacity can he assert personally, in bar to any provision of the
bill of lading, the alleged circumstance that fair and free agreement to
such provision was vitiated by its being in such fine print as to be hardly
readable.
 There can, therefore, be no doubt about the validity and enforceability of
freely-agreed-upon stipulations in a contract of carriage or bill of lading
limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and inserts it into said contract or bill.

 The issue of alleged deviation is also settled by Clause 13 of the bill of lading which
expressly authorizes trans-shipment of the goods at any point in the voyage in
these terms:
o 13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in
the exercise of its or his discretion and although transshipment or
forwarding of the goods may not have been contemplated or provided for
herein, may at port of discharge or any other place whatsoever transship
or forward the goods or any part thereof by any means at the risk and
expense of the goods and at any time, whether before or after loading on
the ship named herein and by any route, whether within or outside the
scope of the voyage or beyond the port of discharge or destination of the
goods and without notice to the shipper or consignee. The carrier or
master may delay such transshipping or forwarding for any reason,
including but not limited to awaiting a vessel or other means of
transportation whether by the carrier or others.
 Said provision removes the necessity to offer any other justification for offloading
the shipment in question in Manila for transshipment to Cebu City, the port of
destination stipulated in the bill of lading.
o Nonetheless, the Court takes note of Sea-Land's explanation that it only
directly serves the Port of Manila from abroad in the usual course of
voyage of its carriers, hence its maintenance of arrangements with a local
forwarder for delivery of its imported cargo to the agreed final point of
destination within the Philippines, such arrangements not being
prohibited, but in fact recognized, by law.
 Furthermore, this Court has also ruled that the Carriage of Goods by Sea Act is
applicable up to the final port of destination and that the fact that transshipment
was made on an interisland vessel did not remove the contract of carriage of goods
from the operation of said Act.
 Private respondent also contends that the aforecited Clauses 22 and 13 of the bill of
lading relied upon by petitioner Sea Land form no part of the short-form bill of
lading attached to his complaint before the Trial Court and appear only in the long
form of that document which, he claims SeaLand offered as an unused blank form
with no entries or signatures therein.
 He, however, admitted in the Trial Court that several times in the past shipments
had been delivered to him through Sea-Land, from which the assumption may fairly
follow that by the time of the consignment now in question, he was already
reasonably apprised of the usual terms covering contracts of carriage with said
petitioner.
 At any rate, as observed earlier, it has already been held that the provisions of the
Carriage of Goods by Sea Act on package limitation [sec 4(5) of the Act
hereinabove referred to] are as much a part of a bill of lading as though
actually placed therein by agreement of the parties.
 By making claim for loss on the basis of the bill of lading, to all intents and purposes
accepted said bill. Having done so, he becomes bound by all stipulations contained
therein whether on the front or the back thereof.
o Respondent cannot elude its provisions simply because they prejudice
him and take advantage of those that are beneficial.
02 Transpo Compiled Digests. 3C. Atty. 35
Ampil
 Secondly, the fact that respondent shipped his goods on board the ship of petitioner
and paid the corresponding freight thereon shows that he impliedly accepted the
bill of lading.
Not part of today’s lesson:
 There is one final consideration. The private respondent admits that Sea-Land had
offered to settle his claim for US$4,000.00, the limit of said carrier's liability for loss
of the shipment under the bill of lading.
o This Court rules that the conversion should be at 8 pesos per 1 $, what it
was during the decision of the Trial Court.
19 CITADEL LINES, INC. V. CA, 184 SCRA 544 -PEREZ DE TAGLE
CITADEL LINES, INC., petitioner, vs. COURT OF APPEALS * and MANILA WINE
MERCHANTS, INC., respondents.
April 25, 1990 J. Regalado
Parties: CarrierCitadel Lines, Inc.; ConsigneeManila Wine Merchants; ArrastreE.
Razon, Inc.
EMERGENCY RECIT:
Citadel shipped dunhill cigs for Manila Wine Merchants. Upon arrival in Manila, it loaded
the cargo into their trucks to give it to the arrastre, E. Razon. One of the trucks, which
was never handed over to the arrastre, was tampered with and the cigs were lost
forever. Manila Wine filed demands from both the Citadel and E. Razon but was denied
by both. Lower court ruled in favor of Manila Wine against Citadel. The CA affirmed.
Upon appeal, the SC ruled that:
Issue 1
 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
 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
 Its extraordinary responsibility 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
o CARRIER failed to prove that the loss was occasioned by an excepted
cause, the inescapable conclusion is that the CARRIER was negligent and
should be held liable therefor.
Issue 2
 It is clearly and expressly provided under Clause 6 of the aforementioned bills of
lading issued by the CARRIER that its liability is limited to $2.00 per kilo. Basic is

the rule, long since enshrined as a statutory provision, that a stipulation limiting the
liability of the carrier to the value of the goods appearing in the bill of lading, unless
the shipper or owner declares a greater value, is binding.
