Common Carrier of Goods Fulltext Part 1

Choco NotesTransportation Law cases – Common Carrier of Goods part 1

Common Carrier of Goods

ContentsVigilance Over Goods Art. 1734 - 35.......................................1

Liability for Loss; Presumption of Negligence....................1Ynchausti v. Dexter..........................................................1Mirasol v. Dollar...............................................................2Standard Vacuum v. Luzon Stevedoring...........................4Fireman’s Fund v. Metro Port...........................................6Aboitiz v. CA....................................................................9Bankers and Manufacturers v. CA..................................13Summa Insurance Corp. v. CA.......................................14Sarkies Tours v. CA........................................................16Belgian Overseas v. Phil. First Insurance.......................18Aboitiz. v. ICNA.............................................................21

Exemption From Liability..................................................26Natural Disaster or Calamity art. 1734 (1); 1739; 1740.26Martini v. Macondray.....................................................31Eastern v. IAC................................................................35Eastern Shipping v. CA..................................................39Arada v. CA....................................................................41Philamgen v. CA.............................................................45Delsan Transporp. v. CA................................................48Philamgen v. MCG Marine Mar 8, 2002 (case not found) 50Edgar Cokaliong v. UCPB General................................50Asia Lighterage and Shipping v. CA..............................54DSR-Senator Lines v. Federal Phoenix..........................57Central Shipping v. Ins. Co. of North Amer...................58FGU Insurance Corp. v. CA...........................................61Schmitz Transport v. Transport Venture.........................66Lea Mer Industries v. Malayan.......................................70

Act of Shipper 1734[3];1741..............................................72Compania Maritima v. CA.............................................72Tabacalera v. North Front...............................................75

Character of Goods.............................................................77Government v. Ynchausti,..............................................77Southern Lines v. CA.....................................................78Calvo v. UCPB...............................................................79Belgian Overseas v. PFIC...............................................82Iron Bulk Shipping v. Remington...................................86AF Sanchez Brokerage v. CA.........................................89

Order of Competent Authority;1734[5]; 1743....................92Ganzon v. CA.................................................................92

Vigilance Over Goods Art. 1734 - 35

Liability for Loss; Presumption of Negligence

Ynchausti v. DexterG.R. No. L-15652 December 14, 1920

THE YNCHAUSTI STEAMSHIP COMPANY, petitioner, vs.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1I. B. DEXTER, as Auditor of the Philippine Islands, and C. E. UNSON, as Acting Purchasing Agent of the Philippine Islands, respondents.

Cohn & Fisher for petitioner.Attorney-General Paredes and Assistant Attorney-General A. Santos for respondents.

STREET, J.:

This a petition for a writ of mandamus filed in this court of the Ynchausti Steamship Company to compel the Purchasing Agent of the Philippine Islands and the Insular Auditor to sign, countersign, and deliver to the petitioner a warrant upon the Treasurer of the Philippine Islands for the sum of P82.79 in satisfaction of a claim for that amount, which is alleged to be due the petitioner as a common carrier for freight earned in transporting for the Government two distinct consignments of mineral oil from Manila to two other ports in the Philippine Islands. After the defendants had duly answered, denying all the allegations of the petition except such as relate to the character and places of residence of the parties to the petition (which are admitted) the controversy was submitted for determination by this court upon an agreed statement of facts as follows:

On July 23, 1918, the Government of the Philippine Islands, acting by and through the respondent Insular Purchasing Agent, employed the services of the petitioner, Ynchausti Steamship Co., a common carrier, for the transportation, on board the steamship Venus, from the port of Manila to the port of Aparri, Cagayan, of a consignment of merchandise, consisting of thirty (30) cases of "White Rose" mineral oil of two five-gallon cans to the case; and on September 18, 1918, the said Government likewise employed the services of petitioner for the transportation on board the steamship Venus, from Manila to Aparri, Cagayan, of ninety-six cases of "Cock" Brand mineral oil, ten gallons to the case. The goods were delivered by the shipper to the carrier, which accordingly received them, and to evidence the contract of transportation, the parties duly executed and delivered what is popularly called the Government bill of lading (General Form 9-A), hereto attached, marked Exhibit A and made a part hereof, wherein and whereby it was stipulated that the carrier, the petitioner Ynchausti & Co., received the above-mentioned supplies in apparent good condition, obligating itself to carry said supplies to the place agreed upon, in accordance with the authorized and prescribed rates and classifications, and subject to the law of common carriers in force on the date of the shipment, and to the conditions prescribed by the Insular Collector of Customs in Philippine Marine Regulations at page 16 under the heading of "Bill of Lading Conditions," hereto attached, marked Exhibit B and made a part hereof.

Upon the delivery of the said shipment of "Cock" brand oil and consignee claimed that one case was delivered empty, and noted such claim upon the bill of lading; and upon the delivery of the said shipment of "White Rose," brand oil the consignee claimed that one case was delivered empty, and noted said claim upon the bill of lading.

Thereafter, notwithstanding the protestations of the petitioner, Ynchausti Steamship Co., that said shortages were due to causes entirely unknown to it, and were not due to any fault or negligence on its part, or on the part of its agents or servants, the Acting Insular Purchasing Agent of the Philippine Islands notified the petitioners herein that after due investigation the Insular Auditor found and decided that the leakages of the two whole cases were due to its

negligence and that the deduction of the sum of P22.53, the invoice value of the goods lost, and held by the Auditor to be the true value thereof had been authorized by the said Insular Auditor.

Petitioner thereupon protested against the threatened deduction, and demanded that it be paid the full amount due for the transportation of the two said shipments of merchandise, to wit, the sum of P82.79, as shown by its transportation voucher presented in this cause, hereto attached. marked Exhibit C and made a part hereof.

Thereafter, notwithstanding the protest and demand of the petitioner as aforesaid, the Insular Auditor, in conformity with his ruling, declined and still declines to issue to the petitioner a warrant for the full sum of P82.79, and has tendered to it a warrant for the sum of P60.26, which the petitioner has refused to accept.lawphi1.net

The sum of P22.53 authorized to be deducted by the Insular Auditor, as appears herein, has not at any time been liquidated by consent, agreement, or by the judgment of any court of competent jurisdiction.

Upon a perusal of the foregoing agreed statement it will be seen that the present litigation had its origin in a situation practically identical with that considered by this court in Compañia General de Tabacos vs. French and Unson (39 Phil., 34). It will be noted, however, that the case mentioned was decided upon demurrer, while the one now before us is to be heard and determined upon the petition, answer, and the admitted facts.

We note that in this case, as in the case of Compañia General de Tabacos vs. French and Unson (supra), the petition alleges that the leakage of the lost gasoline was due to causes unknown to the petitioner and was not due to any fault or negligence of petitioner, its agents, or servants. The respondents, by demurring to the petition in the earlier case, admitted that allegation. In the case now before us that allegation is put in issue, and we find nothing in the admitted statement of facts to support it. It results that if that allegation is material to the relief here sought, the petition must fail.

We are of the opinion that the allegation in question is material and that the belief sought in this case cannot be granted.

In section 646 of the Administrative Code it is provided that when Government property is transmitted from one place to another by carrier, it shall be upon proper bill of lading, or receipt, from such carrier, and it shall be the duty of the consignee, or his representative, to make full notation of any evidence of loss, shortage, or damage, upon the bill of lading, or receipt, before accomplishing it. It is admitted by the petitioner in the agreed statement of facts that the consignee, at the time the oil was delivered, noted the loss in the present case upon the two respective bills of lading. The notation of these losses by the consignee, in obedience to the precept of section 646 of the Administrative Code, is competent evidence to show that the shortage in fact existed. As the petitioner admits that the oil was received by it for carriage and inasmuch as the fact of loss is proved in the manner just stated, it results that there is a presumption that the petitioner was to blame for the loss; and it was incumbent upon the petitioner in order to entitle it to relief in the case to rebut that presumption by proving, as is alleged in the petition, that the loss was not due to any fault or negligence of the petitioner.

The mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. (4

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1R. C. L., p. 917.) It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstance inconsistent with its liability. (Articles 361-363, Code of Commerce.) Indeed, if the Government of the Philippine Islands had instituted an action in a court of law against the petitioner to recover the value of the oil lost while these consignments were in the court of transportation, it would, upon the facts appearing before us, have been entitled to judgment.

From this it is apparent that the mandamus prayed for cannot be granted. It is a rule of universal application that a petition for extraordinary relief of the character here sought must show merit. That is, the petitioner's right to relief must be clear. Such cannot be said to be the case where, as here, a presumption of responsibility on the part of the petitioner stands unrefuted upon the record.

We are of the opinion that, in the absence of proof showing that the carrier was not at fault in respect to the matter under discussion, the Insular Auditor was entitled to withhold, from the amount admittedly due to the petitioner for the freight charges, a sum sufficient to cover the value of the oil lost in transit.

The petition will be dismissed, with costs against the petitioner. So ordered.

Mirasol v. DollarG.R. No. L-29721 March 27, 1929

AMANDO MIRASOL, plaintiff-appellant, vs.THE ROBERT DOLLAR CO., defendant-appellant.

Vicente Hilado for plaintiff-appellant.J.A. Wolfson for defendant-appellant.

STATEMENT

After the promulgation of the decision rendered by the Second Division of February 13, 1929,1 the defendant filed a motion to have the case heard and decided in banc, and inasmuch as the legal questions involved are important to the shipping interests, the court thought it best to do so.

After the formal pleas, plaintiff alleges that he is the owner and consignee of two cases of books, shipped in good order and condition at New York, U.S.A., on board the defendant's steamship President Garfield, for transport and delivery to the plaintiff in the City of Manila, all freight charges paid. That the two cases arrived in Manila on September 1, 1927, in bad order and damaged condition, resulting in the total loss of one case and a partial loss of the other. That the loss in one case is P1,630, and the other P700, for which he filed his claims, and defendant has refused and neglected to pay, giving as its reason that the damage in question "was caused by sea water." That plaintiff never entered into any contract with the defendant limiting defendant's liability as a common carrier, and when he wrote the letter of September 3, 1927, he had not then ascertained the contents of the damaged case, and could not determine their value. That he never intended to ratify or confirm any agreement to limit the liability of the defendant. That on September 9, 1927, when the other case was found, plaintiff filed a claim for the real damage of the books therein named in the sum of $375.

Plaintiff prays for corresponding judgment, with legal interest from the filing of the complaint and costs.

For answer the defendant made a general and specific denial, and as a separate and special defense alleges that the steamship President Garfield at all the times alleged was in all respects seaworthy and properly manned, equipped and supplied, and fit for the voyage. That the damage to plaintiff's merchandise, if any, was not caused through the negligence of the vessel, its master, agent, officers, crew, tackle or appurtenances, nor by reason of the vessel being unseaworthy or improperly manned, "but that such damage, if any, resulted from faults or errors in navigation or in the management of said vessel." As a second separate and special defense, defendant alleges that in the bill of lading issued by the defendant to plaintiff, it was agreed in writing that defendant should not be "held liable for any loss of, or damage to, any of said merchandise resulting from any of the following causes, to wit: Acts of God, perils of the sea or other waters," and that plaintiff's damage, if any, was caused by "Acts of God" or "perils of the sea." As a third special defense, defendant quoted clause 13 of the bill of lading, in which it is stated that in no case shall it be held liable "for or in respect to said merchandise or property beyond the sum of two hundred and fifty dollars for any piece, package or any article not enclosed in a package, unless a higher value is stated herein and ad valorem freight paid or assessed thereon," and that there was no other agreement. That no September 3, 1927 the plaintiff wrote the defendant a letter as follows:

Therefore, I wish to file claim of damage to the meager maximum value that your bills of lading will indemnify me, that is $250 as per condition 13.

As a fourth special defense, defendant alleges that the damage, if any, was caused by "sea water," and that the bill of lading exempts defendant from liability for that cause. That damage by "sea water" is a shipper's risk, and that defendant is not liable.

As a result of the trial upon such issues, the lower court rendered judgment for the plaintiff for P2,080, with legal interest thereon from the date of the final judgment, with costs, from which both parties appealed, and the plaintiff assigns the following errors:

I. The lower court erred in holding that plaintiff's damage on account of the loss of the damaged books in the partially damaged case can be compensated with an indemnity of P450 instead of P750 as claimed by plaintiff.

II. The lower court, consequently, also erred in giving judgment for plaintiff for only P2,080 instead of P2,380.

III. The lower court erred in not sentencing defendant to pay legal interest on the amount of the judgment, at least, from the date of the rendition of said judgment, namely, January 30, 1928.

The defendant assigns the following errors:

I. The lower court erred in failing to recognize the validity of the limited liability clause of the bill of lading, Exhibit 2.

II. The lower court erred in holding defendant liable in any amount and in failing to hold, after its finding as a fact that the damage was caused by sea water, that the defendant is not liable for such damage by sea water.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1III. The lower court erred in awarding damages in favor of plaintiff and against defendant for P2,080 or in any other amount, and in admitting, over objection, Exhibits G, H, I and J.

JOHNS, J.:

Plaintiff's contention that he is entitled to P700 for his Encyclopedia Britannica is not tenable. The evidence shows that the P400 that the court allowed, he could buy a new set which could contain all of the material and the subject matter of the one which he lost. Plaintiff's third assignment of error is well taken, as under all of the authorities, he is entitled to legal interest from the date of his judgement rendered in the lower court and not the date when it becomes final. The lower court found that plaintiff's damage was P2,080, and that finding is sustained by that evidence. There was a total loss of one case and a partial loss of the other, and in the very nature of the things, plaintiff could not prove his loss in any other way or manner that he did prove it, and the trial court who heard him testify must have been convinced of the truth of his testimony.

There is no claim or pretense that the plaintiff signed the bill of lading or that he knew of his contents at the time that it was issued. In that situation he was not legally bound by the clause which purports to limit defendant's liability. That question was squarely met and decided by this court in banc in Juan Ysmael and Co., vs. Gabino Baretto and Co., (51 Phil., 90; see numerous authorities there cited).

Among such authorities in the case of The Kengsington decided by the Supreme Court of the U.S. January 6, 1902 (46 Law. Ed., 190), in which the opinion was written by the late Chief Justice White, the syllabus of which is as follows:

1. Restrictions of the liability of a steamship company for its own negligence or failure of duty toward the passenger, being against the public policy enforced by the courts of the United States, will not to be upheld, though the ticket was issued and accepted in a foreign country and contained a condition making it subject to the law thereof, which sustained such stipulation.

2. The stipulation in a steamship passenger's ticket, which compels him to value his baggage, at a certain sum, far less than it is worth, or, in order to have a higher value put upon it, to subject it to the provisions of the Harter Act, by which the carrier would be exempted from all the liability therefore from errors in navigation or management of the vessel of other negligence is unreasonable and in conflict with public policy.

3. An arbitrary limitation of 250 francs for the baggage of any steamship passenger unaccompanied by any right to increase the amount of adequate and reasonable proportional payment, is void as against public policy.

Both the facts upon which it is based and the legal principles involved are square in point in this case.

The defendant having received the two boxes in good condition, its legal duty was to deliver them to the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in New York until they are delivered to the plaintiff in Manila, the boxes were under the control and supervision of the defendant and beyond the control of the plaintiff. The defendant having admitted that the boxes were damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon the defendant to both allege and prove that the damage was caused by

reason of some fact which exempted it from liability. As to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the knowledge of the defendant and in the very nature of things could not be in the knowledge of the plaintiff. To require the plaintiff to prove as to when and how the damage was caused would force him to call and rely upon the employees of the defendant's ship, which in legal effect would be to say that he could not recover any damage for any reason. That is not the law.

Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights, and when goods are delivered on board ship in good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by the reason of some fact which legally exempts him from liability; otherwise, the shipper would be left without any redress, no matter what may have caused the damage.

The lower court in its opinion says:

The defendant has not even attempted to prove that the two cases were wet with sea water by fictitious event, force majeure or nature and defect of the things themselves. Consequently, it must be presumed that it was by causes entirely distinct and in no manner imputable to the plaintiff, and of which the steamer President Garfield or any of its crew could not have been entirely unaware.

And the evidence for the defendant shows that the damage was largely caused by "sea water," from which it contends that it is exempt under the provisions of its bill of lading and the provisions of the article 361 of the Code of Commerce, which is as follows:

Merchandise shall be transported at the risk and venture of the shipper, if the contrary was not expressly stipulated.

Therefore, all damages and impairment suffered by the goods during the transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper.

The proof of these accidents is incumbent on the carrier.

In the final analysis, the cases were received by the defendant in New York in good order and condition, and when they arrived in Manila, they were in bad condition, and one was a total loss. The fact that the cases were damaged by "sea water," standing alone and within itself, is not evidence that they were damaged by force majeure or for a cause beyond the defendant's control. The words "perils of the sea," as stated in defendant's brief apply to "all kinds of marine casualties, such as shipwreck, foundering, stranding," and among other things, it is said: "Tempest, rocks, shoals, icebergs and other obstacles are within the expression," and "where the peril is the proximate cause of the loss, the shipowner is excused." "Something fortuitous and out of the ordinary course is involved in both words 'peril' or 'accident'."

Defendant also cites and relies on the case of Government of the Philippine Islands vs. Ynchausti & Company (40 Phil., 219), but it appears from a reading of that case that the facts are very different and, hence, it is not in point. In the instant case, there is no claim or pretense that the two cases were not in good order when received on board the ship, and it is admitted that they were in bad order on their arrival at Manila. Hence, they must have been damaged in transit. In the very nature of things, if they were damaged by reason of a tempest, rocks, icebergs, foundering, stranding or the perils of the

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1sea, that would be a matter exclusively within the knowledge of the officers of defendant's ship, and in the very nature of things would not be within plaintiff's knowledge, and upon all of such questions, there is a failure of proof.

The judgment of the lower court will be modified, so as to give the plaintiff legal interest on the amount of his judgment from the date of its rendition in the lower court, and in all respects affirmed, with costs. So ordered.

Johnson, Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.

Standard Vacuum v. Luzon StevedoringG.R. No. L-5203 April 18, 1956

STANDARD VACUUM OIL COMPANY, plaintiff-appellant, vs.LUZON STEVEDORING CO., INC., defendant-appellee.

Ross, Selph, Carrascoso and Janda and Martin B. Laurena for appellant.Perkins, Ponce Enrile and Contreras for appellee.

BAUTISTA ANGELO, J.:

Plantiff entered into a contract with defendant to transport between the ports of Manila and Nin Bay, Sangay, Iloilo, 2,916.44 barrels of bulk gasoline belonging to plaintiff. The gasoline was delivered in accordance with the contract but defendant failed to transport it to its place of destination and so plaintiff brought his action in the Court of First Instance of Manila to recover the sum of P75,578.50 as damages.

Defendant, in its answer, pleaded that its failure to deliver the gasoline was due to fortuitous event or caused by circumstances beyond its control and not to its fault or negligence or that of any of its employees. The court, after receiving the evidence, rendered decision finding that the disaster that had befallen the tugboat was the result of an avoidable accident and the loss of the gasoline was due to a fortuitous even which was beyond the control of defendant and, consequently, dismissed the case with costs against the plaintiff.

The facts as found by the trial court are: "that pursuant to an agreement had between the parties, defendant's barge No. L-522 was laden with gasoline belonging to the plaintiff to be transported from Manila to the Port of Iloilo; that early in the morning of February 2, 1947, defendant's tugboat "Snapper" picked up the barge outside the breakwater; that the barge was placed behind the tugboat, it being connected to the latter by a tow rope ten inches in circumstances; that behind the barge, three other barges were likewise placed, one laden with some cargo while the other two containing hardly any cargo at all; that the weather was good when on that day the tugboat with its tow started on its voyage; that the weather remained good on February 3, 1947, when it passed Santiago Point in Batangas; that at about 3:00 o'clock in the morning of February 4, 1947, the engine of the tugboat came to a dead stop; that the engineer on board the tugboat found out that the trouble was due to a broken idler; that a message was then sent to the defendant's radio station in Manila informing its official of the engine trouble; that upon the receipt of the message the defendant called up several shipping companies in Manila to find out if they had any vessels in the vicinity where the "Snapper' had stalled but sais companies replied in the negative; that thereupon the defendant redioed its tugboat Tamban' which was

docked at Batangas, ordering it to proceed to the place where the Snapper' was; that at about 6:00 o'clock in the same morning of February 4, 1947, the master of the Snapper' attempted to cast anchor but the water areas around Elefante Island were so deep that the anchor did not touch bottom; that in the afternoon of the same day the weather become worse as the wind increased in intensity and the waves were likewise increased in size and force; that due to the rough condition of the sea the anchor chains of the Snapper' and the four barges broke one by one and as a consequence thereof they were drifted and were finally dashed against the rocks a hole was opened in the hull of the Snapper', which ultimately caused it to sink, while the barge No. L-522 was so badly damaged that the gasoline it had on board leaked out; and that the Tamban arrived at the place after the gasoline had already leaked out.

Defendant is a private stevedoring company engaged in transporting local products, including gasoline in bulk and has a fleet of about 140 tugboats and about 90 per cent of its business is devoted to transportation. Though it is engaged in a limited contract of carriage in the sense that it chooses its customers and is not opened to the public, nevertheless, the continuity of its operation in this kind of business have earned for it the level of a public utility. The contract between the plaintiff and defendant comes therefore under the provisions of the Code of Commerce. The pertinent law is article 361 which provides:

ART. 361. The merchandise shall be transported at the risk and venture of the shipper, if the contrary was not expressly stipulated.

Therefore, all damages and impairment suffered by the goods during the transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper.

The proof of these accidents is incumbent on the carrier.

It therefore appears that whenever merchandise is transported on the sea by virtue of a contract entered into between the shipper and the carrier, the merchandise is deemed transported at the risk and venture of the shipper, if the contrary is not stipulated, and all damages suffered by the merchandise during the transportation by reason of accident or force majeure shall be for the account and risk of the shipper, but the proof of these accidents is incumbent on the carrier. Implementing this provision, our Supreme Court has held that all a shipper has to prove in connection with sea carriage is delivery of the merchandise in good condition and its non-delivery at the place of destination in order that the burden of proof may shift to the carrier to prove any of the accidents above adverted to. Thus, it was held that "Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights, and when goods are delivered on board a ship in good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by reason of some fact which legally exempts him from liability" (Mirasol vs. Robert Dollar Co., 53 Phil., 129).

The issue to be determined is: Has defendant proven that its failure to deliver the gasoline to its place of destination is due to accident or force majeure or to a cause beyond its control? This would require an analysis of the facts and circumstances surrounding the transportation of said gasoline.

It appears that the tugboat "Snapper" was acquired by defendant from the foreign Liquidation Commission. It was a surplus property. It was

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1a deep-sea tugboat that had been in the service of the United States Armed Forces prior to its purchase by the Luzon Stevedoring Co. The tugboat was put into operation without first submitting it to an overhaul in a dry-dock. It also appears that this tugboat had previously made several trips and each time it had to obtain a special permit from the Bureau of Customs because it had never been dry-dock and did not have complete equipment to be able to obtain the permanent permit. The special permits that were issued by said Bureau specifically state that they were issued "pending submission of plans and load line certificate, including test and final inspection of equipment." It futher appears that, when the tugboat was inspected by the Bureau of Customs on October 18, 1946, it found it to be inadequately equipped and so the Bureau required defendant to provide it with the requisite equipment but it was never able to complete it. The fact that the tugboat was a surplus property, has not been dry-docked, and was not provided with the requisite equipment to make it seaworthy, shows that defendant did not use reasonable diligence in putting the tugboat in such a condition as would make its use safe for operation. It is true, as defendant contends, that there were then no dry-dock facilities in the Philippines, but this does not mean that they could not be obtained elsewhere. It being a surplus property, a dry-dock inspection was a must to put the tugboat in a sea going condition. It may also be true , as contended, that the deficiency in the equipment was due to the fact that no such equipment was available at the time, but this did not justify defendant in putting such tugboat in business even if unequipped merely to make a profit. Nor could the fact that the tugboat was given a special permit by the Bureau of Customs to make the trip relieve defendant from liability.

Where owner buys old tug, licensed coastwise, and equips it for ocean going, it is negligence to send tug out without stability test, where history and performance with respect to crankiness and tenderness are matters of official record. Sabine Towing Co. vs. Brennan, C.C.A. Tex., 72 F 2d 490, certiorari denied 55 S. Ct. 141, 293 U.S. 632, 79 L. Ed. 717. (80 C.J. S. 803 Footnote).

There are other circumstances which show the lack of precaution and diligence taken by defendant to make the travel of the tugboat safe. One is the failure to carry on board the necessary spare parts. When the idler was broken, the engineer of the tugboat examined it for the first time and it was only then that he found that there were no spare parts to use except a worn out spare driving chain. And the necessity of carrying such spare parts was emphasized by the very defendant's winess, Mr. Depree, who said that in vessels motored by diesel engines it is necessary always to carry spare chains, ball bearings and chain drives. And this was not done.

A tug engaged to tow a barge is liable for damage to the cargo of the barge caused by faulty equipment of the tug. The Raleigh, D.C. Md. 50 F. Supp. 961. (80 C.J.S. Footnote.).

Another circumstance refers to the deficiency or incomplete in the man power of the tug boat. According to law, a tugboat of the tonnage and powers of one like the "Snapper" is required to have a complement composed of one first mate, one second mate, one third mate, one chief engineer, one second engineer, and one third engineer, (section 1203, Revised Administrative Code), but when the trip in question was undertaken, it was only manned by one master, who was merely licensed as a bay, river and lake patron, one second mate, who was licensed as a third mate, oner chief engineer who was licensed as third motor engineer, one assistant engineer, who was licensed as a bay, river, and lake motor engineer, and one second assistant engineer, who was unlicensed. The employment of this crew

to perform functions beyond its competence and qualifications is not onl;y risky but against the law and if a mishap is caused, as in this case, one cannot but surmise that such incompetence has something to do with the mishap. The fact that the tugboat had undertaken several trips before with practically the same crew without any untoward consequence, cannot furnish any justification for continuing in its employ a deficient or incompetent personnel contrary to law and the regulations of the Bureau of Customs.

(1) Generally, seaworthiness is that strength, durability and engineering skill made a part of a ship's construction and continued maintenance, together with a competent and sufficient crew, which would withstand the vicissitudes and dangers of the elements which might reasonably be expected or encountered during her voyage without loss or damage to her particular cargo. The Cleveco, D.C. Ohio, 59 F. Supp. 71, 78, affirmed, C.C.A., 154 F. 2d 606. (80 C.J.S. 997, Footnote.).

Let us now come to the eeforts exerted by defendant in extending help to the tugboat when it was notified of the breakage of the idler. The evidence shows that the idler was broken at about 3:00 o'clock in the morning of February 4, 1947. Within a few minutes, a massage was sent to defendant by radio informing it of the engine trouble. The weather was good until 12:00 o'clock noon when the wind started to blow. According to defendant, since it received the message, it called up different shipping lines in Manila asking them if they had any vessel in the vicinity where the "Snapper" stalled but, unfortunately, none was available at the time,and as its tug "Tamban" was then docked in Batangas, Batangas, which was nearest to the place, it radioed said tug to go to the aid of the "Snapper". Accordingly, the tug "Tamban" set sail from Batangas for the rescue only to return to secure a map of the vicinity where the "Snapper" had stalled, which entailed a delay of two hours. In the meantime, the captain of the "Snapper" attempted to cast anchor. The water areas off Elefante Island were deep and the anchor would not touch bottom. Then the sea became rough and the waves increased in size and force and notwithstanding the efforts of the crew to prevent the tug from drifting away, the force of the wind and the violence of the waves dashed the tug and the barges against the rocks. The tug developed a hole in her hull and sank. The barge carrying the gasoline was so badly damaged that the gasoline leaked out. The tug "Tamban" was finally able to locate the "Snapper" but it was too late.

The foregoing acts only serve to emphasize that the efforts made by defeandant fall short of that diligence and precaution that are demanded by the situation to save the tugboat and the barge it was towing from disaster for it appears that more than twenty-four hours had elapsed befora the tug "Tamban" showed up to extend help. The delay was caused not so much because of the lack of available ships in the vicinity where the "Snapper" stalled but because defendant did not have in readiness any tugboat sufficient in tonnage and equipment to attend to the rescue. The tug "Tamban" that was ordered to extend help was fully inadequate for the purpose. It was a small vessel that was authorized to operate only within Manila Bay and did not even have any map of the Visayan Islands. A public utility that is engaged in sea transportation even for a limited service with a fleet of 140 tugboats should have a competent tug to rush for towing or repairs in the event of untoward happening overseas. If defendant had only such a tug ready for such an emergency, this disaster would not have happened. Defendant could have avoided sending a poorly equipped tug whic, as it is to be expected, failed to do job.

While the breaking of the idler may be due to an accident, or to something unexpected, the cause of the disaster which resulted in the

6

Choco NotesTransportation Law cases – Common Carrier of Goods part 1loss of the gasoline can only be attributed to the negligence or lack of precaution to avert it on the part of defendant. Defendant had enough time to effectuate the rescue if it had only a competent tug for the purpose because the weather was good from 3:00 o'clock a.m. to 12:00 o'clock noon of February 4, 1947 and it was only in the afternoon that the wind began to blow with some intensity,1 but failed to do so because of that shortcoming. The loss of the gasoline certainly cannot be said to be due to force majeure or unforeseen event but to the failure of defendant to extend adequate and proper help. Considering these circumstances, and those we have discussed elsewhere, we are persuaded to conclude that defendant has failed to established that it is exempt from liability under the law.

Wherefore, the decision appealed from is reversed. Defendant is hereby ordered to pay to plaintiff the sum of P75,578.50, with legal interest from the date of the filing of the complaint, with costs.

Bengzon, Paras, C.J., Padilla, Montemayor, Reyes, A., Jugo, Labrador,Concepcion, Reyes, J.B.L., and Endencia, JJ., concur.

Fireman’s Fund v. Metro PortG.R. No. 83613 February 21, 1990

FIREMAN'S FUND INSURANCE CO., petitioner, vs.METRO PORT SERVICE, INC., (Formerly E. Razon, Inc.), respondent.

Dollete, Blanco, Ejercito & Associates for petitioner.

Cruz, Durian, Agabin, Atienza, Alday & Tuason for respondent.

GUTIERREZ, JR., J.:

This is a petition for review of the decision and resolution denying reconsideration of the Court of Appeals in CA-G.R. CV No. 00673 entitled "Fireman's Fund Insurance Co. v. Maersk Line, Compañia General de Tabacos de Filipinas and E. Razon, Inc."

The facts are as follows:

Vulcan Industrial and Mining Corporation imported from the United States several machineries and equipment which were loaded on board the SIS Albert Maersk at the port of Philadelphia, U.S.A., and transhipped for Manila through the vessel S/S Maersk Tempo.

The cargo which was covered by a clean bill of lading issued by Maersk Line and Compania General de Tabacos de Filipinas (referred to as the CARRIER) consisted of the following:

xxx xxx xxx

1 piece truck mounted core drill

1 piece trailer mounted core drill

1 (40') container of 321 pieces steel tubings

1 (40') container of 170 pieces steel tubings

1 (40') container of 13 cases, 3 crates, 2 pallets and 26 mining machinery parts. (Rollo, p. 4)

The shipment arrived at the port of Manila on June 3, 1979 and was turned over complete and in good order condition to the arrastre operator E. Razon Inc. (now Metro Port Service Inc. and referred to as the ARRASTRE).

At about 10:20 in the morning of June 8, 1979, a tractor operator, named Danilo Librando and employed by the ARRASTRE, was ordered to transfer the shipment to the Equipment Yard at Pier 3. 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.

The value of the damage was estimated at P187,500.00 which amount was paid by the petitioner insurance company to the consignee, Vulcan Industrial and Mining Corporation.

The petitioner, under its subrogation rights, then filed a suit against Maersk Line, Compania General de Tabacos (as agent) and E. Razon, Inc., for the recovery of the amount it paid the assured under the covering insurance policy. On October 26, 1980, the trial court rendered judgment, the decretal portion of which reads as follows:

xxx xxx xxx

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants by ordering the latter to pay, jointly and severally, the plaintiff the sum of P187,500.00, with legal interest thereon from August 29, 1980 until full payment thereof.

Defendants are also ordered to pay, in solidum, the sum of P10,000.00 as attorney's fees to the plaintiff, and to pay the costs of this suit.

There shall be no award for exemplary damages in favor of the plaintiff, for the reason that defendants are probably acting in good faith in resisting the complaint. (Rollo, pp. 45-46)

All the defendants appealed to the Court of Appeals. Eventually, Maersk Line and Compania General de Tabacos negotiated with the petitioner for the settlement of the latter's claim and no longer pursued their appeal.

On the appeal of the ARRASTRE, the Court of Appeals rendered a decision with the following dispositive portion:

WHEREFORE, foregoing premises considered, the decision of the court a quo insofar as herein defendant-appellant is concerned is REVERSED It is hereby ordered that the complaint against herein defendant-appellant be dismissed. No costs. (Rollo, p. 50)

Reconsideration of the decision was denied in a resolution dated May 23, 1988.

Hence, the present recourse.

The petitioner raises this lone assignment of error:

7


THE HONORABLE COURT OF APPEALS ERRED IN LIMITING LIABILITY SOLELY ON CO-DEFENDANT MAERSK LINES, CONTRARY TO THE FINDINGS OF FACTS OF THE TRIAL COURT A QUO AND OTHER FACTORS SHOWING CLEAR JOINT LIABILITY OF DEFENDANTS IN SOLIDUM.

There is merit in this petition.

This Court has held in a number of cases that findings of fact of the Court of Appeals are, in general, conclusive on the Supreme Court when supported by the evidence on record. The rule is not absolute, however, and allows exceptions, which we find present in the case at bar. The respondent court's findings of facts are contrary to those of the trial court and appear to be contradicted by the evidence on record thus calling for our review. (Metro Port Service, Inc. v. Court of Appeals, 131 SCRA 365 [1984]).

In absolving the ARRASTRE, the respondent Court ruled that although Librando was an employee of the ARRASTRE, since he was included in its payroll, he was technically and strictly an employee of Maersk Line in this particular instance when he drove the tractor admittedly owned by the foreign shipping line. The Court ruled that he received instructions not from Metro Port but from Maersk Line relative to this job. He was performing a duty that properly pertained to Maersk Line which, for lack of a tractor operator, had to get or hire from the ARRASTRE as per their management contract. 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 Line failed to provide. 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 Line.

The foregoing conclusion disregarded the pertinent findings of facts made by the lower court which are supported by the evidence on record, to wit:

1. The accident occurred while the cargoes were in the custody of the arrastre operator.

2. The tractor operator was an employee of the arrastre operator.

xxx xxx xxx

4. By the management contract inasmuch as the foreign shipping company has no tractor operator in its employ, the arrastre provided the operator.

xxx xxx xxx

8. It was likewise the responsibility of the tractor operator, an employee of the arrastre operator to inspect the chassis and tractor before driving the same, but which obligation the operator failed to do.