 The CONSIGNEE itself admits in its memorandum that the value of the goods
shipped does not appear in the bills of lading. Hence, the stipulation on the carrier's
limited liability applies
COMPLETE DIGEST
Parties:
 Carrier: Citadel Lines, Inc.
 Consignee: Manila Wine Merchants
 Arrastre: E. Razon, Inc.
Facts:
 The vessel "Cardigan Bay/Strait Enterprise" loaded on board at Southampton,
England, for carriage to Manila, 180 Filbrite cartons of mixed British manufactured
cigarettes called "Dunhill International Filter" and "Dunhill International Menthol,"
 The shipment arrived and was received by E. Razon, Inc.
 Due to lack of space at the Special Cargo Coral, the aforesaid cigarettes were placed
in two containers with two pallets in container No. BENU 204850-9, the original
container, and four pallets in container No. BENU 201009-9, with both containers
duly padlocked and sealed by the representative of the CARRIER.
 The CARRIER'S headchecker discovered that container van No. BENU 201009-9 had
a different padlock and the seal was tampered with
 Per investigation conducted by the ARRASTRE, it was revealed that the cargo in
question was not formally turned over to it by the CARRIER but was kept inside
container van No. BENU 201009-9 which was padlocked and sealed by the
representatives of the CARRIER without any participation of the ARRASTRE.
 When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim
dated May 21, 1979, with the CARRIER, demanding the payment of P315,000.00
representing the market value of the missing cargoes. The CARRIER, in its reply
letter dated May 23, 1979, admitted the loss but alleged that the same occurred at
Pier 13, an area absolutely under the control of the ARRASTRE. In view thereof, the
CONSIGNEE filed a formal claim, dated June 4, 1979, with the ARRASTRE,
demanding payment of the value of the goods but said claim was denied.
 Lower court rendered a decision on August 30, 1985, exonerating the ARRASTRE
and adjudging the CARRIER liable for the principal amount of P312,480.00
representing the market value of the lost shipment, and the sum of P30,000.00 as
and for attorney's fees and the costs of suit.
 CA affirmed but deleted attorney’s fees.
Issues:
02 Transpo Compiled Digests. 3C. Atty. 36
Ampil
1. Whether the loss occurred while the cargo in question was in the custody of E.
Razon, Inc. or of Citadel Lines, Inc; and
2. Whether the stipulation limiting the liability of the carrier contained in the bill
of lading is binding on the consignee.
Held:
WHEREFORE, the judgment of respondent court is hereby MODIFIED and petitioner
Citadel Lines, Inc. is ordered to pay private respondent Manila Wine Merchants, Inc. the
sum of US$4,465.60. or its equivalent in Philippine currency at the exchange rate
obtaining at the time of payment thereof. In all other respects, said judgment of
respondent Court is AFFIRMED.
Ratio:
Issue 1
 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. Besides, there is the categorical admission made by two
witnesses, namely, Atty. Lope M. Velasco and Ruben Ignacio, Claims Manager
and Head Checker, respectively, of the CARRIER, that for lack of space the
containers were not turned over to and as the responsibility of E. Razon Inc.
 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 and for the safety of the passengers transported by them, according to
all the circumstances of each case. 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 extra ordinary
diligence as required in Article 1733 of the Civil Code.
 The duty of the consignee is to prove merely that the goods were lost.
Thereafter, the burden is shifted to the carrier to prove that it has exercised
the extraordinary diligence required by law. And, its extraordinary
responsibility 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 the right to receive them.
o CARRIER failed to prove that the loss was occasioned by an excepted
cause, the inescapable conclusion is that the CARRIER was negligent
and should be held liable therefor.
Issue 2
 We, however, find the award of damages in the amount of P312,800.00 for the value
of the goods lost, based on the alleged market value thereof, to be erroneous. It is
clearly and expressly provided under Clause 6 of the aforementioned bills of lading

issued by the CARRIER that its liability is limited to $2.00 per kilo. Basic is the rule,
long since enshrined as a statutory provision, that a stipulation limiting the liability
of the carrier to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding. Further, 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.
 The CONSIGNEE itself admits in its memorandum that the value of the goods
shipped does not appear in the bills of lading. Hence, the stipulation on the carrier's
limited liability applies. There is no question that the stipulation is just and
reasonable under the circumstances and have been fairly and freely agreed upon. In
Sea- land Service, Inc. vs. Intermediate Appellate Court, et al. we there explained
what is a just and reasonable, and a fair and free, stipulation, in this wise:
o “…said stipulation is just and reasonable arguable from the fact that it
echoes Art. 1750 itself in providing a limit to liability only if a greater
value is not declared for the shipment in the bill of lading. To hold
otherwise would amount to questioning the justice and fairness of that
law itself, and this the private respondent does not pretend to do.”
 The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per
carton. Since 90 cartons were lost and the weight of said cartons is 2,233.80 kilos,
at $2.00 per kilo the CARRIER's liability amounts to only US$4,467.60.
GPT – Random note about the case: Counsel for Citadel = Del Rosario & Del
Rosario Law Offices
20 EVERETT STEAMSHIP CORP. V. CA, 297 SCRA 496 –RAZON
EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF APPEALS and
HERNANDEZ TRADING CO. INC., respondents
Keyword: limited liability in the bill of lading
Topic: limited liability
Date: October 8, 1998
Ponente: Martinez
Carrier: Everett Steamship Corp. (Everett)
Shipper: Maruman Trading Co. Ltd. (Maruman)
Consignee: Hernandez Trading Co. Inc. (Hernandez)
Products: bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 an MARCO
C/No. 14
EMERGENCY DIGEST: Hernandez imported three crates of bus spare parts from its
supplier, Maruman. Maruman shipped the items from Japan to Manila on board the
vessel owned by the principal of Everett. The shipment was covered by a bill of lading.
02 Transpo Compiled Digests. 3C. Atty. 37
Ampil
Upon arrival in Manila, it was discovered that one of the crates was missing. Everett
confirmed the loss and admitted responsibility for the loss. Hernandez then made a
formal claim upon Everett for the value of the lost cargo amounting to about 1Million
Yen, as shown in the invoice. However, Everett offered to pay only the maximum amount
of 100,000 Yen as stipulated in the bill of lading which limits the liability of shipper.
Hernandez rejected the offer and then instituted a suit for collection against Everett
before the RTC of Caloocan. Both RTC and CA adjudged Everett liable for the higher
amount claimed by Hernandez and did not give credit to the limited liability clause in
the bill of lading. It held that Hernandez was not privy to the contract of carriage and
that under Art. 1750, Everett was not able to justify the limited liability as just and
reasonable. The Supreme Court reversed the lower courts’ rulings, and upheld the
validity of the limited liability clause as indicated in the bill lading, after proof that the
shipper never declared a greater value for the cargo.
COMPLETE DIGEST:
 Hernandez imported three crates of bus spare parts marked as MARCO C/No. 12,
MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading
Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan.
 The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by Everett’s principal, Everett Orient Lines.
The said crates were covered by Bill of Lading No. NGO53MN.
 Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. This was confirmed and admitted by Everett in its letter of
January 13, 1992 addressed to Hernandez, which thereafter made a formal claim
upon Everett for the value of the lost cargo amounting to One Million Five Hundred
Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an
Invoice No. MTM-941, dated November 14, 1991. However, Everett offered to pay
only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated
under Clause 18 of the covering bill of lading which limits the liability of Everett.
 Hernandez rejected the offer and thereafter instituted a suit for collection docketed
as Civil Case No. C-15532, against Everett before the Regional Trial Court of
Caloocan City, Branch 126.
 On July 16, 1993, the trial court rendered judgment in favor of Hernandez, ordering
Everett to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent
representing the actual value of the lost cargo and the material and packaging cost;
(c) 10% of the total amount as an award for and as contingent attorney’s fees; and
(d) to pay the cost of the suit
 CA affirmed ruling but deleted attorney’s fees.
 Thus, Everett appealed to SC.
ISSUE: Whether or not the limited liability clause stipulated in the bill of lading valid and
binding upon the consignee, notwithstanding the latter not being a privy to the contract?
YES

HELD: Petition granted. CA decision reversed and set aside.
RATIO:
 A stipulation in the bill of lading limiting the common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares a
greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil
Code which provide:
“ART. 1749. A stipulation that the common carrier’s liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or owner
declares a greater value, is binding.”
“ART. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been freely and fairly
agreed upon.”
 Such limited-liability clause has also been consistently upheld by this Court in a
number of cases.
 Pursuant to the afore-quoted provisions of law, it is required that the stipulation
limiting the common carrier’s liability for loss must be “reasonable and just under
the circumstances, and has been freely and fairly agreed upon.”
The bill of lading subject of the present controversy specifically provides,
among others:
“18. All claims for which the carrier may be liable shall be adjusted and settled
on the basis of the shipper’s net invoice cost plus freight and insurance
premiums, if paid, and in no event shall the carrier be liable for any loss of
possible profits or any consequential loss.
“The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding One Hundred Thousand Yen in
Japanese Currency (Y100,000.00) or its equivalent in any other currency per
package or customary freight unit (whichever is least) unless the value of the
goods higher than this amount is declared in writing by the shipper before
receipt of the goods by the carrier and inserted in the Bill of Lading and extra
freight is paid as required.” (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of
lading, the carrier made it clear that its liability would only be up to One
Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the value of its
cargo was higher than the limited liability of the carrier. Considering
that the shipper did not declare a higher valuation, it had itself to blame
for not complying with the stipulations.