9. It was also the responsibility of the supervisor in the employ of the arrastre operator to see that their men complied with their respective tasks, which included the examination if the chassis has twist lock. (Rollo, pp. 44-45)

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]). The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). 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 (Visayan Cebu Terminal Co., Inc. v. Commissioner of Internal Revenue, 13 SCRA 357 [1965]). 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 which in no case shall be more than Three Thousand Five Hundred Pesos (P3,500.00) for each package unless the value of the importation is otherwise specified or manifested or communicated in writing together with the invoice value and supported by a certified packing list to the CONTRACTOR by the interested party or parties before the discharge of the goods, as well as all damage that may be suffered on account of loss, damage, or destruction of any merchandise while in custody or under the control of the CONTRACTOR in any pier, shed, warehouse, facility; or other designated place under the supervision of the BUREAU, but said CONTRACTOR shall not be responsible for the condition of the contents of any package received nor for the weight, nor for any loss, injury or damage to the said cargo before or while the goods are being received or remained on the piers, sheds, warehouse or facility if the loss, injury or damage is caused by force majeure, or other cause beyond the CONTRACTORS control or capacity to prevent or remedy; ...

xxx xxx 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. (Original Records, pp. 110-112; Emphasis supplied)

To carry out its duties, the ARRASTRE is required to provide cargo handling equipment which includes among others trailers, chassis for containers. In some cases, however, the shipping line has its own cargo handling equipment.

8


In this particular instance, the records reveal that Maersk Line provided the chassis and the tractor which carried the carried the subject shipment. It merely requested the ARRASTRE 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.

Handling cargo is mainly the s principal 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. He testified:

xxx xxx xxx

Q My question is in your investigation report including enclosures, the principal reason was that the chassis has no rear twist lock?

A Yes, sir.

Q Did you investigate whether the driver Librando inspected the the truck before he operated the same whether there was rear twist lock or not?

A I have asked him about that question whether he had inspected the has any rear twist lock and the answer he did not inspect, sir.

Q As a operator, do you agree with me that it is the duty also of Librando to see to it that the truck is in good condition and fit to travel, is that correct?

A Yes, sir.

Q And as a tractor operator it is his duty to see to it that the van mounted on top of the tractor was properly is that correct?

A Yes, sir. (At pp. 18-20, T.S.N., February 17, 1982)

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.

xxx xxx xxx

Q You mentioned of the absence of a twist lock. Will you tell us where is this twist lock supposed to be located?

A At the rear end of the chassis.

Q Before you operated the tractor which carried the mounted cord drill truck and trailer did you examine if the chasiss had any twist locks?

A No, sir, because I presumed that it had twist locks and I was confident that it had twist locks.

Q As a matter of procedure and according to you, you examined the tractor, do you not make it a practice to examine whether the chassis had any twist locks?

A I used to do that but in that particular instance I thought it had already its twist locks. (p. 8, T.S.N., October 5, 1981)

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. On cross-examination, he stated that:

Q In your experience, Mr. witness, do you know which is ahead of the placing of the container van or the placing of the twist lock on the chassis?

A The twist lock is already permanently attached on the chassis, sir.

Q Earlier, you mentioned that you cannot see the twist lock if the chassis is loaded, correct?

A Yes, sir.

Q Do you what to impress upon the Honorable Court that, by mere looking at a loaded chassis, the twist lock cannot be seen by the naked eye? Because the van contained a hole in which the twist lock thus entered inside the hold and locked itself. It is already loaded. So. you cannot no longer see it.

Q But if you closely examine this chassis which has a load of container van. You can see whether a twist lock is present or not?

A Yes, sir. A twist lock is present.

Q In other words, if the driver of this tractor closely examined this van, he could have detected whether or not a twist lock is present?

A Yes, sir. (pp. 33-35, T.S.N., March 23, 1982; Emphasis supplied)

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 negligence of its employee. With respect to the limited liability of the ARRASTRE, 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.

9

Choco NotesTransportation Law cases – Common Carrier of Goods part 1WHEREFORE, the appealed judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE and that of the Court of First Instance of Manila, 6th Judicial District, Branch II is REINSTATED. No costs.

SO ORDERED.

Aboitiz v. CAG.R. No. 89757 August 6, 1990

ABOITIZ SHIPPING CORPORATION, petitioner, vs.COURT OF APPEALS AND GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondents.

Sycip, Salazar, Hernandez & Gatmaitan for petitioner.

Dollete, Blanco, Ejercito & Associates for private respondent.

GANCAYCO, J.:

The extent of the liability of a carrier of goods is again brought to the fore in this case.

On October 28, 1980, the vessel M/V "P. Aboitiz" took on board in Hongkong for shipment to Manila some cargo consisting of one (1) twenty (20)-footer container holding 271 rolls of goods for apparel covered by Bill of Lading No. 515-M and one (1) forty (40)-footer container holding four hundred forty- seven (447) rolls, ten (10) bulk and ninety-five (95) cartons of goods for apparel covered by Bill of Lading No. 505-M. The total value, including invoice value, freightage, customs duties, taxes and similar imports amounts to US$39,885.85 for the first shipment while that of the second shipment amounts to US$94,190.55. Both shipments were consigned to the Philippine Apparel, Inc. and insured with the General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC for short). The vessel is owned and operated by Aboitiz Shipping Corporation (Aboitiz for short).

On October 31, 1980 on its way to Manila the vessel sunk and it was declared lost with all its cargoes. GAFLAC paid the consignee the amounts US$39,885.85 or P319,086.80 and US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC was subrogated to all the rights, interests and actions of the consignee against Aboitiz, it filed an action for damages against Aboitiz in the Regional Trial Court of Manila alleging that the loss was due to the fault and negligence of Aboitiz and the master and crew of its vessel in that they did not observe the extraordinary diligence required by law as regards common carriers.

After the issues were joined and the trial on the merits a decision was rendered by the trial court on June 29, 1985, the dispositive part of which reads as follows:

PREMISES CONSIDERED, the Court finds in favor of the plaintiff and against the defendant, ordering the latter to pay the former actual damages in the sum of P1,072,611.20 plus legal interest from the date of the filing of the complaint on October 28, 1981, until full payment thereof, attorney's fees in the amount of 20% of the total claim and to pay the costs.

SO ORDERED. 1

Not satisfied therewith, Aboitiz appealed to the Court of Appeals wherein in due course a decision was rendered on March 9, 1989 affirming in toto the appealed decision, with costs against defendant Aboitiz . 2

A motion for reconsideration of said decision filed by Aboitiz was denied in a resolution dated August 15, 1989.

Hence the herein petition for review alleging that the Court of Appeals decided the case not in accordance with law when —

1. The Court of Appeals held that "findings of administrative bodies are not always binding on court . This is especially so in the case at bar where GAFLAC was not a party in the BMI proceedings and which proceedings was not adversary in characther." This ruling is contrary to the principle established in Vasquez vs. Court of Appeals (138 SCRA 559), where it was held that since the BMI possesses the required expertise in shipping matters and is imbued with quasi-judicial powers, its factual findings are conclusive and binding on the court. Likewise, the case of Timber Export Inc. vs. Retla Steamship Co. (CA-G.R. No. 66143-R) also established the rule that decision of BMI must be given "great materiality and weight to the determination and resolution of the case."

2. The Court of Appeals also held that the trial court did not err when it fixed the liability of Aboitiz not on the basis of the stipulation in the bills of lading at US$500.00 per package/container but on the actual value of the shipment lost notwithstanding the long line of cases decided by this Honorable Supreme Court holding a contrary opinion, as shown below.

3. The Court of Appeals also held that the trial court did not abuse its discretion in granting GAFLAC's motion for execution pending appeal notwithstanding the absence of reasonable and justifiable grounds to support the same. 3

Under the first issue petitioner state that the sinking of the vessel M/V "P. Aboitiz" was the subject of an administrative investigation conducted by the Board of Marine Inquiry (BMI) whereby in a decision dated December 26, 1984, it was found that the sinking of the vessel may be attributed to force majeure on account of a typhoon. Petitioner contends that these findings are conclusive on the courts.

In rejecting the evidence offered by the petitioner the appellate court ruled—

But over and above all these considerations, the trial court did not err in not giving weight to the finding of the BMI that the vessel sank due to a fortuitous event. Findings of administrative bodies are not always binding on courts. This is especially so in the case at bar where plaintiff was not a party in the BMI proceedings and which proceeding was not adversary in character. 4

As a general rule, administrative findings of facts are not disturbed by the courts when supported by substantial evidence unless it is tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction. 5 Even in Vasquez vs. Court of Appeals, 6 which is cited by petitioner, this Court ruled that We nevertheless disagree with the conclusion of the BMI exonerating the captain from any negligence "since it obviously had not taken into

10

Choco NotesTransportation Law cases – Common Carrier of Goods part 1account the legal responsibility of a common carrier towards the security of the passengers involved."

This case was brought to court on October 28, 1981. The trial court was never informed of a parallel administrative investigation that was being conducted by the BMI in any of the pleadings of the petitioner. It was only on March 22, 1985 when petitioner revealed to the trial court the decision of the BMI dated December 26, 1984 (one day after Christmas day). 7 The said decision appears to have been rendered over three (3) years after the case was brought to court.

Moreover, said administrative investigation was conducted unilaterally. Private respondent GAFLAC was not notified or given an opportunity to participate therein. It cannot thereby be bound by said findings and conclusions of the BMI.

The trial court and the appellate court found that the sinking of the M/V "P. Aboitiz" was not due to the waves caused by tropical storm "Yoning" but due to the fault and negligence of petitioner, its master and crew. The court reproduces with approval said findings —

xxx xxx xxx

After a careful examination of the evidence, the Court is convinced in the plaintiffs claim that the M/V "Aboitiz" and its cargo were not lost due to fortuitous event or force majeure.

To begin with, paragraph 4 of the marine protest (Exh. "4", also Exhibit "M"), which is defendant's own evidence, shows that the wind force when the ill-fated ship foundered was 10 to 15 knots. According to the Beaufort Scale (Exhibit "I"), which is admittedly an accurate reference for measuring wind velocity, the wind force of 10 to 15 knots is classified as scale No. 4 and described as "moderate breeze," small waves, becoming longer, fairly frequent white horses. Meteorologist Justo Iglesias, Jr. himself affirms the above description of a wind force of 10 to 15 knots and adds that the weather condition prevailing under said wind force is usual and forseeable. Thus Iglesias, Jr. testified:

Q. In the marine protest of the master of the vessel of Aboitiz, there is reference to wind force from ten to 15 knots. In this Beaufort Scale, will you be able to clarify what this wind force of 10 to 15 as stated in the marine protest?

A. It will be under Force 4 of the Beaufort Scale.

Q. What is the basis of your answer?

A. 10 to 15 falls within this scale of the Beaufort Scale, Force 4.

Atty. Dollete:

May I read into the records, Your Honor. Force 4, descriptive term moderate breeze. Near velocity in knots 11-16 meters per second, 5.5-7.9 in kilometers per hour to 20 to 28 kilometers per hour and 13 to 18 miles per hour. Sea the description of this will be small waves becoming longer fairly frequent white horse (sic).

Q. In the layman's language how do you interpret this white horses?

A. It means white forms. At the top of the crest they were beginning to form white foams.

Q. How about this moderate breeze as described under this Force 4 of the Beaufort Scale, how will you interpret that?

A. Moderate breeze will only give winds of 29 kilometers per hour which is equivalent to just extending your hand out of a running car at that speed.

Q. This weather condition between October 28 and November 1, 1980, will you classify this as extraordinary or ordinary?

A. It was ordinary.

Q. When you said ordinary, was it usual or unusual?

A. It is usual.

Q. When you said it is usual it is foreseeable and predictable?

A. For an experienced meteorologist like a ship captain, it is foreseeable.

Q. When it is foreseeable, necessarily it follows that the weather could be predicted based on the weather bulletin or report?

A. Yes, sir.

Q. And usually the bulletin states the condition in other words, this weather condition which you testified to and reflected in your Exhibit "7" is an ordinary occurrence within that area of Philippine responsibility?

A. Yes, sir.

Q. And in fact this weather condition is to be anticipated at that time of the year with respect to weather condition which is reflected in Exhibit "7"?

A. It is a regular occurrence.

xxx xxx xxx

Moreover, Capt. Racines again admitted in Court that his ill-fated vessel was 200 miles away from the storm 'Yoning when it sank. Said Capt. Racines:

Q. How far were you from this depression or weather disturbance on October 30, 1980?

A. Two hundred miles.

xxx xxx xxx

Q. In other words, this depression was far from your route because it took a northern approach whereas you were towards the south approach?

A. As I have said, I was 200 miles away from the disturbance.

xxx xxx xxx

Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and its cargo were not lost due to fortuitous event or force majeure.

11


In accordance with Article 1732 of the Civil Code, the defendant common carrier, from the nature of its business and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according to all the circumstances of each case. While the goods are in the possession of the carrier, it is but fair that it exercise extra ordinary diligence in protecting them from loss or damage, and if its occurs the law presumes that it was due to the carrier's fault or negligence; that is necessary to protect the interest of the shipper which is at the mercy of the carrier (Article 1756, Civil Code; Anuran vs. Puno, 17 SCRA 224; Nocum vs. Laguna Tayabas Bus Co., 30 SCRA 69; Landigan vs. Pangasinan Transportation Company, 88 SCRA 284). In the case at bar, the defendant failed to prove that the loss of the subject cargo was not due to its fault or negligence. 8

The said factual findings of the appellate court and the trial court are finding on this Court. Its conclusion as to the negligence of the petitioner is supported by the evidence.

The second issue raised to the effect that the liability of the petitioner should be fixed at US$500.00 per package/container, as stipulated in the bill of lading and not at the actual value of the cargo, should be resolved against petitioner.

While it is true that in the bill of lading there is such stipulation that the liability of the carrier is US$500.00 per package/container/customary freight, there is an exception, that is, when the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This is provided for in Section 4(5) of the Carriage of Goods by Sea Act to wit —

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been 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.

Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently mis-stated by the shipper in the bill of lading. (Emphasis supplied.)

In this case the description of the nature and the value of the goods shipped are declared and reflected in the bills of lading. Thus, it is the basis of the liability of the carrier as the actual value of the loss.

Moreover, it is absurd to interpret "container," as provided in the bill of lading to be valued at US$500.00 each, to refer to the container which is the modern substitute for the hold of the vessel. 9 The package/container contemplated by the law to limit the liability of the

carrier should be sensibly related to the unit in which the shipper packed the goods and described them, not a large metal object, functionally a part of the ship, in which the carrier used them to be contained. 10 Such "container" must be given the same meaning and classification as a "package" and "customary freight unit."

The appellate court in disposing this issue quoted its decision in Allied Guarantee Insurance Co. Inc. vs. Aboitiz Shipping Corporation, CA GR. CV No. 04121, March 23, 1987, viz;

Third. Still it is contended that the carrier's liability is limited to $500.00, pursuant to section 8 of the Bill of Lading which provides that 'The liability of the Carrier for any loss or damage to the goods shall in no case exceed the sum of U.S. $500.00 per package/container/customary freight unit, unless the value of the goods has been correctly declared and extra freight paid, prior to the shipment and a signed declaration to this effect appears in the bill of lading, duly confirmed by the Carrier. ... It is contended that the Bill of Lading does not indicate the value of the goods. Nor was the corresponding freight ... paid prior to shipment.

Generally speaking a stipulation, limiting the common carrier's liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is valid. (Civil Code, Art. 1749). Such stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire — & Marine Insurance Co. vs. Macondray Co., 70 SCRA 122, 126-127 (1976) In the case at bar, the goods shipped on the M/V "P. Aboitiz" were insured for P278,530.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put it in its power to have taken the whole cargo. In Juan Ysmael & Co. vs. Gabino Barreto & Co., 51 Phil. 90 (1927), it was held that a stipulation limiting the carrier's liability to $500.00 per package of silk when the value of such package was P2,500.00 unless the true value had been declared and the corresponding freight paid was "void as against public policy." That ruling applies to this case.

Moreover, by the weight of modern authority, a carrier cannot limit its liability for injury or loss of goods shipped where such injury or loss was caused by its own negligence. (Juan Ysmael & Co. v. Gabino Barreto & Co., supra) Here to limit the liability of Aboitiz Shipping to $500.00 would nullify the policy of the law imposing on common carriers the duty to observe extraordinary diligence in the carriage of goods.

Indeed, it is even doubtful whether the word "container" in section 8 of the Bill of Lading includes containers which are a substitute for the hold of a vessel. This provision limits the carrier's liability to "the sum of US$500.00 per package /container customary freight unit." By the rule of noscitur a sociis the word "container" must be given the same meaning as package and customary freight unit and therefore cannot possibly refer to modern containers which are used for shipment of goods in bulk. 11

In the same light, the third issue questioning the order of execution pending appeal of the trial court must be resolved against petitioner as well.

The averments in the motion for execution pending appeal dated December 8, 1985 are as follows —

Aside from the fact that petitioner can easily post a supersedeas bond to stay execution, still other circumstances are present peculiar in the

12

Choco NotesTransportation Law cases – Common Carrier of Goods part 1incident of the sinking of M/V P. Aboitiz which would justify the issuance of execution pending appeal. There are other decided cases adjudging petitioner liable in the lower court in the same incident. Other cases are on appeal, upcoming and about to be decided. The value of cargo loss caused by the sinking of petitioner's vessel is in the tune of no less than fifty million pesos inclusive of interests fees and all claims. Its insurer has gone bankrupt and petitioner alone must face and answer for all these claims. In one branch of the Regional Trial Court of Manila alone there are twenty five (25) cases pending against petitioner involving the same loss of cargoes aboard M/V "P. Aboitiz" as per certification herewith attached as Annex "A". This claim do not include others, pending in various courts in Metro Manila which would have to be satisfied ultimately by petitioner, it being a common carrier which failed to exercise extraordinary diligence over the goods lost. The judgment sought to be enforced may indeed be rendered imminently ineffectual in the ultimate analysis.

The purpose of Sec. 2 Rule 39 would not be achieved or execution pending appeal would not be achieved if insolvency would still be awaited. The remedy is available to petitioner under Sec. 3 Rule 39 of the Rules of Court but to place insolvency as a condition to issuance of a writ of execution pending appeal would render it illusory and ineffectual.

Justice and equity therefore dictates, that as a consequence of the bond posted by private respondent and there being several other cases against petitioner, decided as well as pending, the totality of which claims may render the appealed decision imminently ineffectual and the further fact that the appeal being interposed is evidently for delay as a consequence of the several adverse decisions against it as a common carrier in the lower court, a reconsideration of the decision dated November 25, 1985 of the Honorable Court will be in consonance with law, jurisprudence and equity.

In order to erase all apprehensions that the aforesaid judgment award will wind up ineffectual when not immediately executed, it is most respectfully prayed that herein respondent be required to post a supersedeas bond. The statutory undertaking of posting a bond will then achieve a three-pronged direction of justice, (1) it will cast no doubt on the solvency of the herein petitioner; (2) it will not defeat or render phyrric a just resolution of the case whichever party prevails in the end or in the main case on appeal, since both of their claims are secured by their corresponding bonds; and (3) it will put to equitable operation Sec. 3 Rule 39 of the Revised Rules of Court. 12

The foregoing allegations which were not traversed that petitioner is facing many law suits arising from said sinking of its vessel involving cargo loss of no less than 50 million pesos, in some cases of which judgment had been rendered against Aboitiz, and considering that its insurer is now bankrupt, leaving Aboitiz alone to face and answer the suits, which may render any judgment for GAFLAC ineffectual, that the appeal is interposed manifestly for delay and the willingness of GAFLAC to put up a bond certainly are cogent bases for the issuance of an order of execution pending appeal.

Finally, in a similar case for damages arising from the same incident entitled Aboitiz Shipping Corporation vs. Honorable Court of Appeals and Allied Guaranteed Insurance Company, Inc., G.R. No. 88159, this Court in a resolution dated November 13, 1989 dismissed the petition for lack of merit. Therein this Court held in part —

The appellate court affirmed the decision of the lower court based on its findings that the cause of sinking of the vessel was due to its unseaworthiness and the failure of its crew and the master to exercise extraordinary diligence.

The petitioner, however, contends that the appellate court erred on this matter and insists that the contrary findings of the Board of Marine Inquiry (BMI), which conducted a separate investigation to the effect that the proximate cause of the sinking of the vessel was due to force majeure and that the officers and crew had exhausted all preventive measures to save the vessel and her cargo but to no avail, should prevail. This, according to the petitioner is based on the doctrine of primary administrative jurisdiction.

This argument is untenable.

A cursory reading of the decision and resolution of the appellate court shows that the same took into consideration not only the findings of the lower court but also the findings of the BMI. Thus, the appellate court stated:

Indeed, the decision of the Board was based simply on its finding that the Philippine Coast Guard had certified the vessel to be seaworthy and that it sank because it was exposed later to an oncoming typhoon plotted within the radius where the vessel was positioned. This generalization certainly cannot prevail over the detailed explanation of the trial court in this case as basis for its contrary conclusion. (Rollo, at p. 42)

We find no cogent reason to deviate from the factual findings of the appellate court and rule that the doctrine of primary administrative jurisdiction is not applicable in the case at bar.

The other issue raised is whether or not the carrier's liability is limited to $500.00 pursuant to section 8 of the Bill of Lading. The petitioner claims that the appellate court erred in disregarding the limitation of liability stipulated in the bill of lading. It argues that the consignee agreed to this amount (and) therefore is bound by this rate and that there is no basis for the appellate court's finding that the rate is unreasonable.

The argument is not well-taken. As aptly stated by the appellate court:

Generally speaking any stipulation, limiting the common carrier's liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value is valid. (Civil Code, Art. 1749) Such stipulation, however, must be reasonable and just under the circumstances and must have been fairly and freely agreed upon. (St. Paul Fire & Marine Insurance Co. v. Macondray & Co., 70 SCRA 122, 126-127 [1976] In the case at bar, the goods shipped on the M/V "P. Aboitiz" were insured for P278,536.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put in its power to have taken the whole cargo. In Juan Ysmael & Co. v. Gabino Barretto & Co., 51 Phil. 90 [1927], it was held that a stipulation limiting the carrier's liability to P300.00 per package of silk, when the value of such package was P2,500.00, unless the true value had been declared and the corresponding freight paid; was void as against public policy. That ruling applies to this case.

As argued by the respondent, a limitation of liability in this case would render inefficacious the extraordinary diligence required by law of common carriers. 13

13


The motion for reconsideration of said resolution filed by petitioner was denied with finality in a resolution dated January 8, 1990. Said resolution of the case had become final and executory, entry of judgment having been made and the records remanded for execution on March 22, 1990.

Said case is now the law of the case applicable to the present petition.

WHEREFORE, the petition is dismissed with costs against petitioner.

SO ORDERED.

Bankers and Manufacturers v. CA[G.R. No. 80256. October 2, 1992.]

BANKERS & MANUFACTURERS ASSURANCE CORP., Petitioner, v. COURT OF APPEALS, F. E. ZUELLIG & CO., INC. and E. RAZON, INC., Respondents.

Dollete, Blanco, Ejercito and Associates for Petitioner.

SYLLABUS

1. CIVIL LAW; TRANSPORTATION; SHIPMENT IN CONTAINER; CARRIER’S DUTY IS MERELY TO TRANSPORT. — It must be underscored that the shipment involved in the case at bar was "containerized." The goods under this arrangement are stuffed, packed, and loaded by the shipper at a place of his choice, usually his own warehouse, in the absence of the carrier. The container is sealed by the shipper and thereafter picked up by the carrier. Consequently, the recital of the bill of lading for goods thus transported ordinarily would declare "Said to Contain", "Shipper’s Load and Count", "Full Container Load", and the amount or quantity of goods in the container in a particular package is only prima facie evidence of the amount or quantity which may be overthrown by parol evidence. A shipment under this arrangement is not inspected or inventoried by the carrier whose duty is only to transport and deliver the containers in the same condition as when the carrier received and accepted the containers for transport.

2. ID.; ID.; ID.; ID.; RULE ON PRIMA FACIE LIABILITY OF CARRIER NOT APPLICABLE IN CASE AT BAR. — If any of the vans were found in bad condition, or if any inspection of the goods was to be done in order to determine the condition thereof, the same should have been done at pierside, the pier warehouse, or at any time and place while the vans were under the care and custody of the carrier or of the arrastre operator. Unfortunately for petitioner, even as one of the three vans was inspected and stripped, the two other vans were not similarly gone over. Rather, these two vans and the contents of the one previously stripped were accepted without exception as to any supposed bad order or condition by petitioner’s own broker. To all appearances, therefore, the shipment was accepted by petitioner in good order. It logically follows that the case at bar presents no occasion for the necessity of discussing the diligence required of a carrier or of the theory of prima facie liability of the carrier, for from all indications, the shipment did not suffer loss or damage while it was under the care of the carrier, or of the arrastre operator, it must be added.

D E C I S I O N

MELO, J.:

After the Court of Appeals in CA-G.R. CV No. 08226 (July 8, 1987, Kapunan, Puno (P), Marigomen, JJ.,) affirmed the dismissal by Branch XVI of the Regional Trial Court of Manila of petitioner’s complaint for recovery of the amount it had paid its insured concerning the loss of a portion of a shipment, petitioner has interposed the instant petition for review on certiorari.

Petitioner presents the following bare operative facts: 108 cases of copper tubings were imported by Ali Trading Company. The tubings were insured by petitioner and arrived in Manila on board the vessel S/S "Oriental Ambassador" on November 4, 1978, and turned over to private respondent E. Razon, the Manila arrastre operator upon discharge at the waterfront. The carrying vessel is represented in the Philippines by its agent, the other private respondent, F. E. Zuellig and Co., Inc. Upon inspection by the importer, the shipment was allegedly found to have sustained loses by way of theft and pilferage for which petitioner, as insurer, compensated the importer in the amount of P31,014.00.chanrobles lawlibrary : rednad

Petitioner, in subrogation of the importer-consignee and on the basis of what it asserts had been already established - that a portion of the shipment was lost through theft and pilferage - forthwith concludes that the burden of proof of proving a case of non-liability shifted to private respondents, one of whom, the carrier, being obligated to exercise extraordinary diligence in the transport and care of the shipment. The implication of petitioner’s statement is that private respondents have not shown why they are not liable. The premises of the argument of petitioner may be well-taken but the conclusions are not borne out or supported by the record.

It must be underscored that the shipment involved in the case at bar was "containerized." The goods under this arrangement are stuffed, packed, and loaded by the shipper at a place of his choice, usually his own warehouse, in the absence of the carrier. The container is sealed by the shipper and thereafter picked up by the carrier. Consequently, the recital of the bill of lading for goods thus transported ordinarily would declare "Said to Contain", "Shipper’s Load and Count", "Full Container Load", and the amount or quantity of goods in the container in a particular package is only prima facie evidence of the amount or quantity which may be overthrown by parol evidence.

A shipment under this arrangement is not inspected or inventoried by the carrier whose duty is only to transport and deliver the containers in the same condition as when the carrier received and accepted the containers for transport. In the case at bar, the copper tubings were placed in three containers. Upon arrival in Manila on November 4, 1978, the shipment was discharge in apparent good order and condition and from the pier’s docking apron, the containers were shifted to the container yard of Pier 3 for safekeeping. Three weeks later, one of the container vans, said to contain 19 cases of the cargo, was "stripped" in the presence of petitioner’s surveyors, and three cases were found to be in bad order. The 19 cases of the van stripped were then kept inside Warehouse No. 3 of Pier 3 pending delivery. It should be stressed at this point, that the three cases found in bad order are not the cases for which the claim below was presented, for although the three cases appeared to be in bad order, the contents remained good and intact.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1The two other container vans were not moved from the container yard and they were not stripped. On December 8, 1978, the cargo was released to the care of the consignee’s authorized customs broker, the RGS Customs Brokerage. The broker, accepting the shipment without exception as to bad order, caused the delivery of the vans to the consignee’s warehouse in Makati. It was at that place, when the contents of the two containers were removed and inspected, that petitioner’s surveyors reported, that checked against the packing list, the shipment in Container No. OOLU2559269 was short of seven cases (see p. 18, Rollo).chanrobles law library

Under the prevailing circumstances, it is, therefore, not surprising why the Court of Appeals in sustaining the trial court, simply quoted the latter, thus:jgc:chanrobles.com.ph

"It must be also considered that the subject container was not stripped of its contents at the pier zone. The two unstripped containers (together with the 19 cases removed from the stripped third container) were delivered to, and received by, the customs broker for the consignee without any exception or notation of bad order or shortlanding (Exhs. 1, 2 and 3-Vessel). If there was any suspicion or indication of irregularity or theft or pilferage, plaintiff’s or consignee’s representatives should have noted the same on the gate passes or insisted that some form of protest form part of the documents concerning the shipment. Yet, no such step was taken. The shipment appears to have been delivered to the customs broker in good order and condition and complete save for the three cases noted as being apparently in bad order.

Consider further that the stripping of the subject container was done at the consignee’s warehouse where, according to plaintiff’s surveyor, the loss of the seven cases was discovered. The evidence is not settled as whether the defendants’ representatives were notified of, and were present at, the unsealing and opening of the containers in the bodega. Nor is the evidence clear how much time elapsed between the release of the shipment from the pier and the stripping of the containers at consignee’s bodega. All these fail to discount the possibility that the loss in question could have taken place after the containers had left the pier." (pp. 20-21, Rollo)

Verily, if any of the vans were found in bad condition, or if any inspection of the goods was to be done in order to determine the condition thereof, the same should have been done at pierside, the pier warehouse, or at any time and place while the vans were under the care and custody of the carrier or of the arrastre operator. Unfortunately for petitioner, even as one of the three vans was inspected and stripped, the two other vans were not similarly gone over. Rather, these two vans and the contents of the one previously stripped were accepted without exception as to any supposed bad order or condition by petitioner’s own broker. To all appearances, therefore, the shipment was accepted by petitioner in good order.chanrobles law library : red

It logically follows that the case at bar presents no occasion for the necessity of discussing the diligence required of a carrier or of the theory of prima facie liability of the carrier, for from all indications, the shipment did not suffer loss or damage while it was under the care of the carrier, or of the arrastre operator, it must be added.

WHEREFORE, the petition is hereby DISMISSED and the decision of the Court of Appeals AFFIRMED, with costs against petitioner.

SO ORDERED.

Summa Insurance Corp. v. CA[G.R. No. 84680. February 5, 1996]

SUMMA INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS and METRO PORT SERVICE, INC., respondents.D E C I S I O NPANGANIBAN, J.:

Is an arrastre operator legally liable for the loss of a shipment in its custody? If so, what is the extent of its liability? These are the two questions that this Court faced in this petition for review on certiorari of the Decision[1] of the Court of Appeals[2] in CA-G.R. No. CV 04964 promulgated on April 27, 1988, which affirmed with modification the decision of the Court of First Instance of Manila in Civil Case No. 82-13988, ordering petitioner to pay private respondent a sum of money, with legal interest, attorney’s fees and the costs of the suit.

The Facts

On November 22, 1981, the S/S “Galleon Sapphire”, a vessel owned by the National Galleon Shipping Corporation (NGSC), arrived at Pier 3, South Harbor, Manila, carrying a shipment consigned to the order of Caterpillar Far East Ltd. with Semirara Coal Corporation (Semirara) as “notify party.” The shipment, including a bundle of PC 8 U blades, was covered by marine insurance under Certificate No. 82/012-FEZ issued by petitioner and Bill of Lading No. SF/MLA 1014. The shipment was discharged from the vessel to the custody of private respondent, formerly known as E. Razon, Inc., the exclusive arrastre operator at the South Harbor. Accordingly, three good-order cargo receipts were issued by NGSC, duly signed by the ship’s checker and a representative of private respondent.

On February 24, 1982, the forwarder, Sterling International Brokerage Corporation, withdrew the shipment from the pier and loaded it on the barge “Semirara 8104.” The barge arrived at its port of destination, Semirara Island, on March 9, 1982. When Semirara inspected the shipment at its warehouse, it discovered that the bundle of PC8U blades was missing.

On March 15, 1982, private respondent issued a shortlanded certificate stating that the bundle of PC8U blades was already missing when it received the shipment from the NGSC vessel. Semirara then filed with petitioner, private respondent and NGSC its claim for P280,969.68, the alleged value of the lost bundle.

On September 29, 1982, petitioner paid Semirara the invoice value of the lost shipment. Semirara thereafter executed a release of claim and subrogation receipt. Consequently, petitioner filed its claims with NGSC and private respondent but it was unsuccessful.

Petitioner then filed a complaint (Civil Case No. 82-13988) with the Regional Trial Court, Branch XXIV, Manila, against NGSC and private respondent for collection of a sum of money, damages and attorney’s fees.

On August 2, 1984, the trial court rendered a decision absolving NGSC from any liability but finding private respondent liable to petitioner. The dispositive portion of the decision reads as follows:

“PREMISES CONSIDERED, judgment is hereby rendered ordering defendant Metro Port Service, Inc. to pay plaintiff Summa Insurance Corporation the sum of P280,969.68 with legal interest from

15

Choco NotesTransportation Law cases – Common Carrier of Goods part 1November 22, 1982, the date of the filing of the complaint, until full payment, and attorney’s fees in the sum of P20,000.00, with costs of suit.

“The complaint as against defendant National Galleon Shipping Corporation and the counterclaim interposed by said defendant are hereby dismissed.” (Rollo, p. 32).

In resolving the issue as to who had custody of the shipment when it was lost, the trial court relied more on the good-order cargo receipts issued by NGSC than on the short-landed certificate issued by private respondent. The trial court held:

“As between the aforementioned two documentary exhibits, the Court is more inclined to give credence to the cargo receipts. Said cargo receipts were signed by a checker of defendant NGSC and a representative of Metro Port. It is safe to presume that the cargo receipts accurately describe the quantity and condition of the shipment when it was discharged from the vessel. Metro Port’s representative would not have signed the cargo receipts if only four (4) packages were discharged from the vessel and given to the possession and custody of the arrastre operator. Having been signed by its representative, the Metro Port is bound by the contents of the cargo receipts.

“On the other hand, the Metro Port’s shortlanded certificate could not be given much weight considering that, as correctly argued by counsel for defendant NGSC, it was issued by Metro Port alone and was not countersigned by the representatives of the shipping company and the consignee. Besides, the certificate was prepared by Atty. Servillano V. Dolina, Second Deputy General Manager of Metro Port, and there is no proof on record that he was present at the time the subject shipment was unloaded from the vessel and received by the arrastre operator. Moreover, the shortlanded certificate bears the date of March 15, 1982, more than three months after the discharge of the cargo from the carrying vessel.

“Neither could the Court give probative value to the marine report (Exhibit “J”, also Exhibit “1”-Razon). The attending surveyor who attended the unloading of the shipment did not take the witness stand to testify on said report. Although Transnational Adjustment Co.’s general manager, Mariano C. Remorin, was presented as a witness, his testimony is not competent because he was not present at the time of the discharge of the cargo.

“Under the foregoing considerations, the Court finds that the one (1) bundle of PC8U blade in question was not lost while the cargo was in the custody of the carrying vessel. Considering that the missing bundle was discharged from the vessel unto the custody of defendant arrastre operator and considering further that the consignee did not receive this cargo from the arrastre operator, it is safe to conclude from these facts that said missing cargo was lost while same was in the possession and control of defendant Metro Port. Defendant Metro Port has not introduced competent evidence to prove that the loss was not due to its fault or negligence. Consequently, only the Metro Port must answer for the value of the missing cargo. Defendant NGSC is absolved of any liability for such loss.”

On appeal, the Court of Appeals modified the decision of the trial court and reduced private respondent’s liability to P3,500.00 as follows[3]:

“WHEREFORE, the judgment appealed from is MODIFIED in that defendant Metro Port Service, Inc., is ordered to pay plaintiff Summa Insurance Corporation:

(1) the sum of P3,500.00, with legal interest from November 22, 1982, until fully paid; and

(2) the sum of P7,000.00, as and for attorney’s fees.

“Costs against defendant Metro Port Service, Inc.”

Petitioner moved for reconsideration of the said decision but the Court of Appeals denied the same. Hence, the instant petition.

The Issues

The issues brought by the parties could be stated as follows:

(1) Is the private respondent legally liable for the loss of the shipment in question?

(2) If so, what is the extent of its liability?

The First Issue: Liability for Loss of Shipment

Petitioner was subrogated to the rights of the consignee. The relationship therefore between the consignee and the arrastre operator must be examined. This relationship is much akin to that existing between the consignee or owner of shipped goods and the common carrier, or that between a depositor and a warehouseman.[4] In the performance of its obligations, an arrastre operator should observe the same degree of diligence as that required of a common carrier and a warehouseman as enunciated under Article 1733 of the Civil Code and Section 3(b) of the Warehouse Receipts Law, respectively. Being the custodian of the goods discharged from a vessel, an arrastre operator’s duty is to take good care of the goods and to turn them over to the party entitled to their possession.

In this case, it has been established that the shipment was lost while in the custody of private respondent. We find private respondent liable for the loss. This is an issue of fact determined by the trial court and respondent Court, which is not reviewable in a petition under Rule 45 of the Rules of Court.

The Second Issue: Extent of Liability

In the performance of its job, an arrastre operator is bound by the management contract it had executed with the Bureau of Customs. However, a management contract, which is a sort of a stipulation pour autrui within the meaning of Article 1311 of the Civil Code, is also binding on a consignee because it is incorporated in the gate pass and delivery receipt which must be presented by the consignee before delivery can be effected to it.[5] The insurer, as successor-in-interest of the consignee, is likewise bound by the management contract.[6] Indeed, upon taking delivery of the cargo, a consignee (and necessarily its successor-in- interest) tacitly accepts the provisions of the management contract, including those which are intended to limit the liability of one of the contracting parties, the arrastre operator.[7]

However, a consignee who does not avail of the services of the arrastre operator is not bound by the management contract.[8] Such an exception to the rule does not obtain here as the consignee did in fact accept delivery of the cargo from the arrastre operator.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1Section 1, Article VI of the Management Contract between private respondent and the Bureau of Customs[9] provides:

1. Responsibility and Liability for Losses and Damages - 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 a 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 steamship 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 which in no case shall be more than Three Thousand Five Hundred Pesos (P3,500.00) for each package unless the value of the importation is otherwise specified or manifested or communicated in writing together with the invoice value and supported by a certified packing list to the CONTRACTOR by the interested party or parties before the discharge of the goods, as well as all damage that may be suffered on account of loss, damage, or destruction of any merchandise while in custody or under the control of the CONTRACTOR in any pier, shed, warehouse, facility or other designated place under the supervision of the BUREAU, x x x (Italics supplied).

Interpreting a similar provision in the management contract between private respondent’s predecessor, E. Razon, Inc. and the Bureau of Customs, the Court said in E. Razon Inc. vs. Court of Appeals:[10]

“Indeed, the provision in the management contract regarding the declaration of the actual invoice value ‘before the arrival of the goods’ must be understood to mean a declaration before the arrival of the goods in the custody of the arrastre operator, whether it be done long before the landing of the shipment at port, or immediately before turn-over thereof to the arrastre operator’s custody. What is essential is knowledge beforehand of the extent of the risk to be undertaken by the arrastre operator, as determined by the value of the property committed to its care that it may define its responsibility for loss or damage to such cargo and to ascertain compensation commensurate to such risk assumed x x x.”

In the same case, the Court added that the advance notice of the actual invoice of the goods entrusted to the arrastre operator is “for the purpose of determining its liability, that it may obtain compensation commensurable to the risk it assumes, (and) not for the purpose of determining the degree of care or diligence it must exercise as a depository or warehouseman”[11] since the arrastre operator should not discriminate between cargoes of substantial and small values, nor exercise care and caution only for the handling of goods announced to it beforehand to be of sizeable value, for that would be spurning the public service nature of its business.

On the same provision limiting the arrastre operator’s liability, the Court held in Northern Motors, Inc. v. Prince Line[12]:

“Appellant claims that the above quoted provision is null and void, as it limits the liability of appellee for the loss, destruction or damage of any merchandise, to P500.00 per package, contending that to sustain the validity of the limitation would be to encourage acts of conversion and unjust enrichment on the part of the arrastre operator. Appellant, however, overlooks the fact that the limitation of appellee’s liability under said provision, is not absolute or unqualified, for if the value of the merchandise is specified or manifested by the consignee, and the corresponding arrastre charges are paid on the basis of the declared value, the limitation does not

apply. Consequently, the questioned provision is neither unfair nor abitrary, as contended, because the consignee has it in his hands to hold, if he so wishes, the arrastre operator responsible for the full value of his merchandise by merely specifying it in any of the various documents required of him, in clearing the merchandise from the customs. For then, the appellee arrastre operator, by reasons of the payment to it of a commensurate charge based on the higher declared value of the merchandise, could and should take extraordinary care of the special or valuable cargo. In this manner, there would be mutuality. What would, indeed, be unfair and arbitrary is to hold the arrastre operator liable for the full value of the merchandise after the consignee has paid the arrastre charges only (on) a basis much lower than the true value of the goods.”

In this case, no evidence was offered by petitioner proving the amount of arrastre fees paid to private respondent so as to put the latter on notice of the value of the cargo. While petitioner alleged that prior to the loss of the package, its value had been relayed to private respondent through the documents the latter had processed, petitioner does not categorically state that among the submitted documents were the pro forma invoice value and the certified packing list. Neither does petitioner pretend that these two documents were prerequisites to the issuance of a permit to deliver or were attachments thereto. Even the permit to deliver, upon which petitioner anchors its arguments, may not be considered by the Court because it was not identified and formally offered in evidence.[13]

In civil cases, the burden of proof is on the party who would be defeated if no evidence is given on either side. Said party must establish his case by a preponderance of evidence, which means that the evidence as a whole adduced by one side is superior to that of the other.[14] Petitioner having asserted the affirmative of the issue in this case, it should have presented evidence required to obtain a favorable judgment.

On the other hand, on top of its denial that it had received the invoice value and the packing list before the discharge of the shipment, private respondent was able to prove that it was apprised of the value of the cargo only after its discharge from the vessel, ironically through petitioner’s claim for the lost package to which were attached the invoice and packing list. All told, petitioner failed to convince the Court that the requirement of the management contract had been complied with to entitle it to recover the actual invoice value of the lost shipment.

Anent the attorney’s fees, we find the award to be proper considering that the acts and omissions of private respondent have compelled petitioner to litigate or incur expenses to protect its rights.[15] However, as to the amount of the award, we find no reason to re-examine the appellate court’s determination thereon in view of the amount of the principal obligation. Otherwise, we would be disregarding the doctrine that discretion, when well exercised, should not be disturbed.

WHEREFORE, the petition for review on certiorari is DENIED and the decision of the Court of Appeals is AFFIRMED. Costs against petitioner.

SO ORDERED.

Sarkies Tours v. CA[G.R. No. 108897. October 2, 1997]

17

Choco NotesTransportation Law cases – Common Carrier of Goods part 1SARKIES TOURS PHILIPPINES, INC. petitioner vs. HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G. FORTADES, MARISOL A. FORTADES and FATIMA A. FORTADES., respondent.D E C I S I O NROMERO, J.:

This petition for review is seeking the reversal of the decision of the Court of Appeals in CA-G.R. CV No. 18979 promulgated on January 13, 1993, as well as its resolution of February 19, 1993, denying petitioner’s motion for reconsideration for being a mere rehash of the arguments raised in the appellant’s brief.

The case arose from a damage suit filed by private respondents Elino, Marisol, and Fatima Minerva, all surnamed Fortades, against petitioner for breach of contract of carriage allegedly attended by bad faith.

On August 31, 1984, Fatima boarded petitioner’s De Luxe Bus No. 5 in Manila on her way to Legazpi City. Her brother Raul helped her load three pieces of luggage containing all of her optometry review books, materials and equipment, trial lenses, trial contact lenses, passport and visa, as well as her mother Marisol’s U.S. immigration (green) card, among other important documents and personal belongings. Her belongings was kept in the baggage compartment of the bus, but during a stopover at Daet, it was discovered that all but one bag remained in the open compartment. The others, including Fatima’s things, were missing and could have dropped along the way. Some of the passengers suggested retracing the route to try to recover the lost items, but the driver ignored them and proceeded to Legazpi City.

Fatima immediately reported the loss to her mother who, in turn, went to petitioner’s office in Legazpi City and later at its head office in Manila. The latter, however, merely offered her P1,000.00 for each piece of luggage lost, which she turned down. After returning to Bicol disappointed but not defeated, they asked assistance from the radio stations and even from Philtranco bus drivers who plied the same route on August 31st. The effort paid off when one of Fatima’s bags was recovered. Marisol also reported the incident to the National Bureau of Investigation’s field office in Legazpi City, and to the local police.

On September 20, 1984, respondents, through counsel, formally demanded satisfaction of their complaint from petitioner. In a letter dated October 1, 1984, the latter apologized for the delay and said that “(a) team has been sent out to Bicol for the purpose of recovering or at least getting the full detail”[1] of the incident.

After more than nine months of fruitless waiting, respondents decided to file the case below to recover the value of the remaining lost items, as well as moral and exemplary damages, attorney’s fees and expenses of litigation. They claimed that the loss was due to petitioner’s failure to observe extraordinary diligence in the care of Fatima’s luggage and that petitioner dealt with them in bad faith from the start. Petitioner, on the other hand, disowned any liability for the loss on the ground that Fatima allegedly did not declare any excess baggage upon boarding its bus.

On June 15, 1988, after trial on the merits, the court a quo adjudged the case in favor of herein respondents, viz:

“PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiffs (herein respondents) and against the herein defendant

Sarkies Tours Philippines, Inc., ordering the latter to pay to the former the following sums of money, to wit:

1. The sum of P30,000.00 equivalent to the value of the personal belongings of plaintiff Fatima Minerva Fortades, etc. less the value of one luggage recovered;

2. The sum of P90,000.00 for the transportation expenses, as well as moral damages;

3. The sum of P10,000.00 by way of exemplary damages;

4. The sum of P5,000.00 as attorney’s fees; and

5. The sum of P5,000.00 as litigation expenses or a total of One Hundred Forty Thousand (P140,000.00) Pesos.

to be paid by herein defendant Sarkies Tours Philippines, Inc. to the herein plaintiffs within 30 days from receipt of this Decision.

SO ORDERED.”

On appeal, the appellate court affirmed the trial court’s judgment, but deleted the award of moral and exemplary damages. Thus,

“WHEREFORE, premises considered, except as above modified, fixing the award for transportation expenses at P30,000.00 and the deletion of the award for moral and exemplary damages, the decision appealed from is AFFIRMED, with costs against defendant-appellant.

SO ORDERED."

Its motion for reconsideration having was likewise rejected by the Court of Appeals, so petitioner elevated its case to this Court for a review.

After a careful scrutiny of the records of this case, we are convinced that the trial and appellate courts resolved the issues judiciously based on the evidence at hand.

Petitioner claims that Fatima did not bring any piece of luggage with her, and even if she did, none was declared at the start of the trip. The documentary and testimonial evidence presented at the trial, however, established that Fatima indeed boarded petitioner’s De Luxe Bus No. 5 in the evening of August 31, 1984, and she brought three pieces of luggage with her, as testified by her brother Raul,[2] who helped her pack her things and load them on said bus. One of the bags was even recovered with the help of a Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly admitted its liability by apologizing to respondents and assuring them that efforts were being made to recover the lost items.

The records also reveal that respondents went to great lengths just to salvage their loss. The incident was reported to the police, the NBI, and the regional and head offices of petitioner. Marisol even sought the assistance of Philtranco bus drivers and the radio stations. To expedite the replacement of her mother’s lost U.S. immigration documents, Fatima also had to execute an affidavit of loss.[3] Clearly, they would not have gone through all that trouble in pursuit of a fancied loss.

Fatima was not the only one who lost her luggage. Other passengers suffered a similar fate: Dr. Lita Samarista testified that petitioner

18

Choco NotesTransportation Law cases – Common Carrier of Goods part 1offered her P1,000.00 for her lost baggage and she accepted it;[4] Carleen Carullo-Magno also lost her chemical engineering review materials, while her brother lost abaca products he was transporting to Bicol.[5]

Petitioner’s receipt of Fatima’s personal luggage having been thus established, it must now be determined if, as a common carrier, it is responsible for their loss. Under the Civil Code, “(c)ommon 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 x x x transported by them,”[6] and this liability “lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to x x x the person who has a right to receive them,”[7] unless the loss is due to any of the excepted causes under Article 1734 thereof.[8]

The cause of the loss in the case at bar was petitioner’s negligence in not ensuring that the doors of the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggage was lost, to the prejudice of the paying passengers. As the Court of Appeals correctly observed:

“x x x. Where the common carrier accepted its passenger’s baggage for transportation and even had it placed in the vehicle by its own employee, its failure to collect the freight charge is the common carrier’s own lookout. It is responsible for the consequent loss of the baggage. In the instant case, defendant appellant’s employee even helped Fatima Minerva Fortades and her brother load the luggages/baggages in the bus’ baggage compartment, without asking that they be weighed, declared, receipted or paid for (TSN, August 4, 1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither was this required of the other passengers (TSN, August 4, 1986, p. 104; February 5, 1988, p. 13).”

Finally, petitioner questions the award of actual damages to respondents. On this point, we likewise agree with the trial and appellate courts’ conclusions. There is no dispute that of the three pieces of luggage of Fatima, only one was recovered. The other two contained optometry books, materials, equipment, as well as vital documents and personal belongings. Respondents had to shuttle between Bicol and Manila in their efforts to be compensated for the loss. During the trial, Fatima and Marisol had to travel from the United States just to be able to testify. Expenses were also incurred in reconstituting their lost documents. Under these circumstances, the Court agrees with the Court of Appeals in awarding P30,000.00 for the lost items and P30,000.00 for the transportation expenses, but disagrees with the deletion of the award of moral and exemplary damages which, in view of the foregoing proven facts, with negligence and bad faith on the fault of petitioner having been duly established, should be granted to respondents in the amount of P20,000.00 and P5,000.00, respectively.

WHEREFORE, the assailed decision of the Court of Appeals dated January 13, 1993, and its resolution dated February 19, 1993, are hereby AFFIRMED with the MODIFICATION that petitioner is ordered to pay respondent an additional P20,000.00 as moral damages and P5,000.00 as exemplary damages. Costs against petitioner.

SO ORDERED.

Belgian Overseas v. Phil. First Insurance[G.R. No. 143133. June 5, 2002]

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondent.D E C I S I O NPANGANIBAN, J.:

Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor.

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision[1] and the May 2, 2000 Resolution[2] of the Court of Appeals[3] (CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as follows:

“WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following:

‘1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual damages, representing the value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on July 25, 1991, until fully paid;

‘2) Attorney’s fees amounting to 20% of the claim; and

‘3) Costs of suit.’”[4]

The assailed Resolution denied petitioner’s Motion for Reconsideration.

The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as follows:

“WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendant’s counterclaim.”[5]

The Facts

The factual antecedents of the case are summarized by the Court of Appeals in this wise:

“On June 13, 1990, CMC Trading A.G. shipped on board the MN ‘Anangel Sky’ at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1“Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee’s claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter’s rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured.

“Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.”[6]

Ruling of the Trial Court

The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law.[7]

It likewise debunked petitioners’ counterclaim, because respondent’s suit was not manifestly frivolous or primarily intended to harass them.[8]

Ruling of the Court of Appeals

In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers.

The CA further held as inadequately proven petitioners’ claim that the loss or the deterioration of the goods was due to pre-shipment damage.[9] It likewise opined that the notation “metal envelopes rust stained and slightly dented” placed on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.[10]

As to the extent of petitioners’ liability, the CA held that the package limitation under COGSA was not applicable, because the words “L/C No. 90/02447” indicated that a higher valuation of the cargo had been declared by the shipper. The CA, however, affirmed the award of attorney’s fees.

Hence, this Petition.[11]

Issues

In their Memorandum, petitioners raise the following issues for the Court’s consideration:

I

“Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code;

II

“Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law;

III

“Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and to exempt herein defendants from liability;

IV

“Whether or not the “PACKAGE LIMITATION” of liability under Section 4 (5) of COGSA is applicable to the case at bar.”[12]

In sum, the issues boil down to three:

1. Whether petitioners have overcome the presumption of negligence of a common carrier

2. Whether the notice of loss was timely filed

3. Whether the package limitation of liability is applicable

This Court’s Ruling

The Petition is partly meritorious.

First Issue:Proof of Negligence

Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony offered by private respondent. The contention is untenable.

Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.[13] Thus, common carriers are required to render service with the greatest skill and foresight and “to use all reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.”[14] The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.[15]

This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a contract of transportation with common carriers.[16] Even if it wants to, it cannot submit its own stipulations for their approval.[17] Hence, it merely adheres to the agreement prepared by them.

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 they transported deteriorated or got lost or destroyed.[18] That is, unless they prove that they exercised extraordinary diligence in transporting the goods.[19] In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence.[20]

However, the presumption of fault or negligence will not arise[21] if the loss is due to any of the following causes: (1) flood, storm,

20

Choco NotesTransportation Law cases – Common Carrier of Goods part 1earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority.[22] This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.[23]

Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.[24]

That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent.[25]

First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany.[26]

Second, prior to the unloading of the cargo, an Inspection Report[27] prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty.

Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage.[29]

Fourth, the Certificate of Analysis[30] stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water.

Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition.

These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions of his testimony are reproduce hereunder:

“Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you are connected?

A. BM Santos Checkers Agency, sir.

Q. How is BM Santos Checkers Agency related or connected with defendant Jardine Davies Transport Services?

A. It is the company who contracts the checkers, sir.

Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities?

A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes.

x x x x x x x x x

Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker?

A. Yes, sir.

Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY?

A. Yes, sir, I was there.

x x x x x x x x x

Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY?

ATTY. MACAMAY:

Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is the document itself, Your Honor that shows the condition of the steel sheets.

COURT:

Let the witness answer.

A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides.”[32]

All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils while in the possession of petitioner,[33] who notably failed to explain why.[34]

Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow, to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.[35]

True, the words “metal envelopes rust stained and slightly dented” were noted on the Bill of Lading; however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss.[36] Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit.[37] Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken.[38] Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four coils.[39]

In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of the Civil Code. They cite the notation “metal envelopes rust stained and slightly dented” printed on the Bill of Lading as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage. We are not convinced.

21

Choco NotesTransportation Law cases – Common Carrier of Goods part 1From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition noted on the Bill of Lading.[40] The aforecited exception refers to cases when goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals.[41] None of these is present in the instant case.

Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition.[42] Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the present case.[43]

Second Issue:Notice of Loss

Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act[44] (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.[45]

We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report[46] as to the condition of the goods was prepared and signed by representatives of both parties.[47]

Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year.[48] This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.[49]

In Loadstar Shipping Co., Inc. v. Court of Appeals,[50] we ruled that a claim is not barred by prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.:

“Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar.”

In the present case, the cargo was discharged on July 31, 1990, while the Complaint[51] was filed by respondent on July 25, 1991, within the one-year prescriptive period.

Third Issue:Package Limitation

Assuming arguendo they are liable for respondent’s claims, petitioners contend that their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)[52] of COGSA.[53]

On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment was declared

by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or “L/C No. 90/02447” in the said Bill of Lading.[54]

A bill of lading serves two functions. First, it is a receipt for the goods shipped.[55] Second, it is a contract by which three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities and assume stipulated obligations.[56] In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract.[57]

Further, a stipulation in the bill of lading limiting to a certain sum the common carrier’s liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value[58] -- is sanctioned by law.[59] There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties.[60] The rationale for, this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.[61]

It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per package.[62] In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws.[63] Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the bill of lading.[64] The provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties.[65]

In the case before us, there was no stipulation in the Bill of Lading[66] limiting the carrier’s liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words “L/C No. 90/02447 cannot be the basis for petitioners’ liability.

First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.[67] That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.[68]

Second, in Keng Hua Paper Products v. Court of Appeals,[69] we held that a bill of lading was separate from the Other Letter of Credit arrangements. We ruled thus:

“(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis-à-vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1cannot negate petitioner’s obligation to private respondent arising from the contract of transportation.”[70]

In the light of the foregoing, petitioners’ liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.[71] In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court[72] we explained the meaning of package:

“When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the ‘package’ referred to in the liability limitation provision of Carriage of Goods by Sea Act.”

Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as the shipping unit subject to the US$500 limitation.

WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners’ liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs.

SO ORDERED.

Aboitiz. v. ICNAABOITIZ SHIPPING G.R. No. 168402CORPORATION, Petitioner, Present: YNARES-SANTIAGO, J., Chairperson, - versus - AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. INSURANCE COMPANY OF Promulgated:NORTH AMERICA,Respondent. August 6, 2008 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x D E C I S I O N REYES, R.T., J.: THE RIGHT of subrogation attaches upon payment by the insurer of the insurance claims by the assured. As subrogee, the insurer steps into the shoes of the assured and may exercise only those rights that the assured may have against the wrongdoer who caused the damage.

Before Us is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) which reversed the Decision[2] of the Regional Trial Court (RTC). The CA ordered petitioner Aboitiz Shipping Corporation to pay the sum of P280,176.92 plus interest and attorney’s fees in favor of respondent Insurance Company of North America (ICNA). The Facts Culled from the records, the facts are as follows: On June 20, 1993, MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS) procured a marine insurance policy from respondent ICNA UK Limited of London. The insurance was for a transshipment of certain wooden work tools and workbenches purchased for the consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City, Philippines.[3] ICNA issued an “all-risk” open marine policy,[4] stating: This Company, in consideration of a premium as agreed and subject to the terms and conditions printed hereon, does insure for MSAS Cargo International Limited &/or Associated &/or Subsidiary Companies on behalf of the title holder: – Loss, if any, payable to the Assured or order.[5] The cargo, packed inside one container van, was shipped “freight prepaid” from Hamburg, Germany on board M/S Katsuragi. A clean bill of lading[6] was issued by Hapag-Lloyd which stated the consignee to be STIP, Ecotech Center, Sudlon Lahug, Cebu City. The container van was then off-loaded at Singapore and transshipped on board M/S Vigour Singapore. On July 18, 1993, the ship arrived and docked at the Manila International Container Port where the container van was again off-loaded. On July 26, 1993, the cargo was received by petitioner Aboitiz Shipping Corporation (Aboitiz) through its duly authorized booking representative, Aboitiz Transport System. The bill of lading[7] issued by Aboitiz contained the notation “grounded outside warehouse.” The container van was stripped and transferred to another crate/container van without any notation on the condition of the cargo on the Stuffing/Stripping Report.[8] On August 1, 1993, the container van was loaded on board petitioner’s vessel, MV Super Concarrier I. The vessel left Manila en route to Cebu City on August 2, 1993. On August 3, 1993, the shipment arrived in Cebu City and discharged onto a receiving apron of the Cebu International Port. It was then brought to the Cebu Bonded Warehousing Corporation pending clearance from the Customs authorities. In the Stripping Report[9] dated August 5, 1993, petitioner’s checker noted that the crates were slightly broken or cracked at the bottom. On August 11, 1993, the cargo was withdrawn by the representative of the consignee, Science Teaching Improvement Project (STIP) and delivered to Don Bosco Technical High School, Punta Princesa, Cebu City. It was received by Mr. Bernhard Willig. On August 13, 1993, Mayo B. Perez, then Claims Head of petitioner, received a telephone call from Willig informing him that the cargo sustained water damage. Perez, upon receiving the call, immediately went to the bonded warehouse and checked the condition of the container and other cargoes stuffed in the same container. He found

23

Choco NotesTransportation Law cases – Common Carrier of Goods part 1that the container van and other cargoes stuffed there were completely dry and showed no sign of wetness.[10] Perez found that except for the bottom of the crate which was slightly broken, the crate itself appeared to be completely dry and had no water marks. But he confirmed that the tools which were stored inside the crate were already corroded. He further explained that the “grounded outside warehouse” notation in the bill of lading referred only to the container van bearing the cargo.[11] In a letter dated August 15, 1993, Willig informed Aboitiz of the damage noticed upon opening of the cargo.[12] The letter stated that the crate was broken at its bottom part such that the contents were exposed. The work tools and workbenches were found to have been completely soaked in water with most of the packing cartons already disintegrating. The crate was properly sealed off from the inside with tarpaper sheets. On the outside, galvanized metal bands were nailed onto all the edges. The letter concluded that apparently, the damage was caused by water entering through the broken parts of the crate. The consignee contacted the Philippine office of ICNA for insurance claims. On August 21, 1993, the Claimsmen Adjustment Corporation (CAC) conducted an ocular inspection and survey of the damage. CAC reported to ICNA that the goods sustained water damage, molds, and corrosion which were discovered upon delivery to consignee.[13] On September 21, 1993, the consignee filed a formal claim[14] with Aboitiz in the amount of P276,540.00 for the damaged condition of the following goods: ten (10) wooden workbenchesthree (3) carbide-tipped saw bladesone (1) set of ball-bearing guidesone (1) set of overarm router bitstwenty (20) rolls of sandpaper for stroke sander In a Supplemental Report dated October 20, 1993,[15] CAC reported to ICNA that based on official weather report from the Philippine Atmospheric, Geophysical and Astronomical Services Administration, it would appear that heavy rains on July 28 and 29, 1993 caused water damage to the shipment. CAC noted that the shipment was placed outside the warehouse of Pier No. 4, North Harbor, Manila when it was delivered on July 26, 1993. The shipment was placed outside the warehouse as can be gleaned from the bill of lading issued by Aboitiz which contained the notation “grounded outside warehouse.” It was only on July 31, 1993 when the shipment was stuffed inside another container van for shipment to Cebu. Aboitiz refused to settle the claim. On October 4, 1993, ICNA paid the amount of P280,176.92 to consignee. A subrogation receipt was duly signed by Willig. ICNA formally advised Aboitiz of the claim and subrogation receipt executed in its favor. Despite follow-ups, however, no reply was received from Aboitiz. RTC Disposition ICNA filed a civil complaint against Aboitiz for collection of actual damages in the sum of P280,176.92, plus interest and

attorney’s fees.[16] ICNA alleged that the damage sustained by the shipment was exclusively and solely brought about by the fault and negligence of Aboitiz when the shipment was left grounded outside its warehouse prior to delivery. Aboitiz disavowed any liability and asserted that the claim had no factual and legal bases. It countered that the complaint stated no cause of action, plaintiff ICNA had no personality to institute the suit, the cause of action was barred, and the suit was premature there being no claim made upon Aboitiz. On November 14, 2003, the RTC rendered judgment against ICNA. The dispositive portion of the decision[17] states: WHEREFORE, premises considered, the court holds that plaintiff is not entitled to the relief claimed in the complaint for being baseless and without merit. The complaint is hereby DISMISSED. The defendant’s counterclaims are, likewise, DISMISSED for lack of basis.[18] The RTC ruled that ICNA failed to prove that it is the real party-in-interest to pursue the claim against Aboitiz. The trial court noted that Marine Policy No. 87GB 4475 was issued by ICNA UK Limited with address at Cigna House, 8 Lime Street, London EC3M 7NA. However, complainant ICNA Phils. did not present any evidence to show that ICNA UK is its predecessor-in-interest, or that ICNA UK assigned the insurance policy to ICNA Phils. Moreover, ICNA Phils.’ claim that it had been subrogated to the rights of the consignee must fail because the subrogation receipt had no probative value for being hearsay evidence. The RTC reasoned: While it is clear that Marine Policy No. 87GB 4475 was issued by Insurance Company of North America (U.K.) Limited (ICNA UK) with address at Cigna House, 8 Lime Street, London EC3M 7NA, no evidence has been adduced which would show that ICNA UK is the same as or the predecessor-in-interest of plaintiff Insurance Company of North America ICNA with office address at Cigna-Monarch Bldg., dela Rosa cor. Herrera Sts., Legaspi Village, Makati, Metro Manila or that ICNA UK assigned the Marine Policy to ICNA. Second, the assured in the Marine Policy appears to be MSAS Cargo International Limited &/or Associated &/or Subsidiary Companies. Plaintiff’s witness, Francisco B. Francisco, claims that the signature below the name MSAS Cargo International is an endorsement of the marine policy in favor of Science Teaching Improvement Project. Plaintiff’s witness, however, failed to identify whose signature it was and plaintiff did not present on the witness stand or took (sic) the deposition of the person who made that signature. Hence, the claim that there was an endorsement of the marine policy has no probative value as it is hearsay. Plaintiff, further, claims that it has been subrogated to the rights and interest of Science Teaching Improvement Project as shown by the Subrogation Form (Exhibit “K”) allegedly signed by a representative of Science Teaching Improvement Project. Such representative, however, was not presented on the witness stand. Hence, the Subrogation Form is self-serving and has no probative value.[19] (Emphasis supplied) The trial court also found that ICNA failed to produce evidence that it was a foreign corporation duly licensed to do business in the Philippines. Thus, it lacked the capacity to sue before Philippine Courts, to wit:

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1Prescinding from the foregoing, plaintiff alleged in its complaint that it is a foreign insurance company duly authorized to do business in the Philippines. This allegation was, however, denied by the defendant. In fact, in the Pre-Trial Order of 12 March 1996, one of the issues defined by the court is whether or not the plaintiff has legal capacity to sue and be sued. Under Philippine law, the condition is that a foreign insurance company must obtain licenses/authority to do business in the Philippines. These licenses/authority are obtained from the Securities and Exchange Commission, the Board of Investments and the Insurance Commission. If it fails to obtain these licenses/authority, such foreign corporation doing business in the Philippines cannot sue before Philippine courts. Mentholatum Co., Inc. v. Mangaliman, 72 Phil. 524. (Emphasis supplied) CA Disposition ICNA appealed to the CA. It contended that the trial court failed to consider that its cause of action is anchored on the right of subrogation under Article 2207 of the Civil Code. ICNA said it is one and the same as the ICNA UK Limited as made known in the dorsal portion of the Open Policy.[20] On the other hand, Aboitiz reiterated that ICNA lacked a cause of action. It argued that the formal claim was not filed within the period required under Article 366 of the Code of Commerce; that ICNA had no right of subrogation because the subrogation receipt should have been signed by MSAS, the assured in the open policy, and not Willig, who is merely the representative of the consignee. On March 29, 2005, the CA reversed and set aside the RTC ruling, disposing as follows: WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed decision of the Regional Trial Court of Makati City in Civil Case No. 94-1590 is hereby REVERSED and SET ASIDE. A new judgment is hereby rendered ordering defendant-appellee Aboitiz Shipping Corporation to pay the plaintiff-appellant Insurance Company of North America the sum of P280,176.92 with interest thereon at the legal rate from the date of the institution of this case until fully paid, and attorney’s fees in the sum of P50,000, plus the costs of suit.[21] The CA opined that the right of subrogation accrues simply upon payment by the insurance company of the insurance claim. As subrogee, ICNA is entitled to reimbursement from Aboitiz, even assuming that it is an unlicensed foreign corporation. The CA ruled: At any rate, We find the ground invoked for the dismissal of the complaint as legally untenable. Even assuming arguendo that the plaintiff-insurer in this case is an unlicensed foreign corporation, such circumstance will not bar it from claiming reimbursement from the defendant carrier by virtue of subrogation under the contract of insurance and as recognized by Philippine courts. x x x x x x x Plaintiff insurer, whether the foreign company or its duly authorized Agent/Representative in the country, as subrogee of the claim of the insured under the subject marine policy, is therefore the real party in interest to bring this suit and recover the full amount of loss of the subject cargo shipped by it from Manila to the consignee in Cebu City. x x x[22]

The CA ruled that the presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence. Hence, the trial court erred in dismissing the complaint and in not finding that based on the evidence on record and relevant provisions of law, Aboitiz is liable for the loss or damage sustained by the subject cargo. Issues The following issues are up for Our consideration: (1) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT ICNA HAS A CAUSE OF ACTION AGAINST ABOITIZ BY VIRTUE OF THE RIGHT OF SUBROGATION BUT WITHOUT CONSIDERING THE ISSUE CONSISTENTLY RAISED BY ABOITIZ THAT THE FORMAL CLAIM OF STIP WAS NOT MADE WITHIN THE PERIOD PRESCRIBED BY ARTICLE 366 OF THE CODE OF COMMERCE; AND, MORE SO, THAT THE CLAIM WAS MADE BY A WRONG CLAIMANT. (2) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE SUIT FOR REIMBURSEMENT AGAINST ABOITIZ WAS PROPERLY FILED BY ICNA AS THE LATTER WAS AN AUTHORIZED AGENT OF THE INSURANCE COMPANY OF NORTH AMERICA (U.K.) (“ICNA UK”). (3) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THERE WAS PROPER INDORSEMENT OF THE INSURANCE POLICY FROM THE ORIGINAL ASSURED MSAS CARGO INTERNATIONAL LIMITED (“MSAS”) IN FAVOR OF THE CONSIGNEE STIP, AND THAT THE SUBROGATION RECEIPT ISSUED BY STIP IN FAVOR OF ICNA IS VALID NOTWITHSTANDING THE FACT THAT IT HAS NO PROBATIVE VALUE AND IS MERELY HEARSAY AND A SELF-SERVING DOCUMENT FOR FAILURE OF ICNA TO PRESENT A REPRESENTATIVE OF STIP TO IDENTIFY AND AUTHENTICATE THE SAME. (4) THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE EXTENT AND KIND OF DAMAGE SUSTAINED BY THE SUBJECT CARGO WAS CAUSED BY THE FAULT OR NEGLIGENCE OF ABOITIZ.[23] (Underscoring supplied) Elsewise stated, the controversy rotates on three (3) central questions: (a) Is respondent ICNA the real party-in-interest that possesses the right of subrogation to claim reimbursement from petitioner Aboitiz? (b) Was there a timely filing of the notice of claim as required under Article 366 of the Code of Commerce? (c) If so, can petitioner be held liable on the claim for damages? Our Ruling We answer the triple questions in the affirmative. A foreign corporation not licensed to do business in the Philippines is not absolutely incapacitated from filing a suit in local courts. Only when that foreign corporation is “transacting” or “doing business” in the country will a license be necessary before it can institute suits.[24] It may, however, bring suits on isolated business