 The shipper, Maruman Trading, we assume, has been extensively engaged in the
trading business. It cannot be said to be ignorant of the business transactions it
entered into involving the shipment of its goods to its customers. The shipper
could not have known, or should know the stipulations in the bill of lading
02 Transpo Compiled Digests. 3C. Atty. 38
Ampil
and there it should have declared a higher valuation of the goods shipped.
Moreover, Maruman Trading has not been heard to complain that it has been
deceived or rushed into agreeing to ship the cargo in Everett’s vessel. In fact,
it was not even impleaded in this case.
 When Hernandez formally claimed reimbursement for the missing goods from
Everett and subsequently filed a case against the latter based on the very same bill
of lading, it (Hernandez) accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it. Thus, Hernandez
cannot now reject or disregard the carrier’s limited liability stipulation in the bill of
lading. In other words, Hernandez is bound by the whole stipulations in the bill of
lading and must respect the same.
 The bill of lading in question confirms Everett’s contention. To defeat the carrier’s
limited liability, the aforecited Clause 18 of the bill of lading requires that the
shipper should have declared in writing a higher valuation of its goods before
receipt thereof by the carrier and insert the said declaration in the bill of lading,
with the extra freight paid. These requirements in the bill of lading were never
complied with by the shipper, hence, the liability of the carrier under the limited
liability clause stands. The commercial Invoice No. MTM-941 does not in itself
sufficiently and convincingly show that Everett has knowledge of the value of the
cargo as contended by Hernandez. No other evidence was proffered by Hernandez
to support is contention.
21 REGIONAL CONTAINER V. NETHERLANDS INSURANCE, 598 SCRA 304 –
SANTOS
Regional Container Lines v. Netherlands Insurance (2009)
Goods: Epoxy Molding Compound
Carrier: RCL and EDSA Shipping (as agent)
Shipper: Temic
Insurance company: Netherlands
ER:
1. 405 cartons of Epoxy Molding Compound was to be shipped from Singapore to
Manila for Temic.
2. Pacific Eagle was contracted to transport the subject cargo.
3. The cargo was packed, stored, and sealed by pacific Eagle in its Refrigerated
Container (the goods were highly perishable, thus the inside of the container had to
be kept at 0 degrees celcius all the time)
4. Pacific Eagle then loaded the refrigerated container on board M/V Piya Bhum, a
vessel owned by RCL (Pacific Eagle had a slot charter agreement)
5. Netherlands insured the goods.
6. The M/V Piya Bhum docked in Manila.  After unloading the refrigerated container, it
was plugged to the power terminal of the pier to keep its temperature constant.  
7. The cargo was surveyed, they found that based on the temperature chart, the
temperature reading was constant when it was in the ship, However, when the
cargo had already been unloaded from the ship – the temperature fluctuated with a
reading of 33º Celsius.

8. The surveyors believed the fluctuation was caused by the burnt condenser fan
motor of the refrigerated container.
9. Temic received the shipment. It found the cargo completely damaged.
10. Temic filed a claim for cargo loss against NETHERLANDS, which NETHERLANDS
paid.
11. NETHERLANDS now claims from the shipper and other parties involved in the
transport of their goods.
12. RTC dismissed the complaint. CA made RCL and Edsa Shipping Liable, but the other
parties were released due to prescription.
13. Issue: is WON the CA erred in declaring RCL and EDSA liable on the theory of
presumption of negligence.
14. SC: CA was correct. RCL and EDSA shipping are liable.
15. To overcome the presumption of negligence, the common carrier must
establish by adequate proof that it exercised extraordinary diligence over the
goods.  It must do more than merely show that some other party could be
responsible for the damage.
16. RCL and EDSA Shipping failed to prove that they did exercise that degree of
diligence required by law over the goods they transported. It is proven that the
fluctuation of the temperature in the refrigerated container van, as recorded in the
temperature chart, occurred after the cargo had been discharged from the vessel
and was already under the custody of the arrastre operator, ICTSI.
17. HOWVER, it does not disprove that the condenser fan – which caused the
fluctuation of the temperature in the refrigerated container – was not
damaged while the cargo was being unloaded from the ship.  It is settled in
maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier; RCL and EDSA Shipping failed to
dispute this.
COMPLETE
 Facts:
 This is the petition for review on certiorari filed by petitioners Regional Container
Lines of Singapore (RCL) and EDSA Shipping Agency (EDSA Shipping) to annul and
set aside the decision and resolution of the CA.  Branch 5, Manila, against “the unknown owner of M/V Piya Bhum” and TMS Ship
 RCL is a foreign corporation based in Singapore. It does business in
the Philippines through its agent, EDSA Shipping, a domestic corporation organized
and existing under Philippine laws.
 Respondent Netherlands Insurance Company (Philippines), Inc. (Netherlands
Insurance) is likewise a domestic corporation engaged in the marine underwriting
business.