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1transactions, which is not prohibited under Philippine law.[25] Thus, this Court has held that a foreign insurance company may sue in Philippine courts upon the marine insurance policies issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier, even if it has no license to do business in this country. It is the act of engaging in business without the prescribed license, and not the lack of license per se, which bars a foreign corporation from access to our courts.[26] In any case, We uphold the CA observation that while it was the ICNA UK Limited which issued the subject marine policy, the present suit was filed by the said company’s authorized agent in Manila. It was the domestic corporation that brought the suit and not the foreign company. Its authority is expressly provided for in the open policy which includes the ICNA office in the Philippines as one of the foreign company’s agents. As found by the CA, the RTC erred when it ruled that there was no proper indorsement of the insurance policy by MSAS, the shipper, in favor of STIP of Don Bosco Technical High School, the consignee. The terms of the Open Policy authorize the filing of any claim on the insured goods, to be brought against ICNA UK, the company who issued the insurance, or against any of its listed agents worldwide.[27] MSAS accepted said provision when it signed and accepted the policy. The acceptance operated as an acceptance of the authority of the agents. Hence, a formal indorsement of the policy to the agent in the Philippines was unnecessary for the latter to exercise the rights of the insurer. Likewise, the Open Policy expressly provides that: The Company, in consideration of a premium as agreed and subject to the terms and conditions printed hereon, does insure MSAS Cargo International Limited &/or Associates &/or Subsidiary Companies in behalf of the title holder: – Loss, if any, payable to the Assured or Order. The policy benefits any subsequent assignee, or holder, including the consignee, who may file claims on behalf of the assured. This is in keeping with Section 57 of the Insurance Code which states: A policy may be so framed that it will inure to the benefit of whosoever, during the continuance of the risk, may become the owner of the interest insured. (Emphasis added) Respondent’s cause of action is founded on it being subrogated to the rights of the consignee of the damaged shipment. The right of subrogation springs from Article 2207 of the Civil Code, which states: Article 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. (Emphasis added) As this Court held in the case of Pan Malayan Insurance Corporation v. Court of Appeals,[28] payment by the insurer to the

assured operates as an equitable assignment of all remedies the assured may have against the third party who caused the damage. Subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.[29] Upon payment to the consignee of indemnity for damage to the insured goods, ICNA’s entitlement to subrogation equipped it with a cause of action against petitioner in case of a contractual breach or negligence.[30] This right of subrogation, however, has its limitations. First, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading.[31] Second, the insurer can be subrogated only to the rights as the insured may have against the wrongdoer. If by its own acts after receiving payment from the insurer, the insured releases the wrongdoer who caused the loss from liability, the insurer loses its claim against the latter.[32] The giving of notice of loss or injury is a condition precedent to the action for loss or injury or the right to enforce the carrier’s liability. Circumstances peculiar to this case lead Us to conclude that the notice requirement was complied with. As held in the case of Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc.,[33] this notice requirement protects the carrier by affording it an opportunity to make an investigation of the claim while the matter is still fresh and easily investigated. It is meant to safeguard the carrier from false and fraudulent claims. Under the Code of Commerce, the notice of claim must be made within twenty four (24) hours from receipt of the cargo if the damage is not apparent from the outside of the package. For damages that are visible from the outside of the package, the claim must be made immediately. The law provides: Article 366. Within twenty four hours following the receipt of the merchandise, the claim against the carrier for damages or average which may be found therein upon opening the packages, may be made, provided that the indications of the damage or average which give rise to the claim cannot be ascertained from the outside part of such packages, in which case the claim shall be admitted only at the time of receipt. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. (Emphasis supplied) The periods above, as well as the manner of giving notice may be modified in the terms of the bill of lading, which is the contract between the parties. Notably, neither of the parties in this case presented the terms for giving notices of claim under the bill of lading issued by petitioner for the goods. The shipment was delivered on August 11, 1993. Although the letter informing the carrier of the damage was dated August 15, 1993, that letter, together with the notice of claim, was received by petitioner only on September 21, 1993. But petitioner admits that even before it received the written notice of claim, Mr. Mayo B. Perez, Claims Head of the company, was informed by telephone sometime in August 13, 1993. Mr. Perez then immediately went to the warehouse and to the delivery site to inspect the goods in behalf of petitioner.[34]

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1 In the case of Philippine Charter Insurance Corporation (PCIC) v. Chemoil Lighterage Corporation,[35] the notice was allegedly made by the consignee through telephone. The claim for damages was denied. This Court ruled that such a notice did not comply with the notice requirement under the law. There was no evidence presented that the notice was timely given. Neither was there evidence presented that the notice was relayed to the responsible authority of the carrier. As adverted to earlier, there are peculiar circumstances in the instant case that constrain Us to rule differently from the PCIC case, albeit this ruling is being made pro hac vice, not to be made a precedent for other cases. Stipulations requiring notice of loss or claim for damage as a condition precedent to the right of recovery from a carrier must be given a reasonable and practical construction, adapted to the circumstances of the case under adjudication, and their application is limited to cases falling fairly within their object and purpose.[36] Bernhard Willig, the representative of consignee who received the shipment, relayed the information that the delivered goods were discovered to have sustained water damage to no less than the Claims Head of petitioner, Mayo B. Perez. Immediately, Perez was able to investigate the claims himself and he confirmed that the goods were, indeed, already corroded. Provisions specifying a time to give notice of damage to common carriers are ordinarily to be given a reasonable and practical, rather than a strict construction.[37] We give due consideration to the fact that the final destination of the damaged cargo was a school institution where authorities are bound by rules and regulations governing their actions. Understandably, when the goods were delivered, the necessary clearance had to be made before the package was opened. Upon opening and discovery of the damaged condition of the goods, a report to this effect had to pass through the proper channels before it could be finalized and endorsed by the institution to the claims department of the shipping company. The call to petitioner was made two days from delivery, a reasonable period considering that the goods could not have corroded instantly overnight such that it could only have sustained the damage during transit. Moreover, petitioner was able to immediately inspect the damage while the matter was still fresh. In so doing, the main objective of the prescribed time period was fulfilled. Thus, there was substantial compliance with the notice requirement in this case. To recapitulate, We have found that respondent, as subrogee of the consignee, is the real party in interest to institute the claim for damages against petitioner; and pro hac vice, that a valid notice of claim was made by respondent. We now discuss petitioner’s liability for the damages sustained by the shipment. The rule as stated in Article 1735 of the Civil Code is that in cases where the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence required by law.[38] Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property rights.[39] This standard is intended to grant favor to

the shipper who is at the mercy of the common carrier once the goods have been entrusted to the latter for shipment.[40] Here, the shipment delivered to the consignee sustained water damage. We agree with the findings of the CA that petitioner failed to overturn this presumption: x x x upon delivery of the cargo to the consignee Don Bosco Technical High School by a representative from Trabajo Arrastre, and the crates opened, it was discovered that the workbenches and work tools suffered damage due to “wettage” although by then they were already physically dry. Appellee carrier having failed to discharge the burden of proving that it exercised extraordinary diligence in the vigilance over such goods it contracted for carriage, the presumption of fault or negligence on its part from the time the goods were unconditionally placed in its possession (July 26, 1993) up to the time the same were delivered to the consignee (August 11, 1993), therefore stands. The presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence. x x x[41] (Emphasis added) The shipment arrived in the port of Manila and was received by petitioner for carriage on July 26, 1993. On the same day, it was stripped from the container van. Five days later, on July 31, 1993, it was re-stuffed inside another container van. On August 1, 1993, it was loaded onto another vessel bound for Cebu. During the period between July 26 to 31, 1993, the shipment was outside a container van and kept in storage by petitioner. The bill of lading issued by petitioner on July 31, 1993 contains the notation “grounded outside warehouse,” suggesting that from July 26 to 31, the goods were kept outside the warehouse. And since evidence showed that rain fell over Manila during the same period, We can conclude that this was when the shipment sustained water damage. To prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used “all reasonable means to ascertain the nature and characteristic of the goods tendered for transport and that it exercised due care in handling them.[42] Extraordinary diligence must include safeguarding the shipment from damage coming from natural elements such as rainfall. Aside from denying that the “grounded outside warehouse” notation referred not to the crate for shipment but only to the carrier van, petitioner failed to mention where exactly the goods were stored during the period in question. It failed to show that the crate was properly stored indoors during the time when it exercised custody before shipment to Cebu. As amply explained by the CA: On the other hand, the supplemental report submitted by the surveyor has confirmed that it was rainwater that seeped into the cargo based on official data from the PAGASA that there was, indeed, rainfall in the Port Area of Manila from July 26 to 31, 1993. The Surveyor specifically noted that the subject cargo was under the custody of appellee carrier from the time it was delivered by the shipper on July 26, 1993 until it was stuffed inside Container No. ACCU-213798-4 on July 31, 1993. No other inevitable conclusion can be deduced from the foregoing established facts that damage from “wettage” suffered by the subject cargo was caused by the negligence of appellee carrier in grounding the shipment outside causing rainwater to seep into the cargoes.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1 Appellee’s witness, Mr. Mayo tried to disavow any responsibility for causing “wettage” to the subject goods by claiming that the notation “GROUNDED OUTSIDE WHSE.” actually refers to the container and not the contents thereof or the cargoes. And yet it presented no evidence to explain where did they place or store the subject goods from the time it accepted the same for shipment on July 26, 1993 up to the time the goods were stripped or transferred from the container van to another container and loaded into the vessel M/V Supercon Carrier I on August 1, 1993 and left Manila for Cebu City on August 2, 1993. x x x If the subject cargo was not grounded outside prior to shipment to Cebu City, appellee provided no explanation as to where said cargo was stored from July 26, 1993 to July 31, 1993. What the records showed is that the subject cargo was stripped from the container van of the shipper and transferred to the container on August 1, 1993 and finally loaded into the appellee’s vessel bound for Cebu City on August 2, 1993. The Stuffing/Stripping Report (Exhibit “D”) at the Manila port did not indicate any such defect or damage, but when the container was stripped upon arrival in Cebu City port after being discharged from appellee’s vessel, it was noted that only one (1) slab was slightly broken at the bottom allegedly hit by a forklift blade (Exhibit “F”).[43] (Emphasis added) Petitioner is thus liable for the water damage sustained by the goods due to its failure to satisfactorily prove that it exercised the extraordinary diligence required of common carriers. WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED. SO ORDERED.

Exemption From Liability

Natural Disaster or Calamity art. 1734 (1); 1739; 1740

Tan Chiong v. InchaustiG.R. No. L-6092 March 8, 1912

TAN CHIONG SIAN, plaintiff-appellee, vs.INCHAUSTI AND CO., defendant-appellant.

Haussermann, Cohn and Fisher for appellant. O'Brien and DeWitt for appellee.

TORRES, J.:

This is an appeal through bill of exceptions, by counsel for the firm of Inchausti & Co., from a judgment rendered by the Honorable A.S. Crossfield, judge.

On January 11, 1909, the Chinaman, Tan Chiong Sian or Tan Chinto, filed a written complaint, which was amended on the 28th of the same month and again amended on October 27 of the same year, against the said firm, wherein he alleged, among other things, as a

cause of action: That, on or about November 25, 1908, the plaintiff delivered to the defendant 205 bundles or cases of general merchandise belonging to him, which Inchausti & Co., upon receiving, bound themselves to deliver in the pueblo of Catarman, Province of Samar, to the Chinaman, Ong Bieng Sip, and in consideration of the obligations contracted by the defendant party, the plaintiff obligated himself to pay to the latter the sum of P250 Philippine currency, which payment should be made upon the delivery of the said merchandise in the said pueblo Catarman; but that the defendant company neither carried nor delivered the aforementioned merchandise to the said Ong Bieng Sip, in Catarman, but unjustly and negligently failed to do so, with the result that the said merchandise was almost totally lost; that, had the defendant party complied well and faithfully with its obligation, according to the agreement made, the merchandise concerned would have a value of P20,000 in the said pueblo of Catarman on the date when it should have been delivered there, wherefore the defendant party owed the plaintiff the said sum of P20,000, which it had not paid him, or any part thereof, notwithstanding the many demands of the plaintiff; therefore the latter prayed for judgment against the defendant for the said sum, together with legal interest thereon from November 25, 1908, and the costs of the suit.

Counsel for the defendant company, in his answer, set forth, that he admitted the allegations of paragraphs 1 and 2 of the complaint, amended for the second time, and denied those paragraphs 3, 4, 5, 6 and 7 of the same. As his first special defense, he alleged that on or about November 28, 1908, his client, the said firm, received in Manila from Ong Bieng Sip 205 bundles, bales, or cases of merchandise to be placed on board the steamer Sorsogon, belonging to the defendant, for shipment to the port of Gubat, Province of Sorsogon, to be in the said port transshipped into another of the defendant's vessels for transportation to the port of Catarman, Samar, and delivered to the aforesaid Chinaman, Ong Bieng Sip; that the defendant company, upon receiving the said merchandise from the latter, Ong Bieng Sip, and on its entering into a contract of maritime transportation with him did not know and was not notified that the plaintiff, Tan Chiong Sian, had any interest whatever in the said merchandise and had made with the plaintiff no contract relative to the transportation of such goods, for, on receiving the latter from the said Ong Bieng Sip, for transportation, there were made out and delivered to him three bills of lading, Nos. 38, 39 and 76, which contained a list of the goods received and, printed on the back thereof were the terms of the maritime transportation contract entered into by and between the plaintiff and the defendant company, copies of which bills of lading and contract, marked as Exhibits A, B, and C, are of record, attached to and made an integral part of the said answer; that Ong Bieng Sip accepted the said bills of lading and the contract extended on the backs thereof; that the merchandise mentioned was put on board the steamer Sorsogon and carried to the port of Gubat, Province of Sorsogon, where this vessel arrived on November 28, 1908, on which date the lorcha Pilar, into which the said merchandise was to be transshipped for carriage to Catarman, was not at Gubat, and therefore the goods had to be unloaded and stored in the defendant company's warehouses at Gubat; that, on the 4th of December of the same year, the lorcha Pilar arrived at Gubat and, after the termination of certain necessary work, the goods received from Chinaman, Ong Bieng Sip, were taken aboard the same, together with other merchandise belonging to the defendant party, for the purpose of transportation to the port of Catarman; that, before the said lorcha could leave for its destination, a strong wind arose which in the course of the day increased in force until, early in the morning of the following day, the lorcha was dragged and driven, by the force of the storm, upon the shore, despite the means

28

Choco NotesTransportation Law cases – Common Carrier of Goods part 1employed by the crew to avoid the accident, and notwithstanding the five anchors that held the craft, which was thus wrecked and completely destroyed and the merchandise with which it was laden, including the 205 bundles or packages taken aboard for the said Chinaman, was scattered on the shore; that, on the occasion, the lorcha Pilar was in good condition, provided with all the proper and necessary equipment and accessories and carried a crew of sufficient number in command of a skillful patron or master, wherefore the wreck of the said craft was solely due to the irresistible force of the elements and of the storm which drove it upon the shore; that the defendant company, with the greatest possible diligence, gathered up the said shipwrecked goods that had been shipped by the Chinaman, Ong Bieng Sip, but, owing to the damage they had suffered, it was impossible to preserve them, so, after having offered to deliver them to him, the defendant proceeded, in the presence of a notary, to sell them at public auction and realized from the sale thereof P1,693.67, the reasonable value of the same in the condition in which they were after they had been gathered up and salved from the wreck of the lorcha Pilar; that the expenses occasioned by such salvage and sale of the said goods amounted to P151.35, which were paid by the defendant party; that the latter offered to the Chinese shipper, the plaintiff, the amount realized from the sale of the said merchandise, less P151.35, the amount of the expenses, and the sum of P250, the amount of the freight stipulated, and is still willing to pay such products of the said sale to the aforementioned Ong Bieng Sip or to any other person who should establish his subrogation to the rights of the Chinaman, Ong Bieng Sip, with respect to the said amount; that, as his client's second special defense, the defendant company alleged that one of the conditions of the shipping contract executed between it and the Chinaman, Ong Bieng Sip, relative to the transportation of the said merchandise, was that the said firm should not be held liable for more than P25 for any bundle or package, unless the value of its contents should be stated in the bill of lading, and that the shipper, Chinaman, Ong Bieng Sip, did not state in the bill of lading the value of any of the bundles or packages in which the goods shipped by him were packed. Counsel for the defendant company, therefore, prayed the court to absolve his client from the complaint, with costs against the plaintiff.

After the hearing of the case and the introduction of testimony by the parties, judgment was rendered, on March 18, 1910, in favor of the plaintiff, Tan Chiong Sian or Tan Chinto, against the defendant Inchausti and Co., for the sum of P14,642.63, with interest at the rate of 6 per cent per annum from January 11, 1909, and for the costs of the trial. The defendant party appealed from this judgment.

This suit was brought for the purpose of collecting a certain sum which it is alleged the defendant firm owes the plaintiff for losses and damages suffered by the latter as a result of the former's noncompliance with the terms of an agreement or contract to transport certain merchandise by sea from this city to the pueblo of Catarman, Island of Samar, for the sum of P250.

The principal question to be determined is whether the defendant is liable for the loss of the merchandise and for failure to deliver the same at the place of destination, or whether he is relieved from responsibility on the ground of force majeure.

Article 1601 of the Civil Code prescribes:

Carriers of goods by land or by water shall be subject with regard to the keeping and preservation of the things entrusted to them, to the same obligations as determined for innkeepers by articles 1783 and 1784.

The provisions of this article shall be understood without prejudice to what is prescribed by the Code of Commerce with regard to transportation by sea and land.

Article 1602 reads:

Carriers are also liable for the loss of and damage to the things which they receive, unless they prove that the loss or damage arose from a fortuitous event or force majeure.

The articles aforecited are as follows:

ART. 1783. The depositum of goods made by travelers in inns or hostelries shall also be considered a necessary one. The keepers of inns and hostelries are liable for them as such bailees, provided that notice thereof may have been given to them or to their employees, and that the travelers on their part take the precautions which said innkeepers or their substitutes may have advised them concerning the care and vigilance of said goods.

ART. 1784. The liability referred to in the preceding article shall include damages to the goods of the travelers caused the servants or employees of the keepers for inns or hostelries as well as by strangers, but not those arising from robbery or which may be caused by any other case of force majeure.

Article 361 of the Code of Commerce provides:

Merchandise shall be transported at the risk and venture of the shipper, unless the contrary was expressly stipulated.

Therefore, all damages and impairment suffered by the goods in transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper.

The proof of these accidents in incumbent on the carrier.

ART. 362. The carrier, however, shall be liable for the losses and damages arising from the causes mentioned in the foregoing article if it is proved that they occurred on account of his negligence or because he did not take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, stating that the goods were of a class or quality different from what they really were.

If, notwithstanding the precaution referred to in this article, the goods transported run the risk of being lost on account of the nature or by reason of an unavoidable accident, without there being time for the owners of the same to dispose thereof, the carrier shall proceed to their sale, placing them for this purpose at the disposal of the judicial authority or of the officials determined by special provisions.

ART. 363. With the exception of the cases prescribed in the second paragraph of article 361, the carrier shall be obliged to deliver the goods transported in the same condition in which, according to the bill of lading, they were at the time of their receipt, without any detriment or impairment, and should he not do so, he shall be obliged to pay the value of the goods not delivered at the point where they should have been and at the time the delivery should have taken place.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1If part of the goods transported should be delivered the consignee may refuse to receive them, when he proves that he can not make use thereof without the others.

On November 25, 1908, Inchausti & Co. received in Manila from the Chinaman, Ong Bieng Sip, 205 bundles, bales or cases of goods to be conveyed by the steamer Sorsogon to the port of Gubat, Province of Sorsogon, where they were to be transshipped to another vessel belonging to the defendant company and by the latter transported to the pueblo of Catarman, Island of Samar, there to be delivered to the Chinese shipper with whom the defendant party made the shipping contract. To this end three bills of lading were executed, Nos. 38, 39, and 76, copies of which, marked as Exhibits A, B, and C, are found on pages 13, 14, and 15 of the record.

The steamer Sorsogon, which carried the goods, arrived at the port of Gubat on the 28th of that month and as the lorcha Pilar, to which the merchandise was to be transshipped for its transportation to Catarman, was not yet there, the cargo was unloaded and stored in the defendant company's warehouses at that port.

Several days later, the lorcha just mentioned arrived at Gubat and, after the cargo it carried had been unloaded, the merchandise belonging to the Chinaman, Ong Bieng Sip, together with other goods owned by the defendant Inchausti & Co., was taken aboard to be transported to Catarman; but on December 5, 1908, before the Pilar could leave for its destination, towed by the launch Texas, there arose and, as a result of the strong wind and heavy sea, the lorcha was driven upon the shore and wrecked, and its cargo, including the Chinese shipper's 205 packages of goods, scattered on the beach. Laborers or workmen of the defendant company, by its order, then proceeded to gather up the plaintiff's merchandise and, as it was impossible to preserve it after it was salved from the wreck of the lorcha, it was sold at public auction before a notary for the sum of P1,693.67.

The contract entered into between the Chinese shipper, Ong Bieng Sip, and the firm of Inchausti & Co., provided that transportation should be furnished from Manila to Catarman, although the merchandise taken aboard the steamer Sorsogon was to be transshipped at Gubat to another vessel which was to convey it from that port to Catarman; it was not stipulated in the said contract that the Sorsogon should convey the goods to their final destination, nor that the vessel into which they were to be transshipped, should be a steamer. The shipper, Ong Bieng Sip, therefore assented to these arrangements and made no protest when his 205 packages of merchandise were unloaded from the ship and, on account of the absence of the lorcha Pilar, stored in the warehouses at Gubat nor did he offer any objection to the lading of his merchandise on to this lorcha as soon as it arrived and was prepared to receive cargo; moreover, he knew that to reach the port of Catarman with promptness and dispatch, the lorcha had to be towed by some vessel like the launch Texas, which the defendant company had been steadily using for similar operations in those waters.

Hence the shipper, Ong Bieng Sip, made no protest or objection to the methods adopted by the agents of the defendant for the transportation of his gods to the port of their destination, and the record does not show that in Gubat the defendant possessed any other means for the conveyance and transportation of merchandise, at least for Catarman, than the lorcha Pilar, towed by said launch and exposed during its passage to all sorts of accidents and perils from the nature and seafaring qualities of a lorcha, from the circumstances

then present and the winds prevailing on the Pacific Ocean during the months of November and December.

It is to be noted that a lorcha is not easily managed or steered when the traveling, for, out at sea, it can only be moved by wind and sails; and along the coast near the shore and in the estuaries where it customarily travels, it can only move by poling. For this reason, in order to arrive at the pueblo of Catarman with promptness and dispatch, the lorcha was usually towed by the launch Texas.

The record does not show that, from the afternoon of the 4th of December, 1908, until the morning of the following day, the 5th, the patron or master of the lorcha which was anchored in the cove of Gubat, received any notice from the captain of the steamer Ton Yek, also anchored near by, of the near approach of a storm. The said captain, Juan Domingo Alberdi, makes no reference in his sworn testimony of having given any such notice to the patron of the lorcha, nor did the latter, Mariano Gadvilao, testify that he received such notice from the captain of the Ton Yek or from the person in charge of the Government observatory. Gadvilao, the patron, testified that only between 10 and 11 o'clock of Saturday morning, the 5th of December, was he informed by Inchausti & Co.'s agent in Gubat that a baguio was approaching; that thereupon, on account of the condition of the sea, he dropped the four anchors that the lorcha had on board and immediately went ashore to get another anchor and a new cable in order more securely to hold the boat in view of the predicted storm. This testimony was corroborated by the said representative, Melchor Muñoz. So the lorcha, when the storm broke upon it, was held fast by five anchors and was, as testified by the defendant without contradiction or evidence to the contrary, well found and provided with all proper and necessary equipment and had a sufficient crew for its management and preservation.

The patron of the lorcha testified specifically that at Gubat or in its immediate vicinity there is no port whatever adequate for the shelter and refuge of vessels in cases of danger, and that, even though there were, on being advised between 10 and 11 o'clock of the morning of the 5th, of the approach of a storm from the eastern Pacific, it would have been impossible to spread any sails or weigh anchor on the lorcha without being dragged or driven against the reefs by the force of the wind. As the craft was not provided with steam or other motive power, it would not have been possible for it to change its anchorage, nor move from the place where it lay, even several hours before the notice was received by its patron. A lorcha can not be compared with a steamer which does not need the help or assistance of any other vessel in its movements.

Due importance must be given to the testimony of the weather observer, Antonio Rocha, that the notice received from the Manila Observatory on the afternoon of December 4, with regard to a storm travelling from the east of the Pelew Islands toward the northwest, was not made known to the people of Gubat and that he merely left a memorandum notice on the desk of the station, intending to give explanations thereof to any person who should request them of him. So the notice of the storm sent by the Manila Observatory was only known to the said observer, and he did not apprise the public of the approach of the storm until he received another notice from Manila at 20 minutes past 8 o'clock on Saturday morning, December 5. Then he made a public announcement and advised the authorities of the storm that was coming.

The patron of the lorcha Pilar is charged with gross negligence for not having endeavored to remove his craft to a safe place in the Sabang River, about half a mile from where it was anchored.

30


In order to find out whether there was or was not such negligence on the part of the patron, it becomes necessary to determine, first, whether the lorcha, on the morning of December 5, could be moved by its own power and without being towed by any steamboat, since it had no steam engine of its own; second, whether the lorcha, on account of its draft and the shallowness of the mouth of the said river, could have entered the latter before the storm broke.

The patron, Mariano Gadvilao, stated under oath that the weather during the night of December 4 was not threatening and he did not believe there would be a storm; that he knew the Sabang River; and that the lorcha Pilar, when loaded, could not enter as there was not sufficient water in its channel; that, according to an official chart of the port of Gubat, the bar of the Sabang River was covered by only a foot and a half of water at ordinary low tide and the lorcha Pilar, when loaded, drew 6 feet and a half; that aside from the fact that the condition of the sea would not have permitted the lorcha to take shelter in the said river, even could it have relied upon the assistance of a towboat, at half past 8 o'clock in the morning the tide was still low; there was but little water in the river and still less over the bar.

It was proven by the said official chart of the port of Gubat, that the depth of water over the bar or entrance of the Sabang River is only one foot and a half at ordinary low tide; that the rise and fall of the tide is about 4_«_ feet, the highest tide being at 2 o'clock in the afternoon of every day; and at that hour, on the 5th of December, the hurricane had already made its appearance and the wind was blowing with all its fury and raising great waves.

The lorcha Pilar, loaded as it had been from the afternoon of December 4, even though it could have been moved by means of poles, without being towed, evidently could not have entered the Sabang River on the morning of the 5th, when the wind began to increase and the sea to become rough, on account of the low tide, the shallowness of the channel, and the boat's draft.

The facts stated in the foregoing paragraph were proved by the said chart which was exhibited in evidence and not rejected or assailed by the plaintiff. They were also supported by the sworn testimony of the patron of the lorcha, unrebutted by any oral evidence on the part of the plaintiff such as might disprove the certainty of the facts related, and, according to section 275 of the Code of Civil Procedure, the natural phenomenon of the tides, mentioned in the official hydrographic map, Exhibit 7, which is prima facie evidence on the subject, of the hours of its occurrence and of the conditions and circumstances of the port of Gubat, shall be judicially recognized without the introduction of proof, unless the facts to the contrary be proven, which was not done by the plaintiff, nor was it proven that between the hours of 10 and 11 o'clock of the morning of December 5, 1908, there did not prevail a state of low tide in the port of Gubat.

The oral evidence adduced by the plaintiff with respect to the depth of the Sabang River, was unable to overcome that introduced by the defendant, especially the said chart. According to section 320 of the Code of Civil Procedure, such a chart is prima facie evidence of particulars of general notoriety and interest, such as the existence of shoals of varying depths in the bar and mouth of the Sabang River and which obstruct the entrance into the same; the distance, length, and number of the said shoals, with other details apparently well known to the patron of the lorcha Pilar, to judge from his testimony.

Vessels of considerable draft, larger than the said lorcha, might have entered the Sabang River some seven or nine years before, according

to the testimony of the Chinaman, Antonio B. Yap Cunco, though he did not state whether they did so at high tide; but, since 1901, or previous years, until 1908, changes may have taken place in the bed of the river, its mouth and its bar. More shoals may have formed or those in existence may have increased in extent by the constant action of the sea. This is the reason why the patron, Gadvilao, who was acquainted with the conditions of the port and cove of Gubat, positively declared that the lorcha Pilar could not, on account of her draft, enter the Sabang River, on account of low water.

The patron of the lorcha, after stating (p.58) that at Gubat or in its vicinity there is no port that affords shelter, affirmed that it was impossible to hoist the sails or weigh the anchors on the morning of the 5th of December, owing to the force of the wind and because the boat would immediately have been dragged or driven upon the shoals; that furthermore the lorcha was anchored in a channel some 300 brazas wide, but, notwithstanding this width, the Pilar was, for want of motive power, unable to move without being exposed to be dashed against the coast by the strong wind and the heavy sea then prevailing. The testimony of this witness was neither impugned nor offset by any evidence whatever; he was a patron of long years of service and of much practice in seafaring, especially in the port of Gubat and its vicinity, who had commanded or been intrusted with the command of other crafts similar to the lorcha Pilar and his testimony was absolutely uncontradicted.

The patron Gadvilao, being cognizant of the duties imposed upon him by rules 14 and 15 of article 612, and others, of the Code of Commerce, remained with sailors, during the time the hurricane was raging, on board the lorcha from the morning of December 5 until early the following morning, the 6th, without abandoning the boat, notwithstanding the imminent peril to which he was exposed, and kept to his post until after the wreck and the lorcha had been dashed against the rocks. Then he solicited help from the captain of the steamer Ton Yek, and, thanks to the relief afforded by a small boat sent by the latter officer, Gadvilao with his crew succeeded in reaching land and immediately reported the occurrence to the representative of Inchausti & Co. and to the public official from whom he obtained the document of protest, Exhibit 1. By such procedure, he showed that, as a patron skilled in the exercise of his vocation, he performed the duties imposed by law in cases of shipwreck brought about by force majeure.

Treating of shipwrecks, article 840 of the Code of Commerce prescribes:

The losses and damages suffered by a vessel and her cargo by reason of shipwreck or standing shall be individually for the account of the owners, the part of the wreck which may be saved belonging to them in the same proportion.

And Article 841 of the same code reads:

If the wreck or stranding should arise through the malice, negligence, or lack of skill of the captain, or because the vessel put to sea insufficiently repaired and supplied, the owner or the freighters may demand indemnity of the captain for the damages caused to the vessel or cargo by the accident, in accordance with the provisions contained in articles 610, 612, 614, and 621.

The general rule established in the first of the foregoing articles is that the loss of the vessel and of its cargo, as the result of shipwreck, shall fall upon the respective owners thereof, save for the exceptions specified in the second of the said articles.

31


These legal provisions are in harmony with those of articles 361 and 362 of the Code of Commerce, and are applicable whenever it is proved that the loss of, or damage to, the goods was the result of a fortuitous event or of force majeure; but the carrier shall be liable for the loss or the damage arising from the causes aforementioned, if it shall have been proven that they occurred through his own fault or negligence or by his failure to take the same precautions usually adopted by diligent and careful persons.

In the contract made and entered into by and between the owner of the goods and the defendant, no term was fixed within which the said merchandise should be delivered to the former at Catarman, nor was it proved that there was any delay in loading the goods and transporting them to their destination. From the 28th of November, when the steamer Sorsogon arrived at Gubat and landed the said goods belonging to Ong Bieng Sip to await the lorcha Pilar which was to convey them to Catarman, as agreed upon, no vessel carrying merchandise made the voyage from Gubat to the said pueblo of the Island of Samar, and with Ong Bieng Sip's merchandise there were also to be shipped goods belonging to the defendant company, which goods were actually taken on board the said lorcha and suffered the same damage as those belonging to the Chinaman. So that there was no negligence, abandonment, or delay in the shipment of Ong Bieng Sip's merchandise, and all that was done by the carrier, Inchausti & Co., was what it regularly and usually did in the transportation by sea from Manila to Catarman of all classes of merchandise. No attempt has been made to prove that any course other than the foregoing was pursued by that firm on this occasion; therefore the defendant party is not liable for the damage occasioned as a result of the wreck or stranding of the lorcha Pilar because of the hurricane that overtook this craft while it was anchored in the port of Gubat, on December 5, 1908, ready to be conveyed to that of Catarman.

It is a fact not disputed, and admitted by the plaintiff, that the lorcha Pilar was stranded and wrecked on the coast of Gubat during the night of the 5th or early in the morning of the 6th of December, 1908, as a result of a violent storm that came from the Pacific Ocean, and, consequently, it is a proven fact that the loss or damage of the goods shipped on the said lorcha was due to the force majeure which caused the wreck of the said craft.

According to the aforecited article 361 of the Code of Commerce, merchandise shall be transported at the risk and venture of the shipper, unless the contrary be expressly stipulated. No such stipulation appears of record, therefore, all damages and impairment suffered by the goods in transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, are for the account and risk of the shipper.

A final clause of this same article adds that the burden of proof of these accidents is upon the carrier; the trial record fully discloses that the loss and damage of the goods shipped by the Chinaman, Ong Bieng Sip, was due to the stranding and wreck of the lorcha Pilar in the heavy storm or hurricane aforementioned; this the plaintiff did not deny, and admitted that it took place between the afternoon of the 5th and early in the morning of the 6th of December, 1908, so it is evident that the defendant is exempt from the obligation imposed by the law to prove the occurrence of the said storm, hurricane, or cyclone in the port of Gubat, and, therefore, if said goods were lost or damaged and could not be delivered in Catarman, it was due to a fortuitous event and a superior, irresistible natural force, or force majeure, which completely disabled the lorcha intended for their transportation to the said port of the Island of Samar.

The record bears no proof that the said loss or damage caused by the stranding or wreck of the lorcha Pilar as a result of the storm mentioned, occurred through carelessness or negligence on the part of the defendant company, its agents or the patron of the said lorcha, or because they did not take the precautions usually adopted by careful and diligent persons, as required by article 362 of the Code of Commerce; the defendant company, as well as its agents and the patron of the lorcha, had a natural interest in preserving the craft and its own goods laden therein — an interest equal to that of the Chinese shipper in preserving his own which were on board the ship lorcha — and, in fact, the defendant, his agents and the patron did take the measures which they deemed necessary and proper in order to save the lorcha and its cargo from the impending danger; accordingly, the patron, as soon as he was informed that a storm was approaching, proceeded to clear the boat of all gear which might offer resistance to the wind, dropped the four anchors he had, and even procured an extra anchor from the land, together with a new cable, and cast it into the water, thereby adding, in so far as possible, to the stability and security of the craft, in anticipation of what might occur, as presaged by the violence of the wind and the heavy sea; and Inchausti & Company's agent furnished the articles requested by the patron of the lorcha for the purpose of preventing the loss of the boat; thus did they all display all the diligence and care such as might have been employed by anyone in similar circumstances, especially the patron who was responsible for the lorcha under his charge; nor is it possible to believe that the latter failed to adopt all the measures that were necessary to save his own life and those of the crew and to free himself from the imminent peril of shipwreck.

In view of the fact that the lorcha Pilar had no means of changing its anchorage, even supposing that there was a better one, and was unable to accept help from any steamer that might have towed it to another point, as wherever it might have anchored, it would continually have been exposed to the lashing of the waves and to the fury of the hurricane, for the port of Gubat is a cove or open roadstead with no shelter whatever from the winds that sweep over it from the Pacific Ocean, and in view of the circumstances that it was impossible for the said lorcha, loaded as it then was, to have entered the Sabang River, even though there had been a steamer to tow it, not only because of an insufficient depth of water in its channel, but also on account of the very high bar at the entrance of the said river, it is incontrovertible that the stranding and wreck of the lorcha Pilar was due to a fortuitous event or to force majeure and not to the fault and negligence of the defendant company and its agents or of the patron, Mariano Gadvilao, inasmuch as the record discloses it to have been duly proved that the latter, in difficult situation in which unfortunately the boat under his charge was placed, took all the precautions that any diligent man should have taken whose duty it was to save the boat and its cargo, and, by the instinct of self-preservation, his own life and those of the crew of the lorcha; therefore, considering the conduct of the patron of the lorcha and that of the defendant's agent in Gubat, during the time of the occurrence of the disaster, the defendant company has not incurred any liability whatever for the loss of the goods, the value of which is demanded by the plaintiff; it must, besides, be taken into account that the defendant itself also lost goods of its own and the lorcha too.

From the moment that it is held that the loss of the said lorcha was due to force majeure, a fortuitous event, with no conclusive proof or negligence or of the failure to take the precautions such as diligent and careful persons usually adopt to avoid the loss of the boat and its cargo, it is neither just nor proper to attribute the loss or damage of the goods in question to any fault, carelessness, or negligence on the

32

Choco NotesTransportation Law cases – Common Carrier of Goods part 1part of the defendant company and its agents and, especially, the patron of the lorcha Pilar.

Moreover, it is to be noted that, subsequent to the wreck, the defendant company's agent took all the requisite measures for the salvage of such of the goods as could be recovered after the accident, which he did with the knowledge of the shipper, Ong Bieng Sip, and, in effecting their sale, he endeavored to secure all possible advantage to the Chinese shipper; in all these proceedings, as shown by the record, he acted in obedience to the law.

From all the foregoing it is concluded that the defendant is not liable for the loss and damage of the goods shipped on the lorcha Pilar by the Chinaman, Ong Bieng Sip, inasmuch as such loss and damage were the result of a fortuitous event or force majeure, and there was no negligence or lack of care and diligence on the part of the defendant company or its agents.

Therefore, we hold it proper to reverse the judgment appealed from, and to absolve, as we hereby do, the defendant, Inchausti & Co., without special findings as to costs.

Arellano, C.J., Mapa and Johnson, JJ., concur. Carson and Trent, JJ., dissent.

Martini v. Macondray [G.R. No. 13972. July 28, 1919.]

G. MARTINI, LTD., Plaintiff-Appellee, vs. MACONDRAY & CO. (INC.), Defendant-Appellant.

D E C I S I O N

STREET, J.:

In September of the year 1916, the Plaintiff G. Martini, Ltd., arranged with the Defendant company, as agents of the Eastern and Australian Steamship Company, for the shipment of two hundred and nineteen cases or packages of chemical products from Manila, Philippine Islands, to Kobe, Japan. The goods were embarked at Manila on the steamship Eastern, and were carried to Kobe on the deck of that ship. Upon arrival at the port of destination it was found that the chemicals comprised in the shipment had suffered damage from the effects of both fresh and salt water; and the present action was instituted by the Plaintiff to recover the amount of the damage thereby occasioned. In the Court of First Instance judgment was rendered in favor of the Plaintiffs for the sum of P34,997.56, with interest from March 24, 1917, and costs of the proceeding. From this judgment the Defendant appealed.

That the damage was caused by water, either falling in the form of rain or splashing aboard by the action of wind and waves, is unquestionable; and the contention of the Plaintiff is that it was the duty of the ship’s company to stow this cargo in the hold and not to place it in an exposed position on the open deck. The defense is that by the contract of affreightment the cargo in question was to be carried on deck at the shipper’s risk; and attention is directed to the fact that on the face of each bill of lading is clearly stamped with a rubber stencil in conspicuous letters the words “on deck at shipper’s risk.” In this connection the Defendant relies upon paragraph 19 of

the several bills of lading issued for transportation of this cargo, which reads as follows:

“19. Goods signed for on this bill of lading as carried on deck are entirely at shipper’s risk, whether carried on deck or under hatches, and the steamer is not liable for any loss or damage from any cause whatever. “

The Plaintiff insists that the agreement was that the cargo in question should be carried in the ordinary manner, that is, in the ship’s hold, and that the Plaintiff never gave its consent for the goods to be carried on deck. The material facts bearing on this controverted point appear to be these: On September 15, 1916, the Plaintiff applied to the Defendant for necessary space on the steamship Eastern, and received a shipping order, which constituted authority for the ship’s officers to receive the cargo aboard. One part of this document contained a form which, when signed by the mate, would constitute the “mate’s receipt,” showing that the cargo had been taken on.

Ordinarily the shipper is supposed to produce the mate’s receipt to the agents of the ship’s company, who thereupon issue the bill of lading to the shipper. When, however, the shipper, as not infrequently happens, desires to procure the bill of lading before he obtains the mate’s receipt, it is customary for him to enter into a written obligation, binding himself, among other things, to abide by the terms of the mate’s receipt. In the present instance the mate’s receipt did not come to the Plaintiff’s hand until Monday night, but as the Plaintiff was desirous of obtaining the bills of lading on the Saturday morning preceding in order that he might negotiate them at the bank, a request was made for the delivery of the bills of lading on that day To effectuate this, the Plaintiff was required to enter into the written obligation, calling itself a “letter of guarantee,” which was introduced in evidence as Exhibit D-C. This document is of the date of September 16, 1916, and of the following tenor:

“In consideration of your signing us clean B/L for the undermentioned cargo per above steamer to be shipped on or under deck at ship’s option, for Kobe without production of the mate’s receipt, we hereby guarantee to hold you free from any responsibility by your doing so, and for any expense should the whole or part of the cargo be shut out, or otherwise, and to hand you said mate’s receipt as soon as it reaches us and to abide by all clauses and notations on the same.”

In conformity with the purpose of this document the bills of lading were issued, and the negotiable copies were, upon the same day, negotiated at the bank by the Plaintiff for 90 per cent of the invoice value of the goods. As already stated these bills of lading contained on their face, conspicuously stenciled, the words “on deck at shipper’s risks.” The mate’s receipt, received by the Plaintiff two days later also bore the notation “on deck at shipper’s risk,” written with pencil, and evidently by the officer who took the cargo on board and signed the receipt.

The Plaintiff insists that it had at no time agreed for the cargo to be carried on deck; and G. Martini, manager of Martini & Company, says that the first intimation he had of this was when, at about 4 p.m. on that Saturday afternoon, he examined the nonnegotiable copies of the bills of lading, which had been retained by the house, and discovered the words “on deck at shipper’s risk” stamped thereon. Martini says that upon seeing this, he at once called the attention of S. Codina thereto, the latter being an employee of the house whose duty it was to attend to all shipments of merchandise and who in fact had entire control of all matters relating to the shipping of this cargo.

33

Choco NotesTransportation Law cases – Common Carrier of Goods part 1Codina pretends that up to the time when Martini directed his attention to the fact, he himself was unaware that the cargo was being stowed on deck; and upon the discovery of this fact the two gentlemen mentioned expressed mutual surprise and dissatisfaction. Martini says that he told Codina to protest at once to Macondray & Company over the telephone, while Martini himself proceeded to endite a letter, which appears in evidence as Exhibit D-T of the Defendant and is in its material part as follows:

“MANILA, September 16, 1916.

“MESSRS. MACONDRAY & Co.,

“Manila,

“DEAR SIRS: In re our shipment per steamship Eastern, we are very much surprised to see that the remark ‘on deck at shipper’s risk’ has been stamped on the bills of lading Nos. 8 to 23. . . . and although not believing that the same have actually been shipped on deck we must hold you responsible for any consequence, loss, or damage deriving from your action should they have been shipped as stated.

“Yours faithfully,

“G. MARTINI, LTD.

“By S. CODINA.”

This letter was followed by another of the same date and of substantially the same tenor but containing the following additional statement:

“It is the prevailing practice that, whenever a cargo is being carried on deck, shipowners or agents give advice of it to shippers previous to shipment taking place, and obtain their consent to it. If we had been advised of it, shipment would not have been effected by us. We regret very much this occurrence, but you will understand that in view of your having acted in this case on your own responsibility, we shall have to hold you amenable for any consequences that may be caused from your action.”

The first of these letters was forthwith dispatched by messenger, and upon receiving it, Macondray & Company called Codina by telephone at about 4.30 p.m. and, referring to the communication just received, told him that Macondray & Company could not accept the cargo for transportation otherwise than on deck and that if Martini & Company were dissatisfied, the cargo could be discharged from the ship.

There is substantial conformity in the testimony of the two parties with respect to the time of the conversation by telephone and the nature of the message which Macondray & Company intended to convey, though the witnesses differ as to some details and in respect to what occurred immediately thereafter. Basa, who was in charge of the shipping department of Macondray & Company and who conducted the conversation on the part of the latter, says that he told Codina that if Martini & Company was unwilling for the cargo to be carried on deck that they could discharge it and further advised him that Macondray & Company’s empty boats were still at the ship’s side ready to receive the cargo. In reply Codina stated that Martini, the manager, was then out and that he would answer in a few minutes, after communication with Martini. Within the course of half an hour Codina called Basa up and said that as the cargo was already stowed on deck, Martini & Company were willing for it to be carried

in this way, and that their protest was a mere formality. Codina admits that he was informed by Basa that the cargo could not be carried under the hatches, and that if Martini & Company were dissatisfied to have it carried on deck, they could discharge it. He denies being told that it could be taken off in Macondray & Company’s boats. Codina further states that when the conversation was broken off for the purpose of enabling him to communicate with Martini, he consulted with the latter, and was directed to say that Martini & Company did not consent for the cargo to be carried on deck and that it must be discharged. Upon returning to the telephone, he found that the connection had been broken, and he says that he was thereafter unable to get Macondray & Company by telephone during that afternoon, although he attempted to do so more than once.

In the light of all the evidence the conclusion seems clear enough that, although Martini & Company would have greatly preferred for the cargo to be carried under the hatches, they nevertheless consented for it to go on deck. Codina, if attentive to the interests of his house, must have known from the tenor of the guaranty to which his signature is affixed that the Defendant had reserved the right to carry it on deck, and when the bills of lading were delivered to the Plaintiff they plainly showed that the cargo would be so carried.

It must therefore be considered that the Plaintiff was duly affected with notice as to the manner in which the cargo was shipped. No complaint, however, was made until after the bills of lading had been negotiated at the bank. When the manager of Martini & Company first had his attention drawn to the fact that the cargo was being carried on deck, he called Codina to account, and the latter found it to his interest to feign surprise and pretend that he had been deceived by Macondray & Company. Even then there was time to stop the shipment, but Martini & Company failed to give the necessary instructions, thereby manifesting acquiescence in the accomplished fact.

In a later letter of October 25, 1916, addressed to Macondray & Company, Martini, referring to the incident says: “If previous to the mailing of the documents, you had actually notified us by phone or otherwise that you could not accept our cargo in any other way but on deck, we should have promptly given you instructions to leave it on the lighters and at our disposal.”

From this it is inferable that one reason why the Plaintiff allowed the cargo to be carried away without being discharged, was that the bills had been discounted and to stop the shipment would have entailed the necessity of refunding the money which the bank had advanced, with the inconveniences incident thereto. Another reason apparently was that Martini discerned, or thought he discerned the possibility of shifting the risk so as to make it fall upon the ship’s company.

With reference to the practicability of discharging the cargo in the late afternoon or evening of Saturday, September 16, before the ship departed, as it did at 8 p.m. some evidence was introduced tending to show that in order to get the cargo off certain formalities were necessary which could not be accomplished, as for instance, the return of the mate’s receipt (which had not yet come to the Plaintiff’s hands), the securing of a permit from the customs authorities, and the securing of an order of discharge from the steamship company. In view of the fact that the Plaintiff did nothing whatever looking towards the discharge of the cargo, not even so much as to notify Macondray & Company that the cargo must come off, the proof relative to the practicability of discharge is inconclusive. If the Plaintiff had promptly informed Macondray & Company of their resolve to have the cargo discharged, and the latter had nevertheless

34

Choco NotesTransportation Law cases – Common Carrier of Goods part 1permitted the ship to sail without discharging it, there would have been some ground for Plaintiff’s contention that its consent had not been given for the goods to be carried on deck. Needless to say we attach no weight to the statement of Codina that he was unable to get Macondray & Company by telephone in order to communicate directions for the discharge of the cargo.

The evidence submitted in behalf of the Defendant shows that there was no space in the hold to take the cargo; and it was therefore unnecessary to consider whether the chemicals to be shipped were of an explosive or inflammable character, such as to require stowage on deck. By reason of the fact that the cargo had to be carried on deck at all events, if carried at all, the guaranty Exhibit D-C was so drawn as to permit stowage either on or under deck at the ship’s option; and the attention of Codina must have been drawn to this provision because Macondray & Company refused to issue the bills of lading upon a guaranty signed by Codina upon another form (Exhibit R), which contained no such provision. The messenger between the two establishments who was sent for the bills of lading accordingly had to make a second trip and go back for a letter of guaranty signed upon the desired form. The pretense of Codina that he was deceived into signing a document different from that which he supposed himself to be signing is wholly unsustained.

The result of the discussion is that Martini & Company must be held to have assented to the shipment of the cargo on deck and that they are bound by the bills of lading in the form in which they were issued. The trial court in our opinion erred in holding otherwise, and in particular by ignoring, or failing to give sufficient weight to the contract of guaranty.

Having determined that the Plaintiff consented to the shipment of the cargo on deck, we proceed to consider whether the Defendant can be held liable for the damage which befell the cargo in question. It of course goes without saying that if a clean bill of lading had been issued and the Plaintiff had not consented for the cargo to go on deck, the ship’s company would have been liable for all damage which resulted from the carriage on deck. In the case of The Paragon (1 Ware, 326; 18 Fed. Cas. No. 10708), decided in 1836 in one of the district courts of the United States, it appeared that cargo was shipped from Boston, Massachusetts, to Portland, Maine, upon what is called a clean bill of lading, that is, one in the common form without any memorandum in the margin or on its face showing that the goods are to be carried on deck. It was proved that the shipper had not given his consent for carriage on deck. Nevertheless, the master stowed the goods on deck; and a storm having arisen, it became necessary to jettison them. None of the cargo in the hold was lost. It was thus evident that although the cargo in question was lost by peril of the sea, it would not have been lost except for the fact that it was being carried on deck. It was held that the ship was liable. In the course of the opinion the following language was used:

“It is contended that the goods, in this case, having been lost by the dangers of the seas, both the master and the vessel are exempted from responsibility within the common exemption in bills of lading; and the goods having been thrown overboard from necessity, and for the safety of the vessel and cargo, as well as the lives of the crew, that it presents a case for a general average or contribution, upon the common principle that when a sacrifice is made for the benefit of all, that the loss shall be shared by all. . . . In every contract of affreightment, losses by the dangers of the seas are excepted from the risks which the master takes upon himself, whether the exception is expressed in the contract or not. The exception is made by the law, and falls within the general principle that no one is responsible for

fortuitous events and accidents of major force. Casus fortuitous nemo praestat. But then the general law is subject to an exception, that when the inevitable accident is preceded by a fault of the debtor or person bound without which it would not have happened, then he becomes responsible for it. (Pothier, des Obligations, No. 542; Pret. a Usage, No. 57; Story, Bailm., c. 4, No. 241; In Majorious casibus si culpa ejus interveniat tenetur; Dig. 44, 7, 1, s. 4.)

“The master is responsible for the safe and proper stowage of the cargo, and there is no doubt that by the general maritime law he is bound to secure the cargo safely under deck. . . . If the master carries goods on deck without the consent of the shipper . . . he does it at his own risk. If they are damaged or lost in consequence of their being thus exposed, he cannot protect himself from responsibility by showing that they were damaged or lost by the dangers of the seas. . . . When the shipper consents to his goods being carried on deck, he takes the risk upon himself of these peculiar perils. . . . This is the doctrine of all the authorities, ancient and modern. “

Van Horn vs. Taylor (2 La. Ann., 587; 46 Am. Dec., 558), was a case where goods stowed on deck were lost in a collision. The court found that the ship carrying these goods was not at fault, and that the shipper had notice of the fact that the cargo was being carried on deck. It was held that the ship was not liable. Said the court:

“It is said that the Plaintiff’s goods were improperly stowed on deck; that the deck load only was thrown overboard by the collision, the cargo in the hold not being injured. The goods were thus laden with the knowledge and implied approbation of the Plaintiff. He was a passenger on board the steamer, and does not appear to have made any objection to the goods being thus carried, though the collision occurred several days after the steamer commenced her voyage.”

In the case of The Thomas P. Thorn (8 Ben., 3; 23 Fed., Cas. No. 13927), decided in the District Court in the State of New York, it appeared that tobacco was received upon a canal boat, with the understanding that it was to be carried on deck, covered with tarpaulins. Upon arrival at its destination it was found damaged by water, for the most part on the top, and evidently as a consequence of rains. At the same time a quantity of malt stowed below deck on the same voyage was uninjured. In discussing the question whether upon a contract to carry on deck, the vessel was liable for the wetting of the tobacco, the court said:

“It is manifest that the injury to the tobacco arose simply from the fact that it was carried on deck. The malt, carried below, although an article easily injured, received no damage, and the voyage was performed with usual care, and without disaster. Indeed, there is evidence of a statement by the libelant, that tobacco must of necessity be injured by being carried on deck. But, under a contract to carry upon deck, the risk of any damage resulting from the place of carriage rests upon the shipper, and, without proof of negligence causing the damage, there can be no recovery. Here the evidence shows that all reasonable care was taken of the tobacco during its transportation; that the manner of stowing and covering it was known to and assented to by the shipper; and the inference is warranted that the injury arose, without fault of the carrier, from rain, to which merchandise transported on deck must necessarily be in some degree exposed. Any loss arising from damaged thus occasioned is to be borne by the shipper.”

Lawrence vs. Minturn (17 How [U.S,], 100; 15 L ed., 58), was a case where goods stowed on deck with the consent of the shipper were jettisoned during a storm at sea. In discussing whether this cargo was

35

Choco NotesTransportation Law cases – Common Carrier of Goods part 1entitled to general average, the Supreme Court of the United States said:

“The maritime codes and writers have recognized the distinction between cargo placed on deck, with the consent of the shipper, and cargo under deck.

“There is not one of them which gives a recourse against the master, the vessel, or the owners, if the property lost had been placed on deck with the consent of its owner, and they afford very high evidence of the general and appropriate usages, in this particular, of merchants and shipowners.

“So the courts of this country and England, and the writers on this subject, have treated the owner of goods on deck, with his consent, as not having a claim on the master or owner of the ship in case of jettison. The received law, on the point, is expressed by Chancellor Kent, with his usual precision, in 3 Com., 240: ‘Nor is the carrier in that case (Jettison of deck load) responsible to the owner, unless the goods were stowed on deck without the consent of the owner, or a general custom binding him, and then he would be chargeable with the loss.’“

In Gould vs. Oliver (4 Bing., N. C., 132), decided in the English Court of Common Pleas in 1837, Tindal, C.J., said:

“Where the loading on deck has taken place with the consent of the merchant, it is obvious that no remedy against the shipowner or master for a wrongful loading of the goods on deck can exist. The foreign authorities are indeed express; on that point. And the general rule of the English law, that no one can maintain an action for a wrong, where he has consented or contributed to the act which occasioned his loss, leads to the same conclusion.”

The foregoing authorities fully sustain the proposition that where the shipper consents to have his goods carried on deck he takes the risks of any damage or loss sustained as a consequence of their being so carried. In the present case it is indisputable that the goods were injured during the voyage and solely as a consequence of their being on deck, instead of in the ship’s hold. The loss must therefore fall on the owner. And this would be true, under the authorities, even though paragraph 19 of the bills of lading, quoted near the beginning of this opinion, had not been made a term of the contract.

It is undoubtedly true that, upon general principle, and momentarily ignoring paragraph 19 of these bills of lading, the ship’s owner might be held liable for any damage directly resulting from a negligent failure to exercise the care properly incident to the carriage of the merchandise on deck. For instance, if it had been improperly placed or secured, and had been swept overboard as a proximate result of such lack of care, the ship would be liable, to the same extent as if the cargo had been deliberately thrown over without justification. So, if it had been shown that, notwithstanding the stowage of these goods on deck, the damage could have been prevented, by the exercise of proper skill and diligence in the discharge of the duties incumbent on the ship, the owner might still be held.

To put the point concretely, let it be supposed that a custom had been proved among mariners to protect deck cargo from the elements by putting a tarpaulin over it; or approaching still more to imaginable conditions in the present case, let it be supposed that the persons charged with the duty of transporting this cargo, being cognizant of the probability of damage by water, had negligently and without good reason failed to exercise reasonable care to protect it by covering it

with tarpaulins. In such case it could hardly be denied that the ship’s company should be held liable for such damage as might have been avoided by the use of such precaution.

But it should be borne in mind in this connection that it is incumbent on the Plaintiff, if his cause of action is founded on negligence of this character, to allege and prove that the damage suffered was due to failure of the persons in charge of the cargo to use the diligence properly incident to carriage under these conditions.

In Clark vs. Barnwell (12 How. [U.S.], 272; 13 L. ed., 985), the Supreme Court distinguishes with great precision between the situation where the burden of proof is upon the shipowner to prove that the loss resulted from an excepted peril and that where the burden of proof is upon the owner of the cargo to prove that the loss was caused by negligence on the part of the persons employed in the conveyance of the goods. The first two syllabi in Clark vs. Barnwell read as follows:

“Where goods are shipped and the usual bill of lading given, ‘promising to deliver them in good order, the dangers of the seas excepted,’ and they are found to be damaged the onus probandi is upon the owners of the vessel, to show that the injury was occasioned by one of the excepted causes.

“But, although the injury may have been occasioned by one of the excepted causes, yet still the owners of the vessel are responsible if the injury might have been avoided, by the exercise of reasonable skill and attention on the part of the persons employed in the conveyance of the goods. But the onus probandi then becomes shifted upon the shipper, to show the negligence.

The case just referred to was one where cotton thread, put up in boxes, had deteriorated during a lengthy voyage in a warm climate, owing to dampness and humidity. In discussing the question of the responsibility of the ship’s owner, the court said:

“Notwithstanding, therefore, the proof was clear that the damage was occasioned by the effect of the humidity and dampness of the vessel, which is one of the dangers of navigation, it was competent for the libelants to show that the Respondents might have prevented it by proper skill and diligence in the discharge of their duties; but no such evidence is found in the record. For caught that appears every precaution was taken that is usual or customary, or known to shipmasters, to avoid the damage in question. And hence we are obliged to conclude that it is to be attributed exclusively to the dampness of the atmosphere of the vessel, without negligence or fault on the part of the master or owners.”

Exactly the same words might be used as applicable to the facts of the present case; and as it is apparent that the damage here was caused by rain and sea water — the risk of which is inherently incident to carriage on deck — the Defendant cannot be held liable. It is not permissible for the court, in the absence of any allegation or proof of negligence, to attribute negligence to the ship’s employees in the matter of protecting the goods from rains and storms. The complaint on the contrary clearly indicates that the damage done was due to the mere fact of carriage on deck, no other fault or delinquency on the part of anybody being alleged.

It will be observed that by the terms of paragraph 19 of the bills of lading, the ship is not to be held liable, in the case of goods signed for as carried on deck, for any loss or damage from any cause whatever.” We are not to be understood as holding that this provision would

36

Choco NotesTransportation Law cases – Common Carrier of Goods part 1have protected the ship from liability for the consequences of negligent acts, if negligence had been alleged and proved. From the discussion in Manila Railroad Co. vs. Compania Transatlantica and Atlantic, Gulf & Pacific Co. (38 Phil. Rep., 875), it may be collected that the carrier would be held liable in such case, notwithstanding the exemption contained in paragraph 19. But however that may be damages certainly cannot be recovered on the ground of negligence, even from a carrier, where negligence is neither alleged nor proved.

The judgment appealed from is reversed and the Defendant is absolved from the complaint. No express pronouncement will be made as to the costs of either instance. SO ORDERED.

Eastern v. IACG.R. No. L-69044 May 29, 1987

EASTERN SHIPPING LINES, INC., petitioner, vs.INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents.

No. 71478 May 29, 1987

EASTERN SHIPPING LINES, INC., petitioner, vs.THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD., respondents.

MELENCIO-HERRERA, J.:

These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo.

The basic facts are not in controversy:

In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated value with respondent Development Insurance and Surety Corporation.

In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.

Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured.

G.R. NO. 69044

On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having been subrogated unto the rights of the two insured companies, filed suit against petitioner Carrier for the recovery of the amounts it had paid to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No. 6087).

Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable under the law.

On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on August 14, 1984, affirmed.

Petitioner Carrier is now before us on a Petition for Review on Certiorari.

G.R. NO. 71478

On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured value of the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner Carrier.

Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper.

On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on September 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00 because of $500 per package limitation of liability under the COGSA.

Hence, this Petition for Review on certiorari by Petitioner Carrier.

Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due course on March 25, 1985, and the parties were required to submit their respective Memoranda, which they have done.

On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for Review and moved for its consolidation with G.R. No. 69044, the lower-numbered case, which was then pending resolution with the First Division. The same was granted; the Resolution of the Second

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1Division of September 25, 1985 was set aside and the Petition was given due course.

At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer thereof. We note that in G.R. No. 69044, Petitioner Carrier stated in its Petition:

There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are represented by various counsel representing various consignees or insurance companies. The common defendant in these cases is petitioner herein, being the operator of said vessel. ... 1

Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are deemed admissions of that party and binding upon it. 2 And an admission in one pleading in one action may be received in evidence against the pleader or his successor-in-interest on the trial of another action to which he is a party, in favor of a party to the latter action. 3

The threshold issues in both cases are: (1) which law should govern — the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier?

On the Law Applicable

The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7

On the Burden of Proof

Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. 8 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:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

xxx xxx xxx 9

Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. " However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. 10 It does not fall within the category of an act of God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13

Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of the rent is allowed when more than one-half of the fruits

have been lost due to such event, considering that the law adopts a protection policy towards agriculture. 14

As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary deligence required by law.

In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made the following Finding of fact:

The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big; that the fire must have started twenty-four 24) our the same was noticed; that carbon dioxide was ordered released and the crew was ordered to open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort were not enough to control the fire.

Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods. The evidence of the defendant did not show that extraordinary vigilance was observed by the vessel to prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. Consequently, the crew could not have even explain what could have caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary vigilance and care had been made by the crew to prevent the occurrence of the fire. The defendant, as a common carrier, is liable to the consignees for said lack of deligence required of it under Article 1733 of the Civil Code. 15

Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot escape liability for the loss of the cargo.

And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily.

Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that:

Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from

(b) Fire, unless caused by the actual fault or privity of the carrier.

38


xxx xxx xxx

In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same was noticed; " and that "after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage." The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Petitioner Carrier.

On the US $500 Per Package Limitation:

Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the COGSA, which reads:

(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 bill of lading. This declaration if embodied in the bill of lading shall be prima facie evidence, but all 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.

xxx xxx xxx

Article 1749 of the New Civil Code also allows the limitations of liability in this wise:

Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.

It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of the Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties. 16

In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceed US $500 per package, or its peso equivalent, at the time of

payment of the value of the goods lost, but in no case "more than the amount of damage actually sustained."

The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the amount of the insurance coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The goods were shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually sustained." Consequently, the aforestated amount of P256,039 should be upheld.

With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75.

In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA which was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order.

In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons, which amount is less than the maximum limitation of the carrier's liability."

We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit.

In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel — supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified and affirmed holding that:

When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the "package" referred to in liability limitation provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).

Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers whose contents are disclosed should be treated as packages, the interest in securing international uniformity would suggest that they should not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).

... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a package is inconsistent with the

39

Choco NotesTransportation Law cases – Common Carrier of Goods part 1congressional purpose of establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):

Although this approach has not completely escaped criticism, there is, nonetheless, much to commend it. It gives needed recognition to the responsibility of the courts to construe and apply the statute as enacted, however great might be the temptation to "modernize" or reconstitute it by artful judicial gloss. If COGSA's package limitation scheme suffers from internal illness, Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit's conclusion in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators, do not warrant a distortion or artificial construction of the statutory term "package." A ruling that these large reusable metal pieces of transport equipment qualify as COGSA packages — at least where, as here, they were carrier owned and supplied — would amount to just such a distortion.

Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered "packages" standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I would liken these containers to detachable stowage compartments of the ship. They simply serve to divide the ship's overall cargo stowage space into smaller, more serviceable loci. Shippers' packages are quite literally "stowed" in the containers utilizing stevedoring practices and materials analogous to those employed in traditional on board stowage.

In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional economics test. Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which are then placed in containers, the cartons and not the containers are the packages.

xxx xxx xxx

The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:

Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a carrier- furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per container if the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in clear and unambiguous language, an agreement to treat the container as the package.

(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in Fordham International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis supplied)

In this case, the Bill of Lading (Exhibit "A") disclosed the following data:

2 Containers

(128) Cartons)

Men's Garments Fabrics and Accessories Freight Prepaid

Say: Two (2) Containers Only.

Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be considered as the shipping unit subject to the $500 limitation of liability.

True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however, containers are provided by the carrier. 19 In this case, the probability is that they were so furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation in fine print:

11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container(s).

The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the goods could probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21

On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)

Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its witnesses in Japan by written interrogatories.

We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point, the Trial Court found:

xxx xxx xxx

Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978, when its answer was prepared and filed in Court, until September 26, 1978, when the pre-trial conference was conducted for the last time, the defendant had more than nine months to prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon the plaintiff on August 25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11 the that the deposition of the witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the defendant's motion for postponement, for which reason it deserves no sympathy from the Court in that regard. The defendant has told the Court since February 16, 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take

40

Choco NotesTransportation Law cases – Common Carrier of Goods part 1until August 25, 1979, or more than six months, to prepare its written interrogatories. Only the defendant itself is to blame for its failure to adduce evidence in support of its defenses.

xxx xxx xxx 22

Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due process when the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be heard. 24

On the Award of Attorney's Fees:

Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.

Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00 would be more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed.

WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs.

2) In G.R.No.71478,the judgment is hereby affirmed.

SO ORDERED.

Eastern Shipping v. CAG.R. No. 94151 April 30, 1991

EASTERN SHIPPING LINES, INC., petitioner, vs.THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE CORPORATION, respondents.

Jimenez, Dala & Zaragoza for petitioner.

Reloy Law Office for private respondent.

GANCAYCO, J.:p

The extent of the liability of the common carrier and its insurer for damage to the cargo upon its delivery to the arrastre operator is the center of this controversy.

The findings of fact of the trial court which were adopted by the appellate court and which are not disputed are as follows:

On September 4, 1978, thirteen coils of uncoated 7-wire stress relieved wire strand for prestressed concrete were shipped on board the vessel "Japri Venture," owned and operated by the defendant

Eastern Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc. in Manila, as evidenced by the bill of lading, commercial invoice, packing list and commercial invoice marked Exhibits A, B, C, D; 3, 4, 5 and 6-Razon which were insured by the plaintiff First Nationwide Assurance Corporation for P171,923 (Exhibit E).

On September 16, 1978, the carrying vessel arrived in Manila and discharged the cargo to the custody of the defendant E. Razon, Inc. (Exhibits 1, 2, 3, 4 and 5-ESL), from whom the consignee's customs broker received it for delivery to the consignee's warehouse.

On February 19, 1979, the plaintiff indemnified the consignee in the amount of P171,923.00 for damage and loss to the insured cargo, whereupon the former was subrogated for the latter (Exhibit I).

The plaintiff now seeks to recover from the defendants what it has indemnified the consignee, less P48,293.70, the salvage value of the cargo, or the total amount of P123,629.30.

It appears that while enroute from Kobe to Manila, the carrying vessel "encountered very rough seas and stormy weather" for three days, more or less, which caused it to roll and pound heavily, moving its master to execute a marine note of protest upon arrival at the port of Manila on September 15, 1978 (Exhibit 1-Razon); that the coils wrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the vessel which was flooded with water about one foot deep; that the water entered the hatch when the vessel encountered heavy weather enroute to Manila (Exhibits G, 2, 2A, 2B-Razon); that upon request, a survey of bad order cargo was conducted at the pier in the presence of the representatives of the consignee and the defendant E. Razon, Inc. and it was found that seven coils were rusty on one side each (Exhibits F and 10-Razon); that upon survey conducted at the consignee's warehouse it was found that the "wetting (of the cargo) was caused by fresh water" that entered the hatch when the vessel encountered heavy weather enroute to Manila (p. 3, Exhibit G); and that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose (p. 3, Exhibit G), (pp. 217-218, orig. rec.) 1

The complaint that was filed by the First Nationwide Assurance Corporation (insurer) against Eastern Shipping Lines, Inc. and E. Razon, Inc., in the Regional Trial Court, Manila, was dismissed in a decision dated November 25, 1985. An appeal therefrom was interposed by the insurer to the Court of Appeals wherein in due course a decision was rendered on April 27, 1990, the dispositive part of which reads as follows:

WHEREFORE, the judgment appealed from is hereby SET ASIDE. The appellees are ordered to pay the appellant the sum of P123,629.30, with legal rate of interest from July 24, 1979 until fully paid, Eastern Shipping Lines, Inc. to assume 8/13 thereof, and E. Razon, Inc. to assume 5/13 thereof. No pronouncement as to costs.