 
FACTUAL ANTECEDENTS
 405 cartons of Epoxy Molding Compound were consigned to be shipped
from Singapore to Manila for Temic Telefunken
Microelectronics Philippines (Temic).   o They likewise asserted that no valid subrogation exists, as the payment
02 Transpo Compiled Digests. 3C. Atty. 39
Ampil
 U-Freight Singapore PTE Ltd. (U-Freight Singapore), a forwarding agent based
in Singapore, contracted the services of Pacific Eagle Lines PTE. Ltd. (Pacific Eagle)
to transport the subject cargo.  
 The cargo was packed, stored, and sealed by Pacific Eagle in its Refrigerated
Container.
 As the cargo was highly perishable, the inside of the container had to be kept at a
temperature of 0º Celsius.
 Pacific Eagle then loaded the refrigerated container on board the M/V Piya Bhum, a
vessel owned by RCL, with which Pacific Eagle had a slot charter agreement.
 RCL duly issued its own Bill of Lading in favor of Pacific Eagle.
 To insure the cargo against loss and damage, NETHERLANDS INSURANCE issued a
Marine Open Policy in favor of Temic, to cover all losses/damages to the shipment.
 The M/V Piya Bhum docked in Manila.  After unloading the refrigerated container, it
was plugged to the power terminal of the pier to keep its temperature constant.  
 Fidel Rocha (Rocha), Vice-President for Operations of Marines Adjustment
Corporation, accompanied by two surveyors, conducted a protective survey of the
cargo.
 They found that based on the temperature chart, the temperature reading was
constant from October 18, 1995 to October 25, 1995 at 0º Celsius.  However,
at midnight of October 25, 1995 – when the cargo had already been unloaded from
the ship – the temperature fluctuated with a reading of 33º Celsius. Rocha believed
the fluctuation was caused by the burnt condenser fan motor of the refrigerated
container.
 Temic received the shipment. It found the cargo completely damaged.
 Temic filed a claim for cargo loss against NETHERLANDS, with supporting claims
documents.
 The Netherlands Insurance paid Temic the sum of P1,036,497.00 under the terms
of the Marine Open Policy.
 Temic then executed a loss and subrogation receipt in favor of Netherlands
Insurance.
 Seven months from delivery of the cargo or on June 4, 1996, NETHERLANDS
INSURANCE filed a complaint for subrogation of insurance settlement with the RTC,
Agencies (TMS), the latter thought to be the local agent of M/V Piya Bhum’s
unknown owner.
 Netherlands Insurance amended the complaint to implead EDSA Shipping, RCL,
Eagle Liner Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc. (U-
Ocean), as additional defendants.
 A third amended complaint was later made, impleading Pacific Eagle in substitution
of Eagle Liner Shipping Agencies.
 The defendants all disclaimed liability for the damage caused to the cargo, citing
several reasons why NETHERLAND’s claims must be rejected.  
 Specifically, RCL and EDSA Shipping denied negligence in the transport of the cargo;
they attributed any negligence that may have caused the loss of the shipment to
their co-defendants.
made by Netherlands Insurance to the consignee was invalid.  

o By way of affirmative defenses, RCL and EDSA Shipping averred that the
NETHERLANDS has no cause of action, and is not the real party-in-
interest, and that the claim is barred by laches/prescription.
 RCL and EDSA Shipping insisted that Netherlands Insurance had (1) failed to prove
any valid subrogation, and (2) failed to establish that any negligence on their part
or that the loss was sustained while the cargo was in their custody.
 RTC - handed down an Order dismissing Civil Case on demurrer to evidence. The
trial court ruled that while there was valid subrogation, the defendants could not be
held liable for the loss or damage, as their respective liabilities ended at the time of
the discharge of the cargo from the ship at the Port of Manila.
 NETHERLANDS appealed.
 CA reversed, RCL and EDSA were made to pay. The others were not made liable.
 The CA dismissed Netherland Insurance’s complaint against the other defendants
after finding that the claim had already been barred by prescription.
 RCL and EDSA shipping appeals.
 against the carrier of its failure to observe that diligence, and there need not be an
ISSUE: WON the CA correctly held RCL and EDSA Shipping liable as common carriers
under the theory of presumption of negligence. – YES, CA was correct
HELD: DISMISSED. RCL and EDSA LIABLE
RATIO:
 In Central Shipping Company, Inc. v. Insurance Company of North America, we
reiterated the rules for the liability of a common carrier for lost or damaged cargo
as follows:
 
(1)             Common carriers are bound to observe extraordinary diligence over
the goods they transport, according to all the circumstances of each
case;
(2)             In the event of loss, destruction, or deterioration of the insured
goods, common carriers are responsible, unless they can prove that
such loss, destruction, or deterioration was brought about by, among
others, “flood, storm, earthquake, lightning, or other natural disaster
or calamity”; and
(3)             In all other cases not specified under Article 1734 of the Civil Code,
common carriers are presumed to have been at fault or to have acted
negligently, unless they observed extraordinary diligence.