SO ORDERED. 2

Only Eastern Shipping Lines, Inc. filed this petition for review by certiorari based on the following assigned errors:

I. IT REFUSED TO CONSIDER THE COUNTER-ASSIGNMENT OF ERRORS OF PETITIONER AS CONTAINED IN ITS BRIEF FOR THE DEFENDANT-APPELLEE EASTERN SHIPPING LINES, INC. AND WHICH ARE ONLY MEANT TO

41

Choco NotesTransportation Law cases – Common Carrier of Goods part 1SUSTAIN THE DECISION OF DISMISSAL OF THE TRIAL COURT;

II. AGAINST ITS OWN FINDINGS OF FACT THAT THE CARGO WAS DISCHARGED AND DELIVERED COMPLETE UNTO THE CUSTODY OF THE ARRASTRE OPERATOR UNDER CLEAN TALLY SHEETS, IT NEVERTHELESS ARBITRARILY CONCLUDED PETITIONER AS LIABLE FOR THE CLAIMED DAMAGES;

III. IT FAILED TO HOLD PETITIONER RELIEVED OF ANY LIABILITY OVER THE CARGO NOTWITHSTANDING IT FOUND THAT THE SAME WAS DISCHARGED AND DELIVERED UNTO THE CUSTODY OF THE ARRASTRE OPERATOR UNDER CLEAN TALLY SHEETS AND ERGO TO BE CONSIDERED GOOD ORDER CARGO WHEN DELIVERED; and,

IV. IT ARBITRARILY AWARDED INTEREST AT THE LEGAL RATE TO COMMENCE FROM THE DATE OF THE COMPLAINT IN VIOLATION OF THE DOCTRINAL RULE THAT IN CASE OF UNLIQUIDATED CLAIMS SUCH AS THE CLAIM IN QUESTION, INTEREST SHOULD ONLY COMMENCE FROM THE DATE OF THE DECISION OF THE TRIAL COURT. 3

Under the first assigned error, petitioner contends that the appellate court did not consider its counter-assignment of errors which was only meant to sustain the decision of dismissal of the trial court. An examination of the questioned decision shows that the appellate court did not consider the counter-assignment of errors of petitioner as it did not appeal the decision of the trial court.

Nevertheless, when such counter-assignments are intended to sustain the judgment appealed from on other grounds, but not to seek modification or reversal thereof, the appellate court should consider the same in the determination of the case but no affirmative relief can be granted thereby other than what had been obtained from the lower court. 4 The contention of petitioner on this aspect is, thus, well-taken.

Be that as it may, under the second and third assigned errors, petitioner claims it should not be held liable as the shipment was discharged and delivered complete into the custody of the arrastre operator under clean tally sheets.

While it is true the cargo was delivered to the arrastre operator in apparent good order condition, it is also undisputed that while en route from Kobe to Manila, the vessel encountered "very rough seas and stormy weather", the coils wrapped in burlap cloth and cardboard paper were stored in the lower hatch of the vessel which was flooded with water about one foot deep; that the water entered the hatch; that a survey of bad order cargo which was conducted in the pier in the presence of representatives of the consignee and E. Razon, Inc., showed that seven coils were rusty on one side (Exhibits F and 10-Razon); that a survey conducted at the consignee's warehouse also showed that the "wetting (of the cargo) was caused by fresh water" that entered the hatch when the vessel encountered heavy rain en route to Manila (Exhibit G); and that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose. 5

Consequently, based on these facts, the appellate court made the following findings and conclusions:

Plainly, the heavy seas and rains referred to in the master's report were not caso fortuito, but normal occurrences that an ocean-going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-going vessels would encounter and provide for, in the ordinary course of a voyage. That rain water (not sea water) found its way into the holds of the Jupri Venture is a clear indication that care and foresight did not attend the closing of the ship's hatches so that rain water would not find its way into the cargo holds of the ship.

Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe "extra-ordinary vigilance over goods . . . .according to all circumstances of each case," and Article 1735 of the same Code states, to wit:

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733.

Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the carrier applies; and the carrier must present evidence that it has observed the extraordinary diligence required by Article 1733 of the Civil Code in order to escape liability for damage or destruction to the goods that it had admittedly carried in this case. No such evidence exists of record. Thus, the carrier cannot escape liability.

The Court agrees with and is bound by the foregoing findings of fact made by the appellate court. The presumption, therefore, that the cargo was in apparent good condition when it was delivered by the vessel to the arrastre operator by the clean tally sheets has been overturned and traversed. The evidence is clear to the effect that the damage to the cargo was suffered while aboard petitioner's vessel.

The last assigned error is untenable. The interest due on the amount of the judgment should commence from the date of judicial demand. 6

WHEREFORE, the petition is DISMISSED, with costs against petitioner.

SO ORDERED.

Arada v. CAG.R. No. 98243 July 1, 1992

ALEJANDRO ARADA, doing business under the name and style "SOUTH NEGROS ENTERPRISES", petitioner, vs.HONORABLE COURT OF APPEALS, respondents.

PARAS, J.:

This is a petition for review on certiorari which seeks to annul and set aside the decision * of the Court of Appeals dated April 8, 1991 in CA-G.R. CV No. 20597 entitled "San Miguel Corporation v. Alejandro Arada, doing business under the name and style "South

42

Choco NotesTransportation Law cases – Common Carrier of Goods part 1Negros Enterprises", reversing the decision of the RTC, Seventh Judicial Region, Branch XII, Cebu City, ordering petitioner to pay the private respondent tho amount of P172,284.80 representing the value of the cargo lost on board the ill-fated, M/L Maya with interest thereon at the legal rate from the date of the filing of the complaint on March 25, 1983 until fully paid, and the costs.

The undisputed facts of the case are as follows: Alejandro Arada, herein petitioner, is the proprietor and operator of the firm South Negros Enterprises which has been organized and established for more than ten (10) years. It is engaged in the business of small scale shipping as a common carrier, servicing the hauling of cargoes of different corporations and companies with the five (5) vessels it was operating (Rollo, p. 121).

On March 24, 1982. petitioner entered into a contract with private respondent to safely transport as a common carrier, cargoes of the latter from San Carlos City, Negros Occidental to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of private respondent consisted of 9,824 cases of beer empties valued at P176,824.80, were itemized as follows:

NO. OF CASES

CARGO

VALUE

7,515 CS

PPW STENIE MTS

P136.773.00

1,542 CS

PLW GRANDE MTS

23,438.40

58 CS

G.E. PLASTIC MTS

1,276.00

24 CS

PLP MTS

456.00

37 CS

CS WOODEN MTS

673.40

8 CS

LAGERLITE PLASTIC MTS

128.00

640 CS

STENEI PLASTIC MTS

14,080.00

9,824 CS

P176,824.80

On March 24, 1982, petitioner thru its crew master, Mr. Vivencio Babao, applied for a clearance with the Philippine Coast Guard for M/L Maya to leave the port of San Carlos City, but due to a typhoon, it was denied clearance by SNI Antonio Prestado PN who was then assigned at San Carlos City Coast Guard Detachment (Rollo, p. 122).

On March 25, 1982 M/L Maya was given clearance as there was no storm and the sea was calm. Hence, said vessel left for Mandaue City. While it was navigating towards Cebu, a typhoon developed and said vessel was buffeted on all its sides by big waves. Its rudder was destroyed and it drifted for sixteen (16) hours although its engine was running.

On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever was left of its cargoes. The crew was rescued by a passing pump boat and was brought to Calanggaman Island. Later in the afternoon, they were brought to Palompon, Leyte, where Vivencio Babao filed a marine protest (Rollo, p. 10).

On the basis of such marine protest, the Board of Marine Inquiry conducted a hearing of the sinking of M/L Maya wherein private respondent was duly represented. Said Board made its findings and recommendation dated November 7, 1983, the dispositive portion of which reads as:

WHEREFORE, premises considered, this Board recommends as it is hereby recommended that the owner/operator, officers and crew of M/L Maya be exonerated or absolved from any administrative liability on account of this incident (Exh. 1).

The Board's report containing its findings and recommendation was then forwarded to the headquarters of the Philippine Coast Guard for appropriate action. On the basis of such report, the Commandant of the Philippine Coast Guard rendered a decision dated December 21, 1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator officers and crew of the ill-fated M/L Maya from any administrative liability on account of said incident (Exh. 2).

On March 25, 1983, Private respondent filed a complaint in the Regional Trial Court its first cause of action being for the recovery of the value of the cargoes anchored on breach of contract of carriage. After due hearing, said court rendered a decision dated July 18, 1988, the dispositive portion of which reads

WHEREFORE, judgment is hereby rendered as follows:

(1) With respect to the first cause of action, claim of plaintiff is hereby dismissed;

(2) Under the second cause of action, defendant must pay plaintiff the sum of P2,000.00;

43

Choco NotesTransportation Law cases – Common Carrier of Goods part 1(3) In the third cause of action, the defendant must pay plaintiff the sum of P2,849.20;

(4) Since the plaintiff has withheld the payment of P12,997.47 due the defendynt, the plaintiff should deduct the amount of P4,849.20 from the P12,997.47 and the balance of P8,148.27 must be paid to the defendant; and

(5) Defendant's counterclaim not having been substantiated by evidence is likewise dismissed. NO COSTS. (Orig. Record, pp. 193-195).

Thereafter, private respondent appealed said decision to the Court of Appeals claiming that the trial court erred in —

(1) holding that nothing was shown that the defendant, or any of his employees who manned the M/L Maya was negligent in any way nor did they fail to observe extraordinary diligence over the cargoes of the plaintiff; and

(2) holding that the sinking of said vessel was caused by the storm, consequently, dismissing the claim of plaintiff in its first cause of action for breach of contract of carriage of goods (Rollo, pp. 33-34; Decision, pp. 3-4).

In its decision Promulgated on April 8, 1991, the Court of Appeals reversed the decision of the court a quo, the dispositive portion and the dispositive part of its decision reads as:

WHEREFORE, that part of the Judgment appeal6d from is REVERSED and the appellee Aleiandro Arada, doing business by the name and style, "South Negros Enterprises", ordered (sic) to pay unto the appellant San Miguel Corporation the amount of P176,824.80 representing the value of the cargo lost on board the ill-fated vessel, M/L Maya, with interest thereon at the legal rate from date of the filing of the complaint on March 25, 1983, until fully paid, and the costs. (Rollo, p. 37)

The Court of Appeals ruled that "in view of his failure to observe extraordinary diligence over the cargo in question and his negligence previous to the sinking of the carrying vessel, as above shown, the appellee is liable to the appellant for the value of the lost cargo.

Hence the present recourse.

On November 20, 1991, this Court gave due course to the petition. The pivotal issue to be resolved is whether or not petitioner is liable for the value of the lost cargoes.

Petitioner contends that it was not in the exercise of its function as a common carrier when it entered into a contract with private respondent,but was then acting as a private carrier not bound by the requirement of extraordinary diligence (Rollo, p. 15) and that the factual findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry are binding and conclusive on the Court (Rollo, pp. 16-17).

Private respondent counters that M/L Maya was in the exercise of its function as a common carrier and its failure to observe the extraordinary diligence required of it in the vigilance over their cargoes makes Petitioner liable for the value of said cargoes.

The petition is devoid of merit.

Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation offering their services to the public (Art. 1732 of the New Civil Code).

In the case at bar, there is no doubt that petitioner was exercising its function as a common carrier when it entered into a contract with private respondent to carry and transport the latter's cargoes. This fact is best supported by the admission of petitioner's son, Mr. Eric Arada, who testified as the officer-in-charge for operations of South Negros Enterprises in Cebu City. In substance his testimony on January 14, 1985 is as follows:

Q. How many vessels are you operating?

A. There were all in all around five (5).

Q. And you were entering to service hauling of cargoes to different companies, is that correct?

A. Yes, sir.

Q. In one word, the South Negros Enterprises is engaged in the business of common carriers, is that correct?

A. Yes, sir,

Q. And in fact, at the time of the hauling of the San Miguel Beer, it was also in the same category as a common carrier?

A. Yes, sir,

(TSN. pp. 3-4, Jan. 29, 1985)

A common carrier, both from the nature of its business and for insistent reasons of public policy is burdened by law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers, but in caring for the goods transported by it. The loss or destruction or deterioration of goods turned over to the common carrier for the conveyance to a designated destination raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity ... (Benedicto v. IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547) (Emphasis supplied).

In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize the loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the destruction or deterioration of the goods (Article 1739, New Civil Code).

In the instant case, the appellate court was correct in finding that petitioner failed to observe the extraordinary diligence over the cargo in question and he or the master in his employ was negligent previous to the sinking of the carrying vessel. In substance, the decision reads:

... VIVENCIO BABAO, the master of the carrying vessel, knew that there was a typboon coming before his departure but did not check where it was.

44

Choco NotesTransportation Law cases – Common Carrier of Goods part 1xxx xxx xxx

If only for the fact that he was first denied clearance to depart on March 24, 1982, obviously because of a typhoon coming, Babao, as master of the vessel, should have verified first where the typhoon was before departing on March 25, 1982. True, the sea was calm at departure time. But that might be the calm before the storm. Prudence dictates that he should have ascertained first where the storm was before departing as it might be on his path. (Rollo, pp. 35-36)

Respondent court's conclusion as to the negligence of petitioner is supported by evidence. It will be noted that Vivencio Babao knew of the impending typhoon on March 24, 1982 when the Philippine Coast Guard denied M/L Maya the issuance of a clearance to sail. Less than 24 hours elapsed since the time of the denial of said clearance and the time a clearance to sail was finally issued on March 25, 1982. Records will show that Babao did not ascertain where the typhoon was headed by the use of his vessel's barometer and radio (Rorlo, p. 142). Neither did the captain of the vessel monitor and record the weather conditions everyday as required by Art, 612 of the Code of Commerce (Rollo, pp. 142-143). Had he done so while navigating for 31 hours, he could have anticipated the strong winds and big waves and taken shelter (Rollo, pp- 36; 145). His testimony on May 4, 1982 is as follows:

Q. Did you not check on your own where the typhoon was?

A. No. sir. (TSN, May 4, 1982, pp. 58-59)

Noteworthy is the fact that as Per official records of the Climatological Division of the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA for brevity) issued by its Chief of Climatological Division, Primitivo G. Ballan, Jr. as to the weather and sea conditions that prevailed in the vicinity of Catmon, Cebu during the period March 25-27, 1982, the sea conditions on March 25, 1982 were slight to rough and the weather conditions then prevailing during those times were cloudy skies with rainshowers and the small waves grew larger and larger, to wit:

SPEED

WAVE HT.

SEA

WEATHER

KNOTS

(METERS)

CONDITIONS

March 25

8 AM

15

1-2

slight

cloudy skies

w/ rainshowers

2 PM

20-25

2.0-3.0

moderate

overcast skies

to rough

w/ some rains

8 PM

30

3.7

rough

sea heaps up

white foam from

45


breaking waves

begin to be blown

in streaks along

the direction of

the wind;

Spindrift begins

2 AM

30

3.7

rough

sea heaps up

white foam from

breaking waves

begin to be blown

in streaks along

the direction of the wind;

46


Spindrift begins

(Exh. 3)

A common carrier is obliged to observe extraordinary diligence and the failure of Babao to ascertain the direction of the storm and the weather condition of the path they would be traversing, constitute lack of foresight and minimum vigilance over its cargoes taking into account the surrounding circumstances of the case.

While the goods are in the possession of the carrier, it is but fair that it exercises extraordinary diligence in protecting them from loss or damage, and if loss occurs, the law presumes that it was due to the carrier's fault or negligence; that is necessary to protect the interest of the shipper which is at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz Shipping Corporation v. Court of Appeals, G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387).

Furthermore, the records show that the crew of M/L Maya did not have the required qualifications provided for in P.D. No. 97 or the Philippine Merchant Marine Officers Law, all of whom were unlicensed. While it is true that they were given special permit to man the vessel, such permit was issued at the risk and responsibility of the owner (Rollo, p. 36).

Finally, petitioner claims that the factual findings of the Special Board of Marine Inquiry exonerating the owner/operator, crew officers of the ill-fated vessel M/L Maya from any administrative liability is binding on the court.

In rejecting petitioner's claim, respondent court was correct in ruling that "such exoneration was but with respect to the administrative liability of the owner/operator, officers and crew of the ill-fated" vessel. It could not have meant exoneration of appellee from liability as a common carrier for his failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of his employees. Such is the function of the Court, not the Special Board of Marine Inquiry." (Rollo, P. 37, Annex A, p. 7)

The Philippine Merchant Marine Rules and Regulations particularly Chapter XVI thereof entitled "Marine Investigation and Suspension and Revocation Proceedings" prescribes the Rules governing maritime casualties or accidents, the rules and Procedures in administrative investigation of all maritime cases within the jurisdiction or cognizance of the Philippine Coast Guard and the grounds for suspension and revocation of licenses/certificates of marine officers and seamen (1601 — SCOPE); clearly, limiting the jurisdiction of the Board of Marine Inquiry and Special Board of Marine Inquiry to the administrative aspect of marine casualties in so far as it involves the shipowners and officers.

PREMISES CONSIDERED, the appealed decision is AFFIRMED.

SO ORDERED.

Philamgen v. CAG.R. No. 101426 May 17, 1993

PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs.

COURT OF APPEALS and TRANSPACIFIC TOWAGE, INC., respondents.

Linsangan Law Office for petitioner.

Misa, Castro & Associates for private respondent.

PADILLA, J.:

In this petition for review on certiorari, Philippine American General Insurance Company, Incorporated assails the decision * of the Court of Appeals, dated 31 July 1991, rendered in CA-G.R. CV. No. 21252, which reversed and set aside the decision of the Regional Trial Court of Manila, Branch 16 1 and entered a new one dismissing the petitioner's complaint which sought to collect the sum of P1,511,210.00 from the private respondent.

The facts of the case, as found by the Court of Appeals, 2 are as follows:

On September 4, 1985 the Davao Union Marketing Corporation of Davao City shipped on board the vessel M/V "Crazy Horse" operated by the Transpacific Towage, Inc. cargo consisting of 9,750 sheets of union brand GI sheets with a declared value of P1,086,750.00 and 86,860 bags of union Pozzolan and union Portland Cement with a declared value of P4,300,000.00. The cargo was consigned to the Bicol Union Center of Pasacao, Camarines Sur, with a certain Pedro Olivan as the "Notify-Party."

The cargo was insured by the Philippine American General Insurance Co., Inc., under Marine Note No. 023408 covering 86,000, of Union Pozzolan and POrtland cement for the amount of P3,440,000.00.

The vessel M/V "Crazy Horse" arrived on September 7, 1985 as scheduled as the port of Pasacao, Camarines Sur. Upon arrival the shipmaster notified the consignee's "Notify-Party" that the vessel was already (sic) to discharge the cargo. The discharging could not be affected immediately and continuously because of certain reasons. First, the buoys were installed only on September 11, 1985; second, the dischrage permit was secured by the consignee only on September 13, 1985; third a wooden catwalk had to be installed and extension of the wharf had to be made, which was completed only on September 26, 1985; 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. (Emphasis supplied ours)

On October 16, 1985, a super typhoon code named "Saling" entered the Philippine area of responsibility and was felt in the eastern coast of the country on October 17, 1985. It had a strength of 240 KPH and Pasacao was placed under Storm Signal No. 3. The discharging of the cargo had to be suspended at 11:40 A.M. on October 17, 1985 due to the heavy downpour, strong winds, and turbulent sea. To prevent damage to the cargo all hatches of the vessel were closed and secured. (Emphasis supplied ours)

At the time the discharging of the cargo was suspended, a total of 59,625 bags of cement and 26 crates of GI sheets had already been discharged.

In further preparation for the typhoon the vessel was loaded with 22 tons of fresh water and 3,000 liters of fuel. The shipmaster ordered

47

Choco NotesTransportation Law cases – Common Carrier of Goods part 1the vessel to be moved about 300 meters seaward in order that it would not hit the cat walk or the wooden bridge or the wharf, or the rocks. The vessel was ready for any maneuver that may have to be made.

According to the shipmaster who was plotting the typhoon's path in a chart, the radius was so wide that there was no way the typhoon could be evaded. From 8:00 P.M. of October 17, 1985 to 8:00 P.M. of October 18, 1985 the typhoon raged in the area. It was at about 5:20 A.M. of October 18, 1985 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 vessel sustained holes in the engine room and there was a power failure in the vessel. Water started to fill the engine room and at about 6:15 A.M. the engine broke down.

The shipmaster had no choice but to order the ship to be abandoned. He told the crew to secure the vessel while he went to the Municipal Mayor of Pasacao to request for police assistance to prevent pilferage of the vessel and its cargo. He was, however, unable to get any assistance. When he returned to the vessel he found that it was being continuously pounded by the strong sea waves against the rocks. This caused the vessel to break into two (2) parts and to sink partially. The shipmaster reported the incident to the Philippine Coast Guard but inspite the presence of three (3) coast guards, nothing could be done about the pilferage done on the vessel and its cargo. Almost the whole barrio and because there were so many of them the crew and the guards were helpless to stop the pilferage and looting. As a result of the incident the cargo of cement was damaged while the GI sheets were looted and nothing was left of the undischarged pieces.

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 Co., Inc. paid the shipper Davao Union Marketing Corporation the sum of P1,511,210.00. Thereafter, the said insurer made demands upon the Transpacific Towage, Inc. for the payment of said amount as subrogee of the insured, claiming that the loss of the cargo was directly and exclusively brought about by the fault and negligence of the shipmaster and the crew of M/V "Crazy Horse". Because the latter refused to pay the amount of P1,511,210.00 demanded, the Philippine American General Insurance Co., Inc. filed the present complaint.

The lower court found that although the immediate cause of the loss may have been due to an act of God, the defendant carrier had exposed the property to the accident. The court also found plaintiff guilty of contributory negligence and mitigated the plaintiff's claim to three-fourths (3/4) of its value. Thus the lower court, in its Decision, ordered the defendant:

1) To pay plaintiff the mitigated amount of P1,133,408.00 plus 12% legal interest per annum computed from the date of the filing of herein complaint on May 15, 1986, until duly paid;

2) To pay P8,000.00 as attorney's fees; and

3) To pay costs of suit.

SO ORDERED.

In its now assailed decision, respondent Court of Appeals reversed the decision of the trial court and ruled instead that private respondent, as a common carrier, is not responsible for the loss of the insured cargo involved in the case at bar, as said loss was due solely to a fortituous event.

Petitioner in the present petition contends that respondent appellate court erred in not holding private respondent liable for the loss of the said insured cargo.

We affirm the decision of the Court of Appeals.

It is not disputed that private respondent is a common carrier as defined in Article 1732 of the Civil Code. 3 The following facts are also 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, consisting of 26,424 cement bags and 4,000 pieces of G.I. sheets, were still on board the vessel.

However, the Court notes the fact that as of 17 October 1985, the time when the Pasacao area was placed under storm signal No. 3 due to "Saling", the unloading of the cargo from the vessel was still unfinished, notwithstanding the lapse of forty (40) days from the time the vessel arrived in Pasacao on 7 September 1985, or the lapse of thirty-four (34) days from the time actual discharge of the cargo commenceds on 13 September 1985.

In the opinion of the trial court, this lapse of thirty four (34) days with private respondent not having completed the unloading of the goods, is tantamount to unreasonable delay, which delay exposed the unloaded cargo to accident. The trial court held private respondent liable for the loss of goods under Article 1740 of the Civil Code which provides that if the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free the carrier from responsibility.

On the other hand, the appellate court ruled out any negligence committed by private respondent and held that the delay in fully unloading the cargo from the vessel "was occasioned by causes that may not be attributed solely to human factors, among which were the natural conditions of the port where the M/V "Crazy Horse" had docked, the customs of the place and the weather conditions. 4

The appellate court in exempting private respondent from liability applied Article 1739 of the Civil Code which provides as follows:

In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods.

The appellate court ruled that the los 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.

Considering the disputed fact that there really was delay in completing the unloading of the goods from the vessel, the Court

48

Choco NotesTransportation Law cases – Common Carrier of Goods part 1believes that the real issue at bar centers on the application of Article 1740 of the Civil Code. In short, the principal question, in determining which of the parties in the present case should bear the loss of the goods, is whether the delay involved in the unloading of the goods is deemed negligently incurred in, so as not to free private respondent from liability, notwithstanding the fact that the ultimate cause of the loss of the goods was the sinking of the vessel brought about by typhoon "Saling."

Indeed, from the time the vessel arrived at port Pasacao on 7 September 1985 up to 17 October 1985 when the Pasacao area was placed under storm signal No. 3 due to typhoon "Saling", forty (40) days had passed. Under normal conditions, a period of forty (40) days is undoubtedly more than enough time within which the unloading of the cargo (given its nature) from the vessel could be completed. Hence, the question boils down further to which party should be faulted for this delay.

Private respondent argues that its duty to unload ceased on 7 September 1985 when the shipmaster notified the consignee's "Notify-Party" that the vessel was ready to discharge the cargo. On the other hand, petitioner contends that the duty to unload the cargo from the vessel continued to remain with private respondent. Respondent appellate court, however, ruled that the question as to which party had the task to discharge the cargo is actually immaterial under the circumstances, as the delay could not be attributed to any of the parties, but to several causes such as the natural conditions of the Pasacao port, the customs of the place and the weather conditions obtaining at the time. The appellate court made the following observations:

xxx xxx xxx

To our mind whichever of the parties had the obligation to unload the cargo is not material. For, analyzing the causes for the delay in such unloading, we find that such delay was not due to the negligence of any party but was occasioned by causes that may not be attributed solely to human factors, among which were the natural conditions of the port where the M/V "Crazy Horse" had docked, the customs of the place, and the weather conditions.

The wharf where the vessel had to dock was shallow and rocky, hence it had to drop anchor some distance away in a private port. Buoys had to be constructed in order that the vessel may properly moored. After the buoys were installed a wooden stage had to be constructed so that the stevedores could reach the vessel. For this they needed a floating crane which was not immediately available. The barges that were to load the cargo from the vessel could not go near the wharf because of the shallow and rocky condition. A catwalk had to be installed between the barge and the wharf. This necessitated the dismantling of the wooden stage previously installed.

Apart from these preparations and constructions that had to be made, the weather was not cooperative. Even before the typhoon struck there were intermittent rains, hence the unloading was not continuous. The actual unloading started on September 13, 1985 and could have been finished in 4 or 5 days but because of the rains it was delayed. Another factor that caused further delay was the fact that the fiesta of the Virgin of Penafrancia was celebrated and for the length of time that the celebrations were held, the stevedores who were from the place refused to work.

xxx xxx xxx

The Court of Appeals summarized the reasons which adversely affected the completion of the unloading of the cargo from the time the vessel arrived at the Pasacao area on 7 September 1985, namely: first, the buoys were installed only on 11 September 1985; second, the consignee secured the discharge permit only on 13 September 1985; third, a wooden catwalk had to be installed and the extension of the wharf had to be made, which was completed only on 16 September 1985; fourth, there were intermittent rains and the stevedores supplied by the consignee did not work during the town fiesta of the Virgin of Penafrancia, hence, the unloading was not continuous.

We respect the above-mentioned factual findings of the appellate court as to the natural conditions of the port of Pasacao were the vessel was docked, and several other factors which harshly affected the completion of the discharge of the cargo, as these findings of fact are substantially supported by evidence. 6

While it is true that there was indeed delay in discharging the cargo from the vessel, we agree with the Court of Appeals that neither of the parties herein could be faulted for such delay, for the same (delay) was due not to negligence, but to several factors earlier discussed. The cargo having been lost due to typhoon "Saling", and the delay incurred in its unloading not being due to negligence, private respondent is exempt from liability for the loss of the cargo, pursuant to Article 1740 of the Civil Code.

The records also show that before, during and after the occurrence of typhoon "Saling", private respondent through its shipmaster exercised due negligence to prevent or minimize the loss of the cargo, as shown by the following facts: (1) at 5:20 a.m. of 18 October 1985, as typhoon "Saling" continued to batter the Pasacao area, the shipmaster tried to maneuver the vesel amidst strong winds and rough seas; (2) when water started to enter the engine room and later the engine broke down, the shipmaster ordered ths ship to be abandoned, but he sought police assistance to prevent pilferage of the vessel and its cargo; (3) after the vessel broke into two (2) parts and sank partially, the shipmaster reported th eincident to the Philippine Coast Guard, but unfortunately, despite the presence of three (3) coast guards, nothing could be done to stop the pilferage as almost the entire barrio folk came to loot the vessel and its cargo, including the G.I. sheets.

The diligennced exercised by the shipmaster further supports the exemption of private respondent from liability for the loss of the cargo, in accordance with Article 1739 of the Civil Code.

Although we find private respondent free from liability for the loss of the cargo, we disagree with its contention that the doctrine of res judicata applies in the case at bar, because the Board of Marine Inquiry rendered a decision dated 11 April 1988 (acting on the marine protest filed on 19 October 1985 by the shipmaster of M/V "Crazy Horse") 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." 7

The resolution of the present case is not barred by the judgment of the Board of Marine Inquiry. One of the requisites of the principle of res judicata is that there must be, among other things, identity of subject matters and causes of action between a first and second case in order that the judgment in the prior case may bar that in the subsequent case. 8

49

Choco NotesTransportation Law cases – Common Carrier of Goods part 1The cause of action in the marine protest was to enforce the administrative liability of the shipmaster/captain of M/V "Crazy Horse", its officers and crew for the wreckage and sinking of the subject vessel. On the other hand, the cause of action at bar is to enforce the civil liability of private respondent, a common carrier, for its failure to unload the subject cargo within a period of time considered unreasonably long by the petitioner. While it may be true that the Court is bound to accord great weight to factual findings of the Board, 9 we hold that the protest filed before it and the present case assert different causes of action and seek different reliefs.

All told, we find private respondent not legally liable for the loss of the insured cargo involved in the present case.

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.

SO ORDERED.

Delsan Transporp. v. CA[G.R. No. 127897. November 15, 2001]

DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE CORPORATION, respondents.D E C I S I O NDE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G.R. CV No. 39836 promulgated on June 17, 1996, reversing the decision of the Regional Trial Court of Makati City, Branch 137, ordering petitioner to pay private respondent the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57) and costs and the Resolution[2] dated January 21, 1997 which denied the subsequent motion for reconsideration.

The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private respondent, American Home Assurance Corporation.

On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.

Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57) representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, the private respondent demanded of the petitioner the same amount it paid to Caltex.

Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the Regional Trial Court of Makati City, Branch 137, for collection of a sum of money. After the

trial and upon analyzing the evidence adduced, the trial court rendered a decision on November 29, 1990 dismissing the complaint against herein petitioner without pronouncement as to cost. The trial court found that the vessel, MT Maysun, was seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey Certificate Report No. M5-016-MH upon inspection during its annual dry-docking and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier (herein petitioner) from liability for the loss of its cargo.[3]

The decision of the trial court, however, was reversed, on appeal, by the Court of Appeals. The appellate court gave credence to the weather report issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA for brevity) which showed that from 2:00 o’clock to 8:00 o’clock in the morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to herein petitioner’s allegation that the waves were twenty (20) feet high. In the absence of any explanation as to what may have caused the sinking of the vessel coupled with the finding that the same was improperly manned, the appellate court ruled that the petitioner is liable on its obligation as common carrier[4] to herein private respondent insurance company as subrogee of Caltex. The subsequent motion for reconsideration of herein petitioner was denied by the appellate court.

Petitioner raised the following assignments of error in support of the instant petition,[5] to wit:

I

THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT.

II

THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING THE LEGAL PRESUMPTION THAT THE VESSEL MT “MAYSUN” WAS SEAWORTHY.

III

THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE SUPREME COURT IN THE CASE OF HOME INSURANCE CORPORATION V. COURT OF APPEALS.

Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the Insurance Code of the Philippines, which states that in every marine insurance upon a ship or freight, or freightage, or upon any thing which is the subject of marine insurance there is an implied warranty by the shipper that the ship is seaworthy. Consequently, the insurer will not be liable to the assured for any loss under the policy in case the vessel would later on be found as not seaworthy at the inception of the insurance. It theorized that when private respondent paid Caltex the value of its lost cargo, the act of the private respondent is equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, private respondent was not legally liable to Caltex due to the latter’s breach of implied warranty under the marine insurance policy that the vessel was seaworthy.

The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun was not seaworthy on the ground that the marine

50

Choco NotesTransportation Law cases – Common Carrier of Goods part 1officer who served as the chief mate of the vessel, Francisco Berina, was allegedly not qualified. Under Section 116 of the Insurance Code of the Philippines, the implied warranty of seaworthiness of the vessel, which the private respondent admitted as having been fulfilled by its payment of the insurance proceeds to Caltex of its lost cargo, extends to the vessel’s complement. Besides, petitioner avers that although Berina had merely a 2nd officer’s license, he was qualified to act as the vessel’s chief officer under Chapter IV(403), Category III(a)(3)(ii)(aa) of the Philippine Merchant Marine Rules and Regulations. In fact, all the crew and officers of MT Maysun were exonerated in the administrative investigation conducted by the Board of Marine Inquiry after the subject accident.[6]

In any event, petitioner further avers that private respondent failed, for unknown reason, to present in evidence during the trial of the instant case the subject marine cargo insurance policy it entered into with Caltex. By virtue of the doctrine laid down in the case of Home Insurance Corporation vs. CA,[7] the failure of the private respondent to present the insurance policy in evidence is allegedly fatal to its claim inasmuch as there is no way to determine the rights of the parties thereto.

Hence, the legal issues posed before the Court are:

I

Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner.

II

Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action.

We rule in the negative on both issues.

The payment made by the private respondent for the insured value of the lost cargo operates as waiver of its (private respondent) right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.[8] Article 2207 of the New Civil Code provides that:

Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.

The right of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in

justice and good conscience ought to pay.[9] It is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance company of the insurance claim.[10] Consequently, the payment made by the private respondent (insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies which the latter may have against the petitioner.

From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstances of each case.[11] In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity.[12] In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.[13]

In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner attributes the sinking of MT Maysun to fortuitous event or force majeure. From the testimonies of Jaime Jarabe and Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it appears that a sudden and unexpected change of weather condition occurred in the early morning of August 16, 1986; that at around 3:15 o’clock in the morning a squall (“unos”) carrying strong winds with an approximate velocity of 30 knots per hour and big waves averaging eighteen (18) to twenty (20) feet high, repeatedly buffeted MT Maysun causing it to tilt, take in water and eventually sink with its cargo.[14] This tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted and belied by the weather report[15] from the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), the independent government agency charged with monitoring weather and sea conditions, showing that from 2:00 o’clock to 8:00 o’clock in the morning on August 16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while the height of the waves ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank. Thus, as the appellate court correctly ruled, petitioner’s vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank.

The appellate court also correctly opined that the petitioner’s witnesses, Jaime Jarabe and Francisco Berina, ship captain and chief mate, respectively, of the said vessel, could not be expected to testify against the interest of their employer, the herein petitioner common carrier.

Neither may petitioner escape liability by presenting in evidence certificates[16] that tend to show that at the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit for voyage. These pieces of evidence do not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage. As correctly observed by the Court of appeals:

At the time of dry-docking and inspection, the ship may have appeared fit. The certificates issued, however, do not negate the presumption of unseaworthiness triggered by an unexplained sinking.

51

Choco NotesTransportation Law cases – Common Carrier of Goods part 1Of certificates issued in this regard, authorities are likewise clear as to their probative value, (thus):

Seaworthiness relates to a vessel’s actual condition. Neither the granting of classification or the issuance of certificates establishes seaworthiness. (2-A Benedict on Admiralty, 7-3, Sec. 62)

And also:

Authorities are clear that diligence in securing certificates of seaworthiness does not satisfy the vessel owner’s obligation. Also securing the approval of the shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage does not establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no obligation in relation to seaworthiness. (Ibid.)[17]

Additionally, the exoneration of MT Maysun’s officers and crew by the Board of Marine Inquiry merely concerns their respective administrative liabilities. It does not in any way operate to absolve the petitioner common carrier from its civil liability arising from its failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the determination of which properly belongs to the courts.[18] In the case at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or negligence as common carrier[19] occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.

Anent the second issue, it is our view and so hold that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.[20]

The presentation of the insurance policy was necessary in the case of Home Insurance Corporation v. CA[21] (a case cited by petitioner) because the shipment therein (hydraulic engines) passed through several stages with different parties involved in each stage. First, from the shipper to the port of departure; second, from the port of departure to the M/S Oriental Statesman; third, from the M/S Oriental Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific Conveyor to the port of arrival; fifth, from the port of arrival to the arrastre operator; sixth, from the arrastre operator to the hauler, Mabuhay Brokerage Co., Inc. (private respondent therein); and lastly, from the hauler to the consignee. We emphasized in that case that in the absence of proof of stipulations to the contrary, the hauler can be liable only for any damage that occurred from the time it received the cargo until it finally delivered it to the consignee. Ordinarily, it cannot be held responsible for the handling of the cargo before it actually received it. The insurance contract, which was not presented in evidence in that case would have indicated the scope of the insurer’s liability, if any, since no evidence was adduced indicating at what stage in the handling process the damage to the cargo was sustained.

Hence, our ruling on the presentation of the insurance policy in the said case of Home Insurance Corporation is not applicable to the case at bar. In contrast, there is no doubt that the cargo of industrial fuel

oil belonging to Caltex, in the case at bar, was lost while on board petitioner’s vessel, MT Maysun, which sank while in transit in the vicinity of Panay Gulf and Cuyo East Pass in the early morning of August 16, 1986.

WHEREFORE, the instant petition is DENIED. The Decision dated June 17, 1996 of the Court of Appeals in CA-G.R. CV No. 39836 is AFFIRMED. Costs against the petitioner.

SO ORDERED.

Philamgen v. MCG Marine Mar 8, 2002 (case not found)

Edgar Cokaliong v. UCPB General[G.R. No. 146018. June 25, 2003]

EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL INSURANCE COMPANY, INC., respondent.D E C I S I O NPANGANIBAN, J.:

The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.

The Case

Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the August 31, 2000 Decision[2] and the November 17, 2000 Resolution[3] of the Court of Appeals[4] (CA) in CA-GR SP No. 62751. The dispositive part of the Decision reads:

“IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total amount of P148,500.00, with interest thereon, at the rate of 6% per annum, from date of this Decision of the Court. [Respondent’s] claim for attorney’s fees [is] DISMISSED. [Petitioner’s] counterclaims are DISMISSED.”[5]


On the other hand, the disposition of the Regional Trial Court’s[6] Decision,[7] which was later reversed by the CA, states:

“WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.

“No cost.”[8]

The Facts

The facts of the case are summarized by the appellate court in this wise:

“Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo consisting of one (1) carton of

52

Choco NotesTransportation Law cases – Common Carrier of Goods part 1Christmas décor and two (2) sacks of plastic toys, to be transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on December 12, 1991, for Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia was both the shipper and consignee of the cargo valued, on the face thereof, in the amount of P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one (1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on the face thereof, was valued in the amount of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper and consignee of the cargo.

“On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General Insurance Co., Inc., [respondent] for brevity, for the amount of P100,000.00 ‘against all risks’ under Open Policy No. 002/91/254 for which she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo covered by Bill of Lading No. 58, with [respondent], for the amount of P50,000.00, under Open Policy No. 002/91/254 on the basis of which [respondent] issued Marine Risk Note No. 18410 on said date.

“When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including the goods of Legaspi. After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the cargoes therein. The Captain filed the required Marine Protest.

“Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured under Marine Risk Note No. 18409 and covered by Bill of Lading No. 59. She submitted, in support of her claim, a Receipt, dated December 11, 1991, purportedly signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he received from Feliciana Legaspi valued in the amount of P110,056.00. [Respondent] approved the claim of Feliciana Legaspi and drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net amount of P99,000.00, in settlement of her claim after which she executed a Subrogation Receipt/Deed, for said amount, in favor of [respondent]. She also filed a claim for the value of the cargo covered by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991 and Order Slips, purportedly signed by Nestor Angelia for the goods he received from Feliciana Legaspi valued at P60,338.00. [Respondent] approved her claim and remitted to Feliciana Legaspi the net amount of P49,500.00, after which she signed a Subrogation Receipt/Deed, dated March 9, 1992, in favor of [respondent].

“On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], with the Regional Trial Court of Makati City, for the collection of the total principal amount of P148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and against the [petitioner] as follows:

‘WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be rendered ordering [petitioner] to pay [respondent] the following.

1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate from the time of filing of this complaint until fully paid;

2. Attorney’s fees in the amount of P10,000.00; and

3. Cost of suit.

‘[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just and equitable under the premises.’

“[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was delivered to, and received by, [petitioner] for transportation to Tandag, Surigao del Sur under ‘Bill of Ladings,’ Annexes ‘A’ and ‘B’ of the complaint; that the loss of the cargo was due to the negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation Receipts/Deeds in favor of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it issued in her favor covering the cargo.

“In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any negligence in the burning of the vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) the shippers/consignee had already been paid the value of the goods as stated in the Bill of Lading and, hence, [petitioner] cannot be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading.

“After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to take the depositions of Chester Cokaliong, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel Tanyu, an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given before the Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by way of deposition, before the Court and declared inter alia, that: [petitioner] is a family corporation like the Chester Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and Chester Marketing, Inc., for years, and incurred an account with Chester Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the cargo described therein with Zosimo Mercado and Nestor Angelia as shippers/consignees, respectively; the engine room of the M/V Tandag caught fire after it passed the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its cargo; an investigation was conducted by the Board of Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated February 13, 1992 absolving [petitioner] of any responsibility on account of the fire, which Report of the Board was approved by the District Commander of the Philippine Coast Guard; a few days after the sinking of the vessel, a representative of the Legaspi Marketing filed claims for the values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to ascertain, from the shippers/consignees and the representative of the Legaspi Marketing that the cargo covered by Bill of Lading No. 59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the claim of Legaspi Marketing for the value of the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount under Equitable Banking Corporation Check No. 20230486 dated August 12, 1992, in the amount of P14,000.00 for which the representative of the Legaspi Marketing signed Voucher No. 4379, dated August 12,

53

Choco NotesTransportation Law cases – Common Carrier of Goods part 11992, for the said amount of P14,000.00 in full payment of claims under Bill of Lading No. 59; that [petitioner] approved the claim of Nestor Angelia in the amount of P6,500.00 but that since the latter owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off the amount due to Nestor Angelia under Bill of Lading No. 58 against his account with Chester Marketing, Inc.; [petitioner] lost/[misplaced] the original of the check after it was received by Legaspi Marketing, hence, the production of the microfilm copy by Noel Tanyu of the Equitable Banking Corporation; [petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia that the cargo under both Bills of Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the value of the cargo with [respondent] and that the latter approved the claims of Feliciana Legaspi and paid the total amount of P148,500.00 to her; [petitioner] came to know, for the first time, of the payments by [respondent] of the claims of Feliciana Legaspi when it was served with the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x x executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent]; hence, [petitioner] was absolved of any liability for the loss of the cargo covered by Bills of Lading Nos. 58 and 59; and even if it was, its liability should not exceed the value of the cargo as stated in the Bills of Lading.

“[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x”[9] (Citations omitted)


The CA held that petitioner had failed “to prove that the fire which consumed the vessel and its cargo was caused by something other than its negligence in the upkeep, maintenance and operation of the vessel.”[10]

Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The CA, however, held that the payment did not extinguish petitioner’s obligation to respondent, because there was no evidence that Feliciana Legaspi (the insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating the claim under Bill of Lading No. 58 -- covering cargo valued therein at P6,500 -- as a setoff against Nestor Angelia’s account with Chester Enterprises, Inc.

Finally, it ruled that respondent “is not bound by the valuation of the cargo under the Bills of Lading, x x x nor is the value of the cargo under said Bills of Lading conclusive on the [respondent]. This is so because, in the first place, the goods were insured with the [respondent] for the total amount of P150,000.00, which amount may be considered as the face value of the goods.”[11]

Hence this Petition.[12]

Issues

Petitioner raises for our consideration the following alleged errors of the CA:

“I

“The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that petitioner’s liability should be based on the ‘actual insured value’ of the goods and not from actual valuation declared by the shipper/consignee in the bill of lading.

“II

“The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as sustained by the trial court a quo, holding that the cause of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due diligence was [exercised] by petitioner prior to, during and immediately after the fire on [petitioner’s] vessel.

“III

“The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of action against the petitioner.”[13]

In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability?



First Issue:Liability for Loss

Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise of due diligence was adequately proven by the findings of the Philippine Coast Guard.

We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.

Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure. Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake, a tempest or a public enemy.[14] Hence, fire is not considered a natural disaster or calamity. In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,[15] we explained:

“x x x. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lighting or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier.

“Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases or rural lands where a reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the law adopts a protective policy towards agriculture.

“As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735 of the Civil Code provides that in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law.”

54

Choco NotesTransportation Law cases – Common Carrier of Goods part 1Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials.[16]

The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising the required vigilance. Petitioner did not present sufficient evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank was made, what the normal practice was for its maintenance, or some other evidence to establish that it had exercised extraordinary diligence. It merely stated that constant inspection and care were not possible, and that the last time the vessel was dry-docked was in November 1990. Necessarily, in accordance with Article 1735[17] of the Civil Code, we hold petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.

Second Issue:Extent of Liability

Respondent contends that petitioner’s liability should be based on the actual insured value of the goods, subject of this case. On the other hand, petitioner claims that its liability should be limited to the value declared by the shipper/consignee in the Bill of Lading.

The records[18] show that the Bills of Lading covering the lost goods contain the stipulation that in case of claim for loss or for damage to the shipped merchandise or property, “[t]he liability of the common carrier x x x shall not exceed the value of the goods as appearing in the bill of lading.”[19] The attempt by respondent to make light of this stipulation is unconvincing. As it had the consignees’ copies of the Bills of Lading,[20] it could have easily produced those copies, instead of relying on mere allegations and suppositions. However, it presented mere photocopies thereof to disprove petitioner’s evidence showing the existence of the above stipulation.

A stipulation that limits liability is valid[21] as long as it is not against public policy. In Everett Steamship Corporation v. Court of Appeals,[22] the Court stated:

“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 provides:

‘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. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:

‘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. To hold otherwise would amount to questioning the justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual 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.’

“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 (¥100,000.00) 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.’

“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.” (Italics supplied)

In the present case, the stipulation limiting petitioner’s liability is not contrary to public policy. In fact, its just and reasonable character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them from placing the actual value of the goods therein. In fact, they committed fraud against the common carrier by deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare.

Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of the goods. The common carrier can then take appropriate measures -- getting insurance, if needed, to cover or protect itself. This precaution on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth of the goods it seeks to transport does not

55

Choco NotesTransportation Law cases – Common Carrier of Goods part 1only violate a valid contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier liable for more than the amount it declared in the bill of lading.

Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their respective Bills of Lading. Hence, petitioner was exposed to a risk that was deliberately hidden from it, and from which it could not protect itself.

It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution.

In Aboitiz Shipping Corporation v. Court of Appeals,[23] the description of the nature and the value of the goods shipped were declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as the basis of the carrier’s liability and ordered payment based on such amount. Following this ruling, petitioner should not be held liable for more than what was declared by the shippers/consignees as the value of the goods in the bills of lading.

We find no cogent reason to disturb the CA’s finding that Feliciana Legaspi was the owner of the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to compensation therefor. There is no evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have paid her.

On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the records convincingly shows that the former was the owner of the goods. Respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been extinguished, because payment was made to a person who was not entitled thereto.

With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at P6,500, the parties have not convinced us to disturb the findings of the CA that compensation could not validly take place. Thus, we uphold the appellate court’s ruling on this point.

WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of P14,000 and P6,500, which represent the value of the goods stated in Bills of Lading Nos. 59 and 58, respectively. No costs.

SO ORDERED.

Asia Lighterage and Shipping v. CA[G.R. No. 147246. August 19, 2003]

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.D E C I S I O NPUNO, J.:

On appeal is the Court of Appeals’ May 11, 2000 Decision[1] in CA-G.R. CV No. 49195 and February 21, 2001 Resolution[2] affirming with modification the April 6, 1994 Decision[3] of the Regional Trial Court of Manila which found petitioner liable to pay private respondent the amount of indemnity and attorney's fees.

First, the facts.

On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at US$423,192.35[4] was shipped by Marubeni American Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.[5] The shipment was insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.[6]

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.

On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by Lighterage Receipt No. 0364[7] for delivery to consignee. The cargo did not reach its destination.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other barges which arrived ahead of it while weathering out the storm that night. A few days after, the barge developed a list because of a hole it sustained after hitting an unseen protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990.[8] It likewise secured the services of Gaspar Salvaging Corporation which refloated the barge.[9] The hole was then patched with clay and cement.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid the complete sinking of the barge, a portion of the goods was transferred to three other barges.[10]

The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in the total loss of the remaining cargo.[11] A second Marine Protest was filed on September 7, 1990.[12]

On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and loaded on the three other barges.[13] The total proceeds from the sale of the salvaged cargo was P201,379.75.[14]

On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another letter dated September 18, 1990 to the private respondent for the value of the lost cargo.

56

Choco NotesTransportation Law cases – Common Carrier of Goods part 1On January 30, 1991, the private respondent indemnified the consignee in the amount of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of indemnity, attorney's fees and cost of suit.[16] Petitioner filed its answer with counterclaim.[17]

The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its Decision states:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until fully satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant.[18]

Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate court affirmed the decision of the trial court with modification. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense that the salvage value of P201,379.75 shall be deducted from the amount of P4,104,654.22. Costs against appellant.

SO ORDERED.

Petitioner’s Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate court in a Resolution promulgated on February 21, 2001.

Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate court, viz:[19]

(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.

(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON CARRIERS, “THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED.”

(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEE’S CARGO.

The issues to be resolved are:

(1) Whether the petitioner is a common carrier; and,

(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its care and custody of the consignee’s cargo.

On the first issue, we rule that petitioner is a common carrier.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the general public.[20]

We disagree.

In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. We also did not distinguish between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers services or solicits business only from a narrow segment of the general population.

In the case at bar, the principal business of the petitioner is that of lighterage and drayage[22] and it offers its barges to the public for carrying or transporting goods by water for compensation. Petitioner is clearly a common carrier. In De Guzman, supra,[23] we considered private respondent Ernesto Cendaña to be a common carrier even if his principal occupation was not the carriage of goods for others, but that of buying used bottles and scrap metal in Pangasinan and selling these items in Manila.

We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.

To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of Appeals.[24] The test to determine a common carrier is “whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted.”[25] In the case at bar, the petitioner admitted that it is engaged in the business of shipping and lighterage,[26] offering its barges to the public, despite its limited clientele for carrying or transporting goods by water for compensation.[27]

On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise extraordinary diligence in its care and custody of the consignee’s goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them.[28] They are presumed to have been at fault or to have acted negligently if the

57

Choco NotesTransportation Law cases – Common Carrier of Goods part 1goods are lost, destroyed or deteriorated.[29] To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach:

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:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize the loss.[30] The evidence show that, even before the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states:

CROSS-EXAMINATION BY ATTY. DONN LEE:[31]

x x x x x x x x x

q - Can you tell us what else transpired after that incident?

a - After the first accident, through the initiative of the barge owners, they tried to pull out the barge from the place of the accident, and bring it to the anchor terminal for safety, then after deciding if the vessel is stabilized, they tried to pull it to the consignee’s warehouse, now while on route another accident occurred, now this time the barge totally hitting something in the course.

q - You said there was another accident, can you tell the court the nature of the second accident?

a - The sinking, sir.

q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?

a - Mostly it was related to the first accident because there was already a whole (sic) on the bottom part of the barge.

x x x x x x x x x

This is not all. Petitioner still headed to the consignee’s wharf despite knowledge of an incoming typhoon. During the time that the barge was heading towards the consignee's wharf on September 5, 1990, typhoon “Loleng” has already entered the Philippine area of responsibility.[32] A part of the testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:

DIRECT-EXAMINATION BY ATTY. LEE:[33]

x x x x x x x x x

q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie where she was instead of towing it?

a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the consignee) as I have said was in a hurry for their goods to be delivered at their Wharf since they needed badly the wheat that was loaded in PSTSI-3. It was needed badly by the consignee.

q - And this is the reason why you towed the Barge as you did?

a - Yes, sir.

x x x x x x x x x

CROSS-EXAMINATION BY ATTY. IGNACIO:[34]

x x x x x x x x x

q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I have stated.

q - Despite of the threats of an incoming typhoon as you testified a while ago?

a - It is already in an inner portion of Pasig River. The typhoon would be coming and it would be dangerous if we are in the vicinity of Manila Bay.

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.

q - And yet as a standard operating procedure of your Company, you have to secure a sort of Certification to determine the weather condition, am I correct?

a - Yes, sir.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are already inside the vicinity or inside Pasig entrance, it is a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls short of due diligence required from a common carrier. More importantly, the officers/employees themselves of petitioner admitted that when the towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it was no longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a human factor, i.e., negligence had intervened.

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

DSR-Senator Lines v. Federal Phoenix[G.R. No. 135377. October 7, 2003]

DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., petitioners, vs. FEDERAL PHOENIX ASSURANCE CO., INC., respondent.D E C I S I O NSANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari[1] assailing the Decision[2] dated June 5, 1998 of the Court of Appeals in CA-G.R. CV No. 50833 which affirmed the Decision of the Regional Trial Court (RTC), Manila City, Branch 16, in Civil Case No. 94-69699, “Federal Phoenix Assurance Company, Inc. vs. DSR-Senator Lines and C.F. Sharp & Co., Inc.,” for damages arising from the loss of cargo while in transit.

Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to C.F. Sharp and Company, Inc. (C.F. Sharp), the General Ship Agent of DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia. C.F. Sharp issued International Bill of Lading No. SENU MNL-26548[3] for the cargo with an invoice value of $34,579.60. Under the Bill of Lading, the port of discharge for the cargo was at the Khor Fakkan port and the port of delivery was Riyadh, Saudi Arabia, via Port Dammam. The cargo was loaded in M/S “Arabian Senator.”

Federal Phoenix Assurance Company, Inc. (Federal Phoenix Assurance) insured the cargo against all risks in the amount of P941,429.61.[4]

On June 7, 1993, M/S “Arabian Senator” left the Manila South Harbor for Saudi Arabia with the cargo on board. When the vessel

arrived in Khor Fakkan Port, the cargo was reloaded on board DSR-Senator Lines’ feeder vessel, M/V “Kapitan Sakharov,” bound for Port Dammam, Saudi Arabia. However, while in transit, the vessel and all its cargo caught fire.

On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V “Kapitan Sakharov” with its cargo was gutted by fire and sank on or about July 4, 1993. On December 16, 1993, C.F. Sharp issued a certification to that effect.

Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61 corresponding to the amount of insurance for the cargo. In turn Berde Plants executed in its favor a “Subrogation Receipt”[5] dated January 17, 1994.

On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp demanding payment of P941,429.61 on the basis of the Subrogation Receipt. C.F. Sharp denied any liability on the ground that such liability was extinguished when the vessel carrying the cargo was gutted by fire.

Thus, on March 11, 1994, Federal Phoenix Assurance filed with the RTC, Branch 16, Manila a complaint for damages against DSR-Senator Lines and C.F. Sharp, praying that the latter be ordered to pay actual damages of P941,429.61, compensatory damages of P100,000.00 and costs.

On August 22, 1995, the RTC rendered a Decision in favor of Federal Phoenix Assurance, the dispositive portion of which reads:

“WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against the defendants who are hereby ordered jointly and severally to pay plaintiff:

I. The amount of P941,439.61 (should be P941,429.61[6]) with legal interest of 6% per annum from the date of the letter of demand of February 8, 1993 (EXH. L) and 12% per annum from the date the judgment becomes final and executory until its satisfaction (Eastern Shipping Lines vs. Court of Appeals, G.R. No. 97412, July 12, 1994);

II. The amount of P15,000.00 by way of reasonable attorney’s fees; and

III. To pay costs.

“The counterclaim of defendants is DISMISSED.

“SO ORDERED.”[7]

On appeal, the Court of Appeals rendered a Decision dated June 5, 1998, affirming the RTC Decision, thus:

“In the present recourse, the appellant carrier was presumed to have acted negligently for the fire that gutted the feeder vessel and the consequent loss or destruction of the cargo. Hence, the appellant carrier is liable for appellee’s claim under the New Civil Code of the Philippines.

“Contrary to C.F. Sharp and Co., Inc.’s pose, its liability as ship agent continued and remained until the cargo was delivered to the consignee. The status of the appellant as ship agent subsisted and its liability as a ship agent was co-terminous with and subsisted as long as the cargo was not delivered to the consignee under the terms of the Bill of Lading.

59


“IN LIGHT OF ALL THE FOREGOING, the appeal of the appellants is DISMISSED. The Decision appealed from is affirmed. With costs against the appellants.

“SO ORDERED.”[8]

On September 7, 1998, the Court of Appeals denied the motion for reconsideration of DSR-Senator Lines and C.F. Sharp, prompting them to file with this Court the instant petition.

We find the petition bereft of merit.

Article 1734 of the Civil Code 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:

(1)Flood, storm, earthquake, lightning, or other natural disaster or calamity;




(5) Order or act of competent public authority.”

Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or destruction of the cargo.

In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court,[9] we ruled that since the peril of fire is not comprehended within the exceptions in Article 1734, then the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law.

Even if fire were to be considered a natural disaster within the purview of Article 1734, it is required under Article 1739[10] of the same Code that the natural disaster must have been the proximate and only cause of the loss, and that the carrier has exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster.

We have held that a common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to or until the lapse of a reasonable time for their acceptance by the person entitled to receive them. When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable.[11]

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where

the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption.[12]

Respondent Federal Phoenix Assurance raised the presumption of negligence against petitioners. However, they failed to overcome it by sufficient proof of extraordinary diligence.

WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals dated June 5, 1998, in CA-G.R. CV No. 50833 is hereby AFFIRMED.

SO ORDERED.

Central Shipping v. Ins. Co. of North Amer.[G.R. No. 150751. September 20, 2004]

CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent.D E C I S I O NPANGANIBAN, J.:

A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is one of the causes enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary diligence to prevent or minimize the loss. In the present case, the weather condition encountered by petitioner’s vessel was not a “storm” or a natural disaster comprehended in the law. Given the known weather condition prevailing during the voyage, the manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling action of the sea. The carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now disclaim any liability for the loss.

The Case

Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to reverse and set aside the March 23, 2001 Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 48915. The assailed Decision disposed as follows:

“WHEREFORE, the decision of the Regional Trial Court of Makati City, Branch 148 dated August 4, 1994 is hereby MODIFIED in so far as the award of attorney’s fees is DELETED. The decision is AFFIRMED in all other respects.”[3]

The CA denied petitioner’s Motion for Reconsideration in its November 7, 2001 Resolution.[4]

The Facts

The factual antecedents, summarized by the trial court and adopted by the appellate court, are as follows:

“On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner] received on board its vessel, the M/V ‘Central Bohol’, 376 pieces [of] Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc.

“The cargo was insured for P3,000,000.00 against total loss under [respondent’s] Marine Cargo Policy No. MCPB-00170.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1“On July 25, 1990, upon completion of loading of the cargo, the vessel left Palawan and commenced the voyage to Manila.

“At about 0125 hours on July 26, 1990, while enroute to Manila, the vessel listed about 10 degrees starboardside, due to the shifting of logs in the hold.

“At about 0128 hours, after the listing of the vessel had increased to 15 degrees, the ship captain ordered his men to abandon ship and at about 0130 hours of the same day the vessel completely sank. Due to the sinking of the vessel, the cargo was totally lost.

“[Respondent] alleged that the total loss of the shipment was caused by the fault and negligence of the [petitioner] and its captain and as direct consequence thereof the consignee suffered damage in the sum of P3,000,000.00.

“The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the shipment to the [petitioner] but the latter failed and refused to settle the claim, hence [respondent], being the insurer, paid said claim and now seeks to be subrogated to all the rights and actions of the consignee as against the [petitioner].

“[Petitioner], while admitting the sinking of the vessel, interposed the defense that the vessel was fully manned, fully equipped and in all respects seaworthy; that all the logs were properly loaded and secured; that the vessel’s master exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the storm.

“It raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the captain of its vessel could have foreseen.”[5]

The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. It noted that monsoons, which were common occurrences during the months of July to December, could have been foreseen and provided for by an ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier, the trial court held petitioner liable for the loss of the cargo. Thus, the RTC deducted the salvage value of the logs in the amount of P200,000 from the principal claim of respondent and found that the latter was entitled to be subrogated to the rights of the insured. The court a quo disposed as follows:

“WHEREFORE, premises considered, judgment is hereby rendered in favor of the [respondent] and against the [petitioner] ordering the latter to pay the following:

1) the amount of P2,800,000.00 with legal interest thereof from the filing of this complaint up to and until the same is fully paid;

2) P80,000.00 as and for attorney’s fees;

3) Plus costs of suit.”[6]


The CA affirmed the trial court’s finding that the southwestern monsoon encountered by the vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain and his crew should have anticipated the perils of the sea. The appellate court further held that the weather disturbance was not the sole and

proximate cause of the sinking of the vessel, which was also due to the concurrent shifting of the logs in the hold that could have resulted only from improper stowage. Thus, the carrier was held responsible for the consequent loss of or damage to the cargo, because its own negligence had contributed thereto.

The CA found no merit in petitioner’s assertion of the vessel’s seaworthiness. It held that the Certificates of Inspection and Drydocking were not conclusive proofs thereof. In order to consider a vessel to be seaworthy, it must be fit to meet the perils of the sea.

Found untenable was petitioner’s insistence that the trial court should have given greater weight to the factual findings of the Board of Marine Inquiry (BMI) in the investigation of the Marine Protest filed by the ship captain, Enriquito Cahatol. The CA further observed that what petitioner had presented to the court a quo were mere excerpts of the testimony of Captain Cahatol given during the course of the proceedings before the BMI, not the actual findings and conclusions of the agency. Citing Arada v. CA,[7] it said that findings of the BMI were limited to the administrative liability of the owner/operator, officers and crew of the vessel. However, the determination of whether the carrier observed extraordinary diligence in protecting the cargo it was transporting was a function of the courts, not of the BMI.

The CA concluded that the doctrine of limited liability was not applicable, in view of petitioner’s negligence -- particularly its improper stowage of the logs.


Issues

In its Memorandum, petitioner submits the following issues for our consideration:

“(i) Whether or not the weather disturbance which caused the sinking of the vessel M/V Central Bohol was a fortuitous event.

“(ii) Whether or not the investigation report prepared by Claimsmen Adjustment Corporation is hearsay evidence under Section 36, Rule 130 of the Rules of Court.

“(iii) Whether or not the finding of the Court of Appeals that ‘the logs in the hold shifted and such shifting could only be due to improper stowage’ has a valid and factual basis.

“(iv) Whether or not M/V Central Bohol is seaworthy.

“(v) Whether or not the Court of Appeals erred in not giving credence to the factual finding of the Board of Marine Inquiry (BMI), an independent government agency tasked to conduct inquiries on maritime accidents.

“(vi) Whether or not the Doctrine of Limited Liability is applicable to the case at bar.”[9]

The issues boil down to two: (1) whether the carrier is liable for the loss of the cargo; and (2) whether the doctrine of limited liability is applicable. These issues involve a determination of factual questions of whether the loss of the cargo was due to the occurrence of a natural disaster; and if so, whether its sole and proximate cause was such natural disaster or whether petitioner was partly to blame for failing to exercise due diligence in the prevention of that loss.

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The Court’s Ruling

The Petition is devoid of merit.

First Issue:Liability for Lost Cargo

From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case.[10] In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration was brought about -- among others -- by “flood, storm, earthquake, lightning or other natural disaster or calamity.”[11] 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 prove that they observed extraordinary diligence.[12]

In the present case, petitioner disclaims responsibility for the loss of the cargo by claiming the occurrence of a “storm” under Article 1734(1). It attributes the sinking of its vessel solely to the weather condition between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990.

At the outset, it must be stressed that only questions of law[13] may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. Questions of fact are not proper subjects in this mode of appeal,[14] for “[t]he Supreme Court is not a trier of facts.”[15] Factual findings of the CA may be reviewed on appeal[16] only under exceptional circumstances such as, among others, when the inference is manifestly mistaken,[17] the judgment is based on a misapprehension of facts,[18] or the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion.[19]

In the present case, petitioner has not given the Court sufficient cogent reasons to disturb the conclusion of the CA that the weather encountered by the vessel was not a “storm” as contemplated by Article 1734(1). Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V Central Bohol encountered a southwestern monsoon in the course of its voyage.

The Note of Marine Protest,[20] which the captain of the vessel issued under oath, stated that he and his crew encountered a southwestern monsoon about 2200 hours on July 25, 1990, and another monsoon about 2400 hours on July 26, 1990. Even petitioner admitted in its Answer that the sinking of M/V Central Bohol had been caused by the strong southwest monsoon.[21] Having made such factual representation, it cannot now be allowed to retreat and claim that the southwestern monsoon was a “storm.”

The pieces of evidence with respect to the weather conditions encountered by the vessel showed that there was a southwestern monsoon at the time. Normally expected on sea voyages, however, were such monsoons, during which strong winds were not unusual. Rosa S. Barba, weather specialist of the Philippine Atmospheric Geophysical and Astronomical Services Administration (PAGASA), testified that a thunderstorm might occur in the midst of a southwest monsoon. According to her, one did occur between 8:00 p.m. on July 25, 1990, and 2 a.m. on July 26, 1990, as recorded by the PAGASA Weather Bureau.[22]

Nonetheless, to our mind it would not be sufficient to categorize the weather condition at the time as a “storm” within the absolutory causes enumerated in the law. Significantly, no typhoon was observed within the Philippine area of responsibility during that period.[23]

According to PAGASA, a storm has a wind force of 48 to 55 knots,[24] equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that the wind was blowing around force 7 to 8 on the Beaufort Scale.[25] Consequently, the strong winds accompanying the southwestern monsoon could not be classified as a “storm.” Such winds are the ordinary vicissitudes of a sea voyage.[26]

Even if the weather encountered by the ship is to be deemed a natural disaster under Article 1739 of the Civil Code, petitioner failed to show that such natural disaster or calamity was the proximate and only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In other words, the damaging effects blamed on the event or phenomenon must not have been caused, contributed to, or worsened by the presence of human participation.[27] The defense of fortuitous event or natural disaster cannot be successfully made when the injury could have been avoided by human precaution.[28]

Hence, if a common carrier fails to exercise due diligence -- or that ordinary care that the circumstances of the particular case demand -- to prevent or minimize the loss before, during and after the occurrence of the natural disaster, the carrier shall be deemed to have been negligent. The loss or injury is not, in a legal sense, due to a natural disaster under Article 1734(1).[29]

We also find no reason to disturb the CA’s finding that the loss of the vessel was caused not only by the southwestern monsoon, but also by the shifting of the logs in the hold. Such shifting could been due only to improper stowage. The assailed Decision stated:

“Notably, in Master Cahatol’s account, the vessel encountered the first southwestern monsoon at about 1[0]:00 in the evening. The monsoon was coupled with heavy rains and rough seas yet the vessel withstood the onslaught. The second monsoon attack occurred at about 12:00 midnight. During this occasion, the master ‘felt’ that the logs in the hold shifted, prompting him to order second mate Percival Dayanan to look at the bodega. Complying with the captain’s order, 2nd mate Percival Dayanan found that there was seawater in the bodega. 2nd mate Dayanan’s account was:

‘14.T – Kung inyo pong natatandaan ang mga pangyayari, maari mo bang isalaysay ang naganap na paglubog sa barkong M/V Central Bohol?

‘S – Opo, noong ika-26 ng Julio 1990 humigit kumulang alas 1:20 ng umaga (dst) habang kami ay nagnanabegar patungong Maynila sa tapat ng Cadlao Island at Cauayan Island sakop ng El Nido, Palawan, inutusan ako ni Captain Enriquito Cahatol na tingnan ko ang bodega; nang ako ay nasa bodega, nakita ko ang loob nang bodega na maraming tubig at naririnig ko ang malakas na agos ng tubig-dagat na pumapasok sa loob ng bodega ng barko; agad bumalik ako kay Captain Enriquito Cahatol at sinabi ko ang malakas na pagpasok ng tubig-dagat sa loob nang bodega ng barko na ito ay naka-tagilid humigit kumulang sa 020 degrees, nag-order si Captain Cahatol na standby engine at tinawag ang lahat ng mga officials at mga crew nang maipon kaming lahat ang barko ay naka-tagilid at ito ay tuloy-tuloy ang pagtatagilid na ang ilan sa mga officials ay naka-hawak na

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1sa barandilla ng barko at di-nagtagal sumigaw nang ABANDO[N] SHIP si Captain Cahatol at kami ay nagkanya-kanya nang talunan at languyan sa dagat na malakas ang alon at nang ako ay lumingon sa barko ito ay di ko na nakita.’

“Additionally, [petitioner’s] own witnesses, boatswain Eduardo Viñas Castro and oiler Frederick Perena, are one in saying that the vessel encountered two weather disturbances, one at around 10 o’clock to 11 o’clock in the evening and the other at around 12 o’clock midnight. Both disturbances were coupled with waves and heavy rains, yet, the vessel endured the first and not the second. Why? The reason is plain. The vessel felt the strain during the second onslaught because the logs in the bodega shifted and there were already seawater that seeped inside.”[30]

The above conclusion is supported by the fact that the vessel proceeded through the first southwestern monsoon without any mishap, and that it began to list only during the second monsoon immediately after the logs had shifted and seawater had entered the hold. In the hold, the sloshing of tons of water back and forth had created pressures that eventually caused the ship to sink. Had the logs not shifted, the ship could have survived and reached at least the port of El Nido. In fact, there was another motor launch that had been buffeted by the same weather condition within the same area, yet it was able to arrive safely at El Nido.[31]

In its Answer, petitioner categorically admitted the allegation of respondent in paragraph 5 of the latter’s Complaint “[t]hat at about 0125 hours on 26 July 1990, while enroute to Manila, the M/V ‘Central Bohol’ listed about 10 degrees starboardside, due to the shifting of logs in the hold.” Further, petitioner averred that “[t]he vessel, while navigating through this second southwestern monsoon, was under extreme stress. At about 0125 hours, 26 July 1990, a thud was heard in the cargo hold and the logs therein were felt to have shifted. The vessel thereafter immediately listed by ten (10) degrees starboardside.”[32]

Yet, petitioner now claims that the CA’s conclusion was grounded on mere speculations and conjectures. It alleges that it was impossible for the logs to have shifted, because they had fitted exactly in the hold from the port to the starboard side.