 RCL AND EDSA Shipping’s DEFENSE: RCL and EDSA Shipping disclaim any
responsibility for the loss or damage to the goods in question. They contend that
the cause of the damage to the cargo was the “fluctuation of the temperature in the
reefer van,” which fluctuation occurred after the cargo had already been discharged
from the vessel; no fluctuation, they point out, arose when the cargo was still on
board M/V Piya Bhum.
02 Transpo Compiled Digests. 3C. Atty. 40
Ampil
o As the cause of the damage to the cargo occurred after the same was
already discharged from the vessel and was under the custody of the
arrastre operator (International Container Terminal Services, Inc.
or ICTSI), RCL and EDSA Shipping posit that the presumption of
negligence provided in Article 1735 of the Civil Code should not apply.  
o What applies in this case is Article 1734, particularly paragraphs 3 and 4
thereof, which exempts the carrier from liability for loss or damage to the
cargo when it is caused either by an act or omission of the shipper or by
the character of the goods or defects in the packing or in the containers.
Thus, RCL and EDSA Shipping seek to lay the blame at the feet of other
parties.
 SC  RCL and EDSA Shipping are wrong.
 A common carrier is presumed to have been negligent if it fails to prove that it
exercised extraordinary vigilance over the goods it transported. When the goods
shipped are either lost or arrived in damaged condition, a presumption arises
express finding of negligence to hold it liable .
 To overcome the presumption of negligence, the common carrier must
establish by adequate proof that it exercised extraordinary diligence over the
goods.  It must do more than merely show that some other party could be
responsible for the damage.
 In the present case, RCL and EDSA Shipping failed to prove that they did exercise
that degree of diligence required by law over the goods they transported.  Indeed,
there is sufficient evidence showing that the fluctuation of the temperature in the
refrigerated container van, as recorded in the temperature chart, occurred after the
cargo had been discharged from the vessel and was already under the custody of
the arrastre operator, ICTSI.
 This evidence, however, does not disprove that the condenser fan – which
caused the fluctuation of the temperature in the refrigerated container – was
not damaged while the cargo was being unloaded from the ship.  It is settled
in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier; RCL and EDSA Shipping failed to
dispute this.
 RCL and EDSA Shipping could have offered evidence before the trial court to show
that the damage to the condenser fan did not occur: (1) while the cargo was in
transit; (2) while they were in the act of discharging it from the vessel; or (3) while
they were delivering it actually or constructively to the consignee.  They could have
presented proof to show that they exercised extraordinary care and diligence in the
handling of the goods, but they opted to file a demurrer to evidence. 
 As the order granting their demurrer was reversed on appeal, the CA
correctly ruled that they are deemed to have waived their right to present
evidence, and the presumption of negligence must stand.
 It is for this reason as well that we find RCL and EDSA Shipping’s claim that the loss
or damage to the cargo was caused by a defect in the packing or in the
containers.  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 causes in
Article 1734 of the Civil Code 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.
RCL and EDSA Shipping, however, failed to satisfy this standard of evidence and in fact
offered no evidence at all on this point; a reversal of a dismissal based on a demurrer to
evidence bars the defendant from presenting evidence supporting its allegations.
22 MINDANAO TERMINAL V. PHOENIX ASSURANCE, 587 SCRA 429 –
SUPERABLE
MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. v PHOENIX ASSURANCE
COMPANY OF NEW YORK/MCGEE & CO. INC.; May 8, 2009 (NONS)
KEYWORD: bananas and pineapples from Davao to Korea
DIVISION: Second Division
PONENTE: Tinga
BASIC FACTS:
Shipper: Del Monte Philippines, Inc.
Insurer: Phoenix Assurance Company of New York, McGee & Co., Inc (agent of Phoenix)
Common Carrier: not relevant/stated but ship was M/V Mistrau
Stevedore: Mindanao Terminal and Brokerage Service
Consignee: Taegu Industries, Inc.
Route: Davao City port to Inchon, Korea port
Description of goods: 146, 288 cartons of fresh green Phil. bananas and 15,202 cartons
of fresh pineapples belonging to Del Monte Fresh Produce International, Inc.
ER: (based only on the second issue which is the transpo related part)
 Del Monte Inc. contracted with Mindanao Terminal, a stevedoring company, to load
and stow bananas and pineapples from Del Monte Produce. The goods were bound
for Inchon, Korea, to Taegu Industries. The goods were insured with Phoenix and
McGee.
 The loading and stowing was done by Mindanao Terminal pursuant to the stowage
plan made by Del Monte Produce and the officers of M/V Mistrau.
 When the ship and goods arrived in Korea, it was discovered that 18,000 cartons of
bananas and pineapples were damaged and have no commercial value. The
insurers paid the damage claim and were subrogated to the rights of the insured.
 Phoenix and McGee initiated an action for damages against Mindanao Terminal
based on its improper loading and stowing of the vehicles. The RTC ruled against
Phoenix and McGee and found that the loading and stowing were done under the
direction and supervision of the officers of the ship. The foreman’s report also
showed that the loading was done properly.
 The CA reversed the RTC decision on appeal. It found that Mindanao Terminal as a
stevedoring company was obliged to exercise extraordinary diligence, like a
common carrier and an arrastre operator, in the loading and stowing of the ship.
Since it failed to do so, it is liable for damages.
 ISSUE: Whether Mindanao Terminal is obliged to exercise extraordinary diligence.
02 Transpo Compiled Digests. 3C. Atty. 41
Ampil
 HELD: NO! It is only required to exercise ordinary diligence required of good father
of a family.
 No law or contractual stipulation between the parties require a stevedoring
company to exercise extraordinary diligence. What the law requires, in the absence
of stipulation, is that Mindanao exercise ordinary diligence.
 The case cited by the CA, Summa Insurance v CA (where the SC stated that arrastre
operators are required to exercise extraordinary diligence), is inapplicable.
 An arrastre operator is not the same as a stevedoring company. Arrastre
 On one hand, the responsibility of the arrastre operator lasts until the delivery of
the cargo to the consignee. On the other hand, responsibility of the stevedore ends
upon the loading and stowing of the cargo in the vessel.
 Mindanao Terminal as the stevedore, was only charged with the loading and
stowing of the cargoes from the pier to the ship’s cargo hold; it was never the
custodian of the shipment of Del Monte Produce. A stevedore is not a common
carrier for it does not transport goods or passengers; it is not akin to a
warehouseman for it does not store goods for profit.
 The public policy considerations in legally imposing upon a common carrier or a
warehouseman a higher degree of diligence is not present in a stevedoring outfit
which mainly provides labor in loading and stowing of cargoes for its clients.
FACTS:
 Del Monte Phils., Inc (Del Monte) contracted Mindanao Terminal, a stevedoring
company, to load and stow the bananas and pineapples from Del Monte Produce in
the cargo hold of M/V Mistrau. The goods coming from Davao City port are destined
for Korea, and the consignee Taegu, Industries.
 The goods were insured under an “open cargo policy” with Phoenix Assurance and
McGee & Co. as the underwriting manager/agent of Phoenix by Del Monte Produce.
 Mindanao Terminal stowed the goods under the control and supervision of the
officers of M/V Mistrau.
 When the ship arrived in Korea, the goods were discharged the Marine Cargo
Damage Surveyor of Incok Loss and Average Adjuster of Korea, through its
representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of
the shipment. In a survey report, it was stated that 16,069 cartons of the banana
shipment and 2,185 cartons of the pineapple shipment were so damaged that they
no longer had commercial value.
 Del Monte filed a claim under the open cargo policy and the damages totaled
$210,266.43. A check was issued by McGee and Del Monte issued a subrogation
receipt to Phoenix and McGee.
 An action for damages was initiated by Phoenix and McGee against Mindanao
Terminal in the Davao RTC, Branch 12. The RTC ruled in favor of Mindanao
Terminal. It found that:
o Mindanao Terminal cannot be held liable as its only responsibility
was to load the cargoes.
o The loading and placement of the cargo was under the direction and
supervision of the ship’s officers.

o The ship’s officers would not have signed the foreman’s report unless
they were properly arranged and tightly secured to withstand voyage
across the open seas.
o There is no cause of action between Del Monte Produce (the insured)
and the insurers as the Mindanao Terminal was hired by Del Monte,
Inc.
o The damage could have been caused by the typhoon which the ship
encountered during the voyage.
 The RTC awarded Mindanao Terminal attorney’s fees on account of the travel that
the lawyers of Mindanao Terminal had to do to attend the trial.
 On appeal, the CA reversed the RTC ruling. The CA found that
o The damage was actually caused by the improper stowage by
Mindanao Terminal.
o As the stevedore, Mindanao Terminal should have exercised
extraordinary diligence in loading and stowing the cargoes, like an
arrastre operator as held in Summa Insurance v CA.
o The cause of action was quasi-delict and not breach of contract.
 The MR with the CA was denied, hence this petition.
ISSUES: (1) Whether the insurers have a cause of action against Mindanao Terminal;
(2) Whether Mindanao Terminal was obliged to exercise extraordinary diligence
required of common carriers and arrastre operators in stowing the goods; and
(3) Whether Mindanao Terminal exercised the required diligence, and thus not liable
HELD: (1) Yes, the cause of action is quasi-delict. (2) No. (3) Yes, it exercised the
diligence of a good father of a family.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R.
CV No. 66121 is SET ASIDE and the decision of the Regional Trial Court of Davao City,
Branch 12 in Civil Case No. 25,311.97 is hereby REINSTATED MINUS the awards of
P100,000.00 as attorney’s fees and P83,945.80 as actual damages.
RATIO:
1. The cause of action was based on torts and not breach of contract.
 The insurance carriers may have a cause of action in light of the Court’s
consistent ruling that the act that breaks the contract may be also a tort . A
liability for tort may arise even under a contract, where tort is that which
breaches the contract.
 Here the cause of action of the insurers is the alleged negligent manner by
which Mindanao Terminal handled the cargoes belonging to Del Monte
Produce
2. Mindanao Terminal is not required to exercise extraordinary diligence in the
loading/stowing of the goods.
 Article 1173 of the Civil Code is very clear that if the law or contract does not
state the degree of diligence which is to be observed in the performance of an
obligation then that which is expected of a good father of a family or ordinary
diligence shall be required.
02 Transpo Compiled Digests. 3C. Atty. 42
Ampil
 Mindanao Terminal, a stevedoring company which was charged with the
loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau,
had acted merely as a labor provider in the case at bar. There is no specific
provision of law that imposes a higher degree of diligence than ordinary
diligence for a stevedoring company or one who is charged only with the
loading and stowing of cargoes.
 There is also no contractual stipulation that required Mindanao Terminal to
exercise a higher degree of diligence.
 The case cited by the CA, Summa Insurance v CA, is inapplicable. The issue of
whether an arrastre operator is legally liable for the loss of a shipment in its
custody and the extent of its liability, is inapplicable as the party in this case is
stevedoring company and not an arrastre operator.
o The SC held there that the arrastre operator is like a warehouseman
as it is the custodian of the goods discharged from the vessel. In the
performance of its obligations, an arrastre operator should
observe the same degree of diligence as that required of a
common carrier and a warehouseman .
 A stevedore is not the same as an arrastre operator.
o Arrastre, a Spanish word which refers to hauling of cargo,
comprehends the handling of cargo on the wharf or between the
establishment of the consignee or shipper and the ship's tackle. The
responsibility of the arrastre operator lasts until the delivery of the
cargo to the consignee. The service is usually performed by
longshoremen.
o Stevedoring refers to the handling of the cargo in the holds of the
vessel or between the ship's tackle and the holds of the vessel. The
responsibility of the stevedore ends upon the loading and stowing of
the cargo in the vessel.
 Mindanao Terminal as the stevedore, was only charged with the loading and
stowing of the cargoes from the pier to the ship’s cargo hold; it was never the
custodian of the shipment of Del Monte Produce. A stevedore is not a
common carrier for it does not transport goods or passengers; it is not
akin to a warehouseman for it does not store goods for profit.
 The public policy considerations in legally imposing upon a common carrier or
a warehouseman a higher degree of diligence is not present in a stevedoring
outfit which mainly provides labor in loading and stowing of cargoes for its
clients.
3. Mindanao Terminal exercised the diligence required of it: the ordinary diligence of a
good father of the family.
 Mindanao Terminal loaded and stowed the cargoes of Del Monte Produce
aboard the M/V Mistrau in accordance with the stowage plan, a guide for
the area assignments of the goods in the vessel’s hold, prepared by Del
Monte Produce and the officers of M/V Mistrau.
 The loading and stowing was done under the direction and supervision of the
ship officers. The said ship officers would not have accepted the cargoes on
board the vessel if they were not properly arranged and tightly secured to
withstand the voyage in open seas. If there’s anything wrong with the loading
 02 Transpo Compiled Digests. 3C. Atty. 43
Ampil
of the goods, the officers would have ordered the stevedore to correct the
mistake. But the foreman’s report to which the Chief Officer of the ship
concurred with showed that goods were stowed properly.
 According to the report Byeong Yong Ahn and the survey report done on the
cargo, the cause of the damage was improper stowage 3 due to the manner the
cargoes were arranged such that there were no spaces between cartons, the
use of cardboards as support system, and the use of small rope to tie the
cartons together but not by the negligent conduct of Mindanao Terminal in
loading and stowing the cargoes.
 Again, the loading was done by Mindanao Terminal pursuant to the stowage
plan made by Del Monte Produce and officers of M/V Mistrau. In other words,
the work of the stevedore was under the supervision of the shipper and
officers of the vessel. Even the materials used for stowage, such as ropes,
pallets, and cardboards, are provided for by the vessel.
 Even the survey report found that it was because of the boisterous stormy
weather due to the typhoon Seth, as encountered by M/V Mistrau during its
voyage, which caused the shipments in the cargo hold to collapse, shift and
bruise in extensive extent.
 As it is clear that Mindanao Terminal had duly exercised the required degree of
diligence in loading and stowing the cargoes, which is the ordinary diligence of
a good father of a family, the grant of the petition is in order.

E N D O F AS S I G N M E N T F O R F R I D A Y , 2 9 N O V 2 0 1 3