After carefully studying the records, we are inclined to believe that the logs did indeed shift, and that they had been improperly loaded.

According to the boatswain’s testimony, the logs were piled properly, and the entire shipment was lashed to the vessel by cable wire.[33] The ship captain testified that out of the 376 pieces of round logs, around 360 had been loaded in the lower hold of the vessel and 16 on deck. The logs stored in the lower hold were not secured by cable wire, because they fitted exactly from floor to ceiling. However, while they were placed side by side, there were unavoidable clearances between them owing to their round shape. Those loaded on deck were lashed together several times across by cable wire, which had a diameter of 60 millimeters, and were secured from starboard to port.[34]

It is obvious, as a matter of common sense, that the manner of stowage in the lower hold was not sufficient to secure the logs in the event the ship should roll in heavy weather. Notably, they were of different lengths ranging from 3.7 to 12.7 meters.[35] Being clearly prone to shifting, the round logs should not have been stowed with nothing to hold them securely in place. Each pile of logs should have been lashed together by cable wire, and the wire fastened to the side

of the hold. Considering the strong force of the wind and the roll of the waves, the loose arrangement of the logs did not rule out the possibility of their shifting. By force of gravity, those on top of the pile would naturally roll towards the bottom of the ship.

The adjuster’s Report, which was heavily relied upon by petitioner to strengthen its claim that the logs had not shifted, stated that “the logs were still properly lashed by steel chains on deck.” Parenthetically, this statement referred only to those loaded on deck and did not mention anything about the condition of those placed in the lower hold. Thus, the finding of the surveyor that the logs were still intact clearly pertained only to those lashed on deck.

The evidence indicated that strong southwest monsoons were common occurrences during the month of July. Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy rains, strong winds and rough seas. They should then have taken extra precaution in stowing the logs in the hold, in consonance with their duty of observing extraordinary diligence in safeguarding the goods. But the carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now escape responsibility for the loss.

Second Issue:Doctrine of Limited Liability

The doctrine of limited liability under Article 587 of the Code of Commerce[36] is not applicable to the present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the shipowner and the captain.[37] It has already been established that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. “Closer supervision on the part of the shipowner could have prevented this fatal miscalculation.”[38] As such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited liability rule.

WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

FGU Insurance Corp. v. CA[G.R. No. 137775. March 31, 2005]

FGU INSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented by LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO TO, respondents.[G.R. No. 140704. March 31, 2005]

ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and JAIME, all surnamed ANG, and CO TO, petitioners, vs. THE HONORABLE COURT OF APPEALS, SAN MIGUEL CORP., and FGU INSURANCE CORP., respondents.D E C I S I O NCHICO-NAZARIO, J.:

Before Us are two separate Petitions for review assailing the Decision[1] of the Court of Appeals in CA-G.R. CV No. 49624 entitled, “San Miguel Corporation, Plaintiff-Appellee versus Estate of Ang Gui, represented by Lucio, Julian and Jaime, all surnamed Ang,

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1and Co To, Defendants-Appellants, Third–Party Plaintiffs versus FGU Insurance Corporation, Third-Party Defendant-Appellant,” which affirmed in toto the decision[2] of the Regional Trial Court of Cebu City, Branch 22. The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, for all the foregoing, judgment is hereby rendered as follows:

1) Ordering defendants to pay plaintiff the sum of P1,346,197.00 and an interest of 6% per annum to be reckoned from the filing of this case on October 2, 1990;

2) Ordering defendants to pay plaintiff the sum of P25,000.00 for attorney’s fees and an additional sum of P10,000.00 as litigation expenses;

3) With cost against defendants.

For the Third-Party Complaint:

1) Ordering third-party defendant FGU Insurance Company to pay and reimburse defendants the amount of P632,700.00.[3]

The Facts

Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were operated as common carriers. Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another.

On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO, the following cargoes:

Bill of Lading No. Shipment Destination

1 25,000 cases Pale Pilsen Estancia, Iloilo350 cases Cerveza Negra Estancia, Iloilo

2 15,000 cases Pale Pilsen San Jose, Antique200 cases Cerveza Negra San Jose, Antique

The consignee for the cargoes covered by Bill of Lading No. 1 was SMC’s Beer Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo, while the consignee for the cargoes covered by Bill of Lading No. 2 was SMC’s BMD-San Jose Beer Sales Office, San Jose, Antique.

The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique. The vessels arrived at San Jose, Antique, at about one o’clock in the afternoon of 30 September 1979. The tugboat M/T ANCO left the barge immediately after reaching San Jose, Antique.

When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the clouds over the area were dark and the waves were already big. The arrastre workers unloading the cargoes of SMC on board the D/B Lucio began to complain about their difficulty in unloading the cargoes. SMC’s District Sales Supervisor, Fernando Macabuag, requested ANCO’s representative

to transfer the barge to a safer place because the vessel might not be able to withstand the big waves.

ANCO’s representative did not heed the request because he was confident that the barge could withstand the waves. This, notwithstanding the fact that at that time, only the M/T ANCO was left at the wharf of San Jose, Antique, as all other vessels already left the wharf to seek shelter. With the waves growing bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged into the custody of the arrastre operator.

At about ten to eleven o’clock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because the barge’s rope attached to the wharf was cut off by the big waves. At around midnight, the barge run aground and was broken and the cargoes of beer in the barge were swept away.

As a result, ANCO failed to deliver to SMC’s consignee Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20). The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMC’s claim against ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).

As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent (25%) of the total claim as attorney’s fees.

Upon Ang Gui’s death, ANCO, as a partnership, was dissolved hence, on 26 January 1993, SMC filed a second amended complaint which was admitted by the Court impleading the surviving partner, Co To and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang. The substituted defendants adopted the original answer with counterclaim of ANCO “since the substantial allegations of the original complaint and the amended complaint are practically the same.”

ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the complaint were indeed loaded on the vessel belonging to ANCO. It claimed however that it had an agreement with SMC that ANCO would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event. Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous event which battered and sunk the vessel in which they were loaded, they should not be held liable. ANCO further asserted that there was an agreement between them and SMC to insure the cargoes in order to recover indemnity in case of loss. Pursuant to that agreement, the cargoes to the extent of Twenty Thousand (20,000) cases was insured with FGU Insurance Corporation (FGU) for the total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) per Marine Insurance Policy No. 29591.

Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU, alleging that before the vessel of ANCO left for San Jose, Antique with the cargoes owned by SMC, the cargoes, to the extent of Twenty Thousand (20,000) cases, were insured with FGU for a total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) under Marine Insurance Policy No. 29591. ANCO further alleged that on or about 02 October 1979, by reason of very strong winds and heavy waves brought about by a

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as a result of which, the vessel was totally wrecked and its cargoes owned by SMC were lost and/or destroyed. According to ANCO, the loss of said cargoes occurred as a result of risks insured against in the insurance policy and during the existence and lifetime of said insurance policy. ANCO went on to assert that in the remote possibility that the court will order ANCO to pay SMC’s claim, the third-party defendant corporation should be held liable to indemnify or reimburse ANCO whatever amounts, or damages, it may be required to pay to SMC.

In its answer to the Third-Party complaint, third-party defendant FGU admitted the existence of the Insurance Policy under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes covered by the said insurance policy cannot be attributed directly or indirectly to any of the risks insured against in the said insurance policy. According to FGU, it is only liable under the policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in case of any of the following:

a) total loss of the entire shipment;

b) loss of any case as a result of the sinking of the vessel; orc) loss as a result of the vessel being on fire.

Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the cargoes insured to prevent its loss and/or destruction.

Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and asked for actual, moral, and exemplary damages and attorney’s fees.[1]

The trial court found that while the cargoes were indeed lost due to fortuitous event, there was failure on ANCO’s part, through their representatives, to observe the degree of diligence required that would exonerate them from liability. The trial court thus held the Estate of Ang Gui and Co To liable to SMC for the amount of the lost shipment. With respect to the Third-Party complaint, the court a quo found FGU liable to bear Fifty-Three Percent (53%) of the amount of the lost cargoes. According to the trial court:

. . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground and was broken and the beer cargoes on the said barge were swept away. It is the sense of this Court that the risk insured against was the cause of the loss.

. . .

Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and the amount of the policy was only for P858,500.00, defendants as assured, therefore, were considered co-insurers of third-party defendant FGU Insurance Corporation to the extent of 975,405.00 value of the cargo. Consequently, inasmuch as there was partial loss of only P1,346,197.00, the assured shall bear 53% of the loss…[4] [Emphasis ours]

The appellate court affirmed in toto the decision of the lower court and denied the motion for reconsideration and the supplemental motion for reconsideration.

Hence, the petitions.

The Issues

In G.R. No. 137775, the grounds for review raised by petitioner FGU can be summarized into two: 1) Whether or not respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under the insurance contract considering the circumstances surrounding the loss of the cargoes; and 2) Whether or not the Court of Appeals committed an error of law in holding that the doctrine of res judicata applies in the instant case.

In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the appellate court based on the following assignments of error: 1) The Court of Appeals committed grave abuse of discretion in affirming the findings of the lower court that the negligence of the crewmembers of the D/B Lucio was the proximate cause of the loss of the cargoes; and 2) The respondent court acted with grave abuse of discretion when it ruled that the appeal was without merit despite the fact that said court had accepted the decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and the Supreme Court, as res judicata.

Ruling of the Court

First, we shall endeavor to dispose of the common issue raised by both petitioners in their respective petitions for review, that is, whether or not the doctrine of res judicata applies in the instant case.

It is ANCO’s contention that the decision in Civil Case No. R-19341,[5] which was decided in its favor, constitutes res judicata with respect to the issues raised in the case at bar.

The contention is without merit. There can be no res judicata as between Civil Case No. R-19341 and the case at bar. In order for res judicata to be made applicable in a case, the following essential requisites must be present: 1) the former judgment must be final; 2) the former judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; 3) the former judgment must be a judgment or order on the merits; and 4) there must be between the first and second action identity of parties, identity of subject matter, and identity of causes of action.[6]

There is no question that the first three elements of res judicata as enumerated above are indeed satisfied by the decision in Civil Case No. R-19341. However, the doctrine is still inapplicable due to the absence of the last essential requisite of identity of parties, subject matter and causes of action.

The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant case, SMC is the plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as defendants, with the latter merely impleading FGU as third-party defendant.

The subject matter of Civil Case No. R-19341 was the insurance contract entered into by ANCO, the owner of the vessel, with FGU covering the vessel D/B Lucio, while in the instant case, the subject matter of litigation is the loss of the cargoes of SMC, as shipper, loaded in the D/B Lucio and the resulting failure of ANCO to deliver to SMC’s consignees the lost cargo. Otherwise stated, the controversy in the first case involved the rights and liabilities of the shipowner vis-à-vis that of the insurer, while the present case involves the rights and liabilities of the shipper vis-à-vis that of the shipowner. Specifically, Civil Case No. R-19341 was an action for Specific Performance and Damages based on FGU Marine Hull

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1Insurance Policy No. VMF-MH-13519 covering the vessel D/B Lucio, while the instant case is an action for Breach of Contract of Carriage and Damages filed by SMC against ANCO based on Bill of Lading No. 1 and No. 2, with defendant ANCO seeking reimbursement from FGU under Insurance Policy No. MA-58486, should the former be held liable to pay SMC.

Moreover, the subject matter of the third-party complaint against FGU in this case is different from that in Civil Case No. R-19341. In the latter, ANCO was suing FGU for the insurance contract over the vessel while in the former, the third-party complaint arose from the insurance contract covering the cargoes on board the D/B Lucio.

The doctrine of res judicata precludes the re-litigation of a particular fact or issue already passed upon by a court of competent jurisdiction in a former judgment, in another action between the same parties based on a different claim or cause of action. The judgment in the prior action operates as estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered.[7] If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit.[8]

Since the case at bar arose from the same incident as that involved in Civil Case No. R-19341, only findings with respect to matters passed upon by the court in the former judgment are conclusive in the disposition of the instant case. A careful perusal of the decision in Civil Case No. R-19341 will reveal that the pivotal issues resolved by the lower court, as affirmed by both the Court of Appeals and the Supreme Court, can be summarized into three legal conclusions: 1) that the D/B Lucio before and during the voyage was seaworthy; 2) that there was proper notice of loss made by ANCO within the reglementary period; and 3) that the vessel D/B Lucio was a constructive total loss.

Said decision, however, did not pass upon the issues raised in the instant case. Absent therein was any discussion regarding the liability of ANCO for the loss of the cargoes. Neither did the lower court pass upon the issue of the alleged negligence of the crewmembers of the D/B Lucio being the cause of the loss of the cargoes owned by SMC.

Therefore, based on the foregoing discussion, we are reversing the findings of the Court of Appeals that there is res judicata.

Anent ANCO’s first assignment of error, i.e., the appellate court committed error in concluding that the negligence of ANCO’s representatives was the proximate cause of the loss, said issue is a question of fact assailing the lower court’s appreciation of evidence on the negligence or lack thereof of the crewmembers of the D/B Lucio. As a rule, findings of fact of lower courts, particularly when affirmed by the appellate court, are deemed final and conclusive. The Supreme Court cannot review such findings on appeal, especially when they are borne out by the records or are based on substantial evidence.[9] As held in the case of Donato v. Court of Appeals,[10] in this jurisdiction, it is a fundamental and settled rule that findings of fact by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case.[11]

It is not the function of this Court to analyze or weigh evidence all over again, unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute palpable error or grave abuse of discretion.[12]

A careful study of the records shows no cogent reason to fault the findings of the lower court, as sustained by the appellate court, that ANCO’s representatives failed to exercise the extraordinary degree of diligence required by the law to exculpate them from liability for the loss of the cargoes.

First, ANCO admitted that they failed to deliver to the designated consignee the Twenty Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.

Second, it is borne out in the testimony of the witnesses on record that the barge D/B Lucio had no engine of its own and could not maneuver by itself. Yet, the patron of ANCO’s tugboat M/T ANCO left it to fend for itself notwithstanding the fact that as the two vessels arrived at the port of San Jose, Antique, signs of the impending storm were already manifest. As stated by the lower court, witness Mr. Anastacio Manilag testified that the captain or patron of the tugboat M/T ANCO left the barge D/B Lucio immediately after it reached San Jose, Antique, despite the fact that there were already big waves and the area was already dark. This is corroborated by defendants’ own witness, Mr. Fernando Macabueg.[13]

The trial court continued:

At that precise moment, since it is the duty of the defendant to exercise and observe extraordinary diligence in the vigilance over the cargo of the plaintiff, the patron or captain of M/T ANCO, representing the defendant could have placed D/B Lucio in a very safe location before they left knowing or sensing at that time the coming of a typhoon. The presence of big waves and dark clouds could have warned the patron or captain of M/T ANCO to insure the safety of D/B Lucio including its cargo. D/B Lucio being a barge, without its engine, as the patron or captain of M/T ANCO knew, could not possibly maneuver by itself. Had the patron or captain of M/T ANCO, the representative of the defendants observed extraordinary diligence in placing the D/B Lucio in a safe place, the loss to the cargo of the plaintiff could not have occurred. In short, therefore, defendants through their representatives, failed to observe the degree of diligence required of them under the provision of Art. 1733 of the Civil Code of the Philippines.[14]

Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the contention of respondents SMC and FGU that “the crewmembers of D/B Lucio should have left port at the onset of the typhoon is like advising the fish to jump from the frying pan into the fire and an advice that borders on madness.”[15]

The argument does not persuade. The records show that the D/B Lucio was the only vessel left at San Jose, Antique, during the time in question. The other vessels were transferred and temporarily moved to Malandong, 5 kilometers from wharf where the barge remained.[16] Clearly, the transferred vessels were definitely safer in Malandong than at the port of San Jose, Antique, at that particular time, a fact which petitioners failed to dispute

ANCO’s arguments boil down to the claim that the loss of the cargoes was caused by the typhoon Sisang, a fortuitous event (caso

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1fortuito), and there was no fault or negligence on their part. In fact, ANCO claims that their crewmembers exercised due diligence to prevent or minimize the loss of the cargoes but their efforts proved no match to the forces unleashed by the typhoon which, in petitioners’ own words was, by any yardstick, a natural calamity, a fortuitous event, an act of God, the consequences of which petitioners could not be held liable for.[17]

The Civil Code provides:

Art. 1733. 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.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .



. . .

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods . . . (Emphasis supplied)

Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability)[18] by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were inevitable. It is therefore not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid.[19]

In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a circumstance which prompted SMC’s District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine and could not maneuver by itself. Even if ANCO’s representatives wanted to transfer it, they no longer had any means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its own devices. The captain of the tugboat should have had the foresight not to leave the barge alone considering the pending storm.

While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO could not escape liability to respondent SMC. The records clearly show the failure of petitioners’ representatives to exercise the extraordinary degree of diligence mandated by law. To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss.[20] There must have been no contributory negligence on the part of

the common carrier. As held in the case of Limpangco Sons v. Yangco Steamship Co.:[21]

. . . To be exempt from liability because of an act of God, the tug must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. For, although the immediate or proximate cause of the loss in any given instance may have been what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by any culpable act or omission of its own, it is not excused.[22]

Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the part of M/T ANCO’s crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the request of SMC’s representatives to have the barge transferred to a safer place, as was done by the other vessels in the port; thus, making said blatant negligence the proximate cause of the loss of the cargoes.

We now come to the issue of whether or not FGU can be held liable under the insurance policy to reimburse ANCO for the loss of the cargoes despite the findings of the respondent court that such loss was occasioned by the blatant negligence of the latter’s employees.

One of the purposes for taking out insurance is to protect the insured against the consequences of his own negligence and that of his agents. Thus, it is a basic rule in insurance that the carelessness and negligence of the insured or his agents constitute no defense on the part of the insurer.[23] This rule however presupposes that the loss has occurred due to causes which could not have been prevented by the insured, despite the exercise of due diligence.

The question now is whether there is a certain degree of negligence on the part of the insured or his agents that will deprive him the right to recover under the insurance contract. We say there is. However, to what extent such negligence must go in order to exonerate the insurer from liability must be evaluated in light of the circumstances surrounding each case. When evidence show that the insured’s negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated.

In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,[24] the United States Supreme Court held that:

The ordinary negligence of the insured and his agents has long been held as a part of the risk which the insurer takes upon himself, and the existence of which, where it is the proximate cause of the loss, does not absolve the insurer from liability. But willful exposure, gross negligence, negligence amounting to misconduct, etc., have often been held to release the insurer from such liability.[25] [Emphasis ours]

. . .

In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas. No. 17,731, the owners of an insured vessel attempted to put her across the bar at Hatteras Inlet. She struck on the bar and was wrecked. The master knew that the depth of water on the bar was such as to make the attempted passage dangerous. Judge Clifford held that, under the circumstances, the loss was not within the protection of the policy, saying:

Authorities to prove that persons insured cannot recover for a loss occasioned by their own wrongful acts are hardly necessary, as the

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1proposition involves an elementary principle of universal application. Losses may be recovered by the insured, though remotely occasioned by the negligence or misconduct of the master or crew, if proximately caused by the perils insured against, because such mistakes and negligence are incident to navigation and constitute a part of the perils which those who engage in such adventures are obliged to incur; but it was never supposed that the insured could recover indemnity for a loss occasioned by his own wrongful act or by that of any agent for whose conduct he was responsible.[26] [Emphasis ours]

From the above-mentioned decision, the United States Supreme Court has made a distinction between ordinary negligence and gross negligence or negligence amounting to misconduct and its effect on the insured’s right to recover under the insurance contract. According to the Court, while mistake and negligence of the master or crew are incident to navigation and constitute a part of the perils that the insurer is obliged to incur, such negligence or recklessness must not be of such gross character as to amount to misconduct or wrongful acts; otherwise, such negligence shall release the insurer from liability under the insurance contract.

In the case at bar, both the trial court and the appellate court had concluded from the evidence that the crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent. To wit:

There was blatant negligence on the part of the employees of defendants-appellants when the patron (operator) of the tug boat immediately left the barge at the San Jose, Antique wharf despite the looming bad weather. Negligence was likewise exhibited by the defendants-appellants’ representative who did not heed Macabuag’s request that the barge be moved to a more secure place. The prudent thing to do, as was done by the other sea vessels at San Jose, Antique during the time in question, was to transfer the vessel to a safer wharf. The negligence of the defendants-appellants is proved by the fact that on 01 October 1979, the only simple vessel left at the wharf in San Jose was the D/B Lucio.[27] [Emphasis ours]

As stated earlier, this Court does not find any reason to deviate from the conclusion drawn by the lower court, as sustained by the Court of Appeals, that ANCO’s representatives had failed to exercise extraordinary diligence required of common carriers in the shipment of SMC’s cargoes. Such blatant negligence being the proximate cause of the loss of the cargoes amounting to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00)

This Court, taking into account the circumstances present in the instant case, concludes that the blatant negligence of ANCO’s employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from liability under the insurance contract.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24 February 1999 is hereby AFFIRMED with MODIFICATION dismissing the third-party complaint.

SO ORDERED.

Schmitz Transport v. Transport Venture[G.R. No. 150255. April 22, 2005]

SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, vs. TRANSPORT VENTURE, INC., INDUSTRIAL

INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now INCHCAPE SHIPPING SERVICES, respondents.D E C I S I O NCARPIO-MORALES, J.:

On petition for review is the June 27, 2001 Decision[1] of the Court of Appeals, as well as its Resolution[2] dated September 28, 2001 denying the motion for reconsideration, which affirmed that of Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-63132[3] holding petitioner Schmitz Transport Brokerage Corporation (Schmitz Transport), together with Black Sea Shipping Corporation (Black Sea), represented by its ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the loss of 37 hot rolled steel sheets in coil that were washed overboard a barge.

On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V “Alexander Saveliev” (a vessel of Russian registry and owned by Black Sea) 545 hot rolled steel sheets in coil weighing 6,992,450 metric tons.

The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel Pipe Corporation (Little Giant),[4] were insured against all risks with Industrial Insurance Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-3747-TIS.[5]

The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority (PPA) assigned it a place of berth at the outside breakwater at the Manila South Harbor.[6]

Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive the cargoes from the shipside, and to deliver them to its (the consignee’s) warehouse at Cainta, Rizal,[7] in turn engaged the services of TVI to send a barge and tugboat at shipside.

On October 26, 1991, around 4:30 p.m., TVI’s tugboat “Lailani” towed the barge “Erika V” to shipside.[8]

By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the vessel, left and returned to the port terminal.[9] At 9:00 p.m., arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from the vessel unto the barge.

By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an approaching storm, the unloading unto the barge of the 37 coils was accomplished.[10] No tugboat pulled the barge back to the pier, however.

At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the crew of the barge abandoned it and transferred to the vessel. The barge pitched and rolled with the waves and eventually capsized, washing the 37 coils into the sea.[12] At 7:00 a.m., a tugboat finally arrived to pull the already empty and damaged barge back to the pier.[13]

Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover the lost cargoes proved futile.[14]

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of P5,246,113.11. Little Giant thereupon executed a subrogation receipt[15] in favor of Industrial Insurance.

Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its representative Inchcape (the defendants) before the RTC of Manila, for the recovery of the amount it paid to Little Giant plus adjustment fees, attorney’s fees, and litigation expenses.[16]

Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while typhoon signal No. 1 was raised in Metro Manila.[17]

By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for unloading the cargoes outside of the breakwater notwithstanding the storm signal.[18] The dispositive portion of the decision reads:

WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering the defendants to pay plaintiff jointly and severally the sum of P5,246,113.11 with interest from the date the complaint was filed until fully satisfied, as well as the sum of P5,000.00 representing the adjustment fee plus the sum of 20% of the amount recoverable from the defendants as attorney’s fees plus the costs of suit. The counterclaims and cross claims of defendants are hereby DISMISSED for lack of [m]erit.[19]

To the trial court’s decision, the defendants Schmitz Transport and TVI filed a joint motion for reconsideration assailing the finding that they are common carriers and the award of excessive attorney’s fees of more than P1,000,000. And they argued that they were not motivated by gross or evident bad faith and that the incident was caused by a fortuitous event. [20]

By resolution of February 4, 1998, the trial court denied the motion for reconsideration. [21]

All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed in toto the decision of the trial court, [22] it finding that all the defendants were common carriers — Black Sea and TVI for engaging in the transport of goods and cargoes over the seas as a regular business and not as an isolated transaction,[23] and Schmitz Transport for entering into a contract with Little Giant to transport the cargoes from ship to port for a fee.[24]

In holding all the defendants solidarily liable, the appellate court ruled that “each one was essential such that without each other’s contributory negligence the incident would not have happened and so much so that the person principally liable cannot be distinguished with sufficient accuracy.”[25]

In discrediting the defense of fortuitous event, the appellate court held that “although defendants obviously had nothing to do with the force of nature, they however had control of where to anchor the vessel, where discharge will take place and even when the discharging will commence.”[26]

The defendants’ respective motions for reconsideration having been denied by Resolution[27] of September 28, 2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present petition against TVI, Industrial Insurance and Black Sea.

Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal, consignee Little Giant, hence, the transportation contract was by and between Little Giant and TVI.[28]

By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI were required to file their respective Comments.[29]

By its Comment, Black Sea argued that the cargoes were received by the consignee through petitioner in good order, hence, it cannot be faulted, it having had no control and supervision thereover.[30]

For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and transferred them unto the barge upon the instruction of petitioner.[31]

In issue then are:

(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of negligence on the part of petitioner Black Sea and TVI, and

(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI.

When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all liability arising therefrom:

ART. 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 could not be foreseen, or which though foreseen, were inevitable.

In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it must be impossible to foresee the event which constitute 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 any manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor.[32]

[T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence of nature. Human intervention is to be excluded from creating or entering into the cause of the mischief. When the effect is found to be in part the result of the participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules applicable to the acts of God.[33]

The appellate court, in affirming the finding of the trial court that human intervention in the form of contributory negligence by all the defendants resulted to the loss of the cargoes,[34] held that unloading outside the breakwater, instead of inside the breakwater, while a storm signal was up constitutes negligence.[35] It thus concluded that the proximate cause of the loss was Black Sea’s negligence in deciding to unload the cargoes at an unsafe place and while a typhoon was approaching.[36]

From a review of the records of the case, there is no indication that there was greater risk in loading the cargoes outside the breakwater.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1As the defendants proffered, the weather on October 26, 1991 remained normal with moderate sea condition such that port operations continued and proceeded normally.[37]

The weather data report,[38] furnished and verified by the Chief of the Climate Data Section of PAG-ASA and marked as a common exhibit of the parties, states that while typhoon signal No. 1 was hoisted over Metro Manila on October 23-31, 1991, the sea condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate. It cannot, therefore, be said that the defendants were negligent in not unloading the cargoes upon the barge on October 26, 1991 inside the breakwater.

That no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30 in the morning[39] is, however, a material fact which the appellate court failed to properly consider and appreciate[40] — the proximate cause of the loss of the cargoes. Had the barge been towed back promptly to the pier, the deteriorating sea conditions notwithstanding, the loss could have been avoided. But the barge was left floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the cargoes.[41] The loss thus falls outside the “act of God doctrine.”

The proximate cause of the loss having been determined, who among the parties is/are responsible therefor?

Contrary to petitioner’s insistence, this Court, as did the appellate court, finds that petitioner is a common carrier. For it undertook to transport the cargoes from the shipside of “M/V Alexander Saveliev” to the consignee’s warehouse at Cainta, Rizal. As the appellate court put it, “as long as a person or corporation holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is already considered a common carrier regardless if [it] owns the vehicle to be used or has to hire one.”[42] That petitioner is a common carrier, the testimony of its own Vice-President and General Manager Noel Aro that part of the services it offers to its clients as a brokerage firm includes the transportation of cargoes reflects so.

Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President and General Manager of said Company?

Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the company. I also handle the various division heads of the company for operation matters, and all other related functions that the President may assign to me from time to time, Sir.

Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell the Honorable Court if you came to know the company by the name Little Giant Steel Pipe Corporation?

A: Yes, Sir. Actually, we are the brokerage firm of that Company.

Q: And since when have you been the brokerage firm of that company, if you can recall?

A: Since 1990, Sir.

Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you perform in behalf of this company?

A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also in-charged of the delivery of the goods to their warehouses. We also handled the clearances of their shipment at the Bureau of Customs, Sir.

x x x

Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with regards to this shipment? What work did you do with this shipment?

A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of [the] cargo[es] from lighter to BASECO then to the truck and to the warehouse, Sir.

Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to perform, what equipment do (sic) you require or did you use in order to effect this unloading, transfer and delivery to the warehouse?

A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to lighter, and on this we hired or we sub-contracted with [T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges. Also, in BASECO compound we are leasing cranes to have the cargo unloaded from the barge to trucks, [and] then we used trucks to deliver [the cargoes] to the consignee’s warehouse, Sir.

Q: And whose trucks do you use from BASECO compound to the consignee’s warehouse?

A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.

x x x

ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to contract for the barges of Transport Ventures Incorporated in this particular operation?

A: Firstly, we don’t own any barges. That is why we hired the services of another firm whom we know [al]ready for quite sometime, which is Transport Ventures, Inc. (Emphasis supplied)[43]

It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals,[44] held:

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit,

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

x x x

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.[45]

70


And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of goods is an integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise “would be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of petitioner’s business.”[47]

As for petitioner’s argument that being the agent of Little Giant, any negligence it committed was deemed the negligence of its principal, it does not persuade.

True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting the transportation of the cargoes from the shipside and into Little Giant’s warehouse, however, petitioner was discharging its own personal obligation under a contact of carriage.

Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler[48] to provide the barge and the tugboat. In their Service Contract,[49] while Little Giant was named as the consignee, petitioner did not disclose that it was acting on commission and was chartering the vessel for Little Giant.[50] Little Giant did not thus automatically become a party to the Service Contract and was not, therefore, bound by the terms and conditions therein.

Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can maintain a cause of action for negligence.[51]

In the case of TVI, while it acted as a private carrier for which it was under no duty to observe extraordinary diligence, it was still required to observe ordinary diligence to ensure the proper and careful handling, care and discharge of the carried goods.

Thus, Articles 1170 and 1173 of the Civil Code provide:

ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required.

Was the reasonable care and caution which an ordinarily prudent person would have used in the same situation exercised by TVI?[52]

This Court holds not.

TVI’s failure to promptly provide a tugboat did not only increase the risk that might have been reasonably anticipated during the shipside operation, but was the proximate cause of the loss. A man of ordinary prudence would not leave a heavily loaded barge floating for a considerable number of hours, at such a precarious time, and in the open sea, knowing that the barge does not have any power of its own

and is totally defenseless from the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a tugboat would be charging overtime pay did not excuse TVI from calling for one such tugboat.

As for petitioner, for it to be relieved of liability, it should, following Article 1739[53] of the Civil Code, prove that it exercised due diligence to prevent or minimize the loss, before, during and after the occurrence of the storm in order that it may be exempted from liability for the loss of the goods.

While petitioner sent checkers[54] and a supervisor[55] on board the vessel to counter-check the operations of TVI, it failed to take all available and reasonable precautions to avoid the loss. After noting that TVI failed to arrange for the prompt towage of the barge despite the deteriorating sea conditions, it should have summoned the same or another tugboat to extend help, but it did not.

This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of the cargoes. The following pronouncement of the Supreme Court is instructive:

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176 and related provisions, in conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask further, how then must the liability of the common carrier, on one hand, and an independent contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract. Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.[57]

As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or unconditionally placed in its possession and received for transportation until they were delivered actually or constructively to consignee Little Giant.[58]

Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be made “to the port of discharge or so near thereto as she may safely get, always afloat.”[59] The delivery of the goods to the consignee was not from “pier to pier” but from the shipside of “M/V Alexander Saveliev” and into barges, for which reason the consignee contracted the services of petitioner. Since Black Sea had constructively delivered the cargoes to Little Giant, through petitioner, it had discharged its duty.[60]

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1In fine, no liability may thus attach to Black Sea.

Respecting the award of attorney’s fees in an amount over P1,000,000.00 to Industrial Insurance, for lack of factual and legal basis, this Court sets it aside. While Industrial Insurance was compelled to litigate its rights, such fact by itself does not justify the award of attorney’s fees under Article 2208 of the Civil Code. For no sufficient showing of bad faith would be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.[61] To award attorney’s fees to a party just because the judgment is rendered in its favor would be tantamount to imposing a premium on one’s right to litigate or seek judicial redress of legitimate grievances.[62]

On the award of adjustment fees: The adjustment fees and expense of divers were incurred by Industrial Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost cargo. They do not constitute actual damages.[63]

As for the court a quo’s award of interest on the amount claimed, the same calls for modification following the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals[64] that when the demand cannot be reasonably established at the time the demand is made, the interest shall begin to run not from the time the claim is made judicially or extrajudicially but from the date the judgment of the court is made (at which the time the quantification of damages may be deemed to have been reasonably ascertained).[65]

WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage Corporation, and Transport Venture Incorporation jointly and severally liable for the amount of P5,246,113.11 with the MODIFICATION that interest at SIX PERCENT per annum of the amount due should be computed from the promulgation on November 24, 1997 of the decision of the trial court.

Costs against petitioner.

SO ORDERED.

Lea Mer Industries v. MalayanLEA MER INDUSTRIES, INC., G.R. No. 161745 Petitioner, Present Panganiban, J., Chairman, - versus - Sandoval-Gutierrez, Corona, Carpio Morales, and Garcia, JJ Promulgated:MALAYAN INSURANCE CO., INC.,* Respondent. September 30, 2005x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x DECISION PANGANIBAN, J.:

Common carriers are bound to observe extraordinary diligence in their vigilance over the goods entrusted to them, as required by the nature of their business and for reasons of public policy. Consequently, the law presumes that common carriers are at fault or negligent for any loss or damage to the goods that they transport. In the present case, the evidence submitted by petitioner to overcome this presumption was sorely insufficient. The Case Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the October 9, 2002 Decision[2] and the December 29, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 66028. The challenged Decision disposed as follows: “WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET ASIDE. [Petitioner] is ordered to pay the [herein respondent] the value of the lost cargo in the amount of P565,000.00. Costs against the [herein petitioner].”[4] The assailed Resolution denied reconsideration.

The Facts Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900 metric tons of silica sand valued at P565,000.[5] Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was placed on board Judy VII, a barge leased by Lea Mer.[6] During the voyage, the vessel sank, resulting in the loss of the cargo.[7] Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.[8] To recover the amount paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer, which refused to comply. Consequently, Malayan instituted a Complaint with the Regional Trial Court (RTC) of Manila on September 4, 1992, for the collection of P565,000 representing the amount that respondent had paid Vulcan.[9] On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the loss was a fortuitous event.[10] The RTC noted that the vessel had sunk because of the bad weather condition brought about by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to Manila.[11] Ruling of the Court of Appeals Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for Manila. Thus, the loss of the cargo was occasioned by petitioner’s fault, not by a fortuitous event.[12] Hence, this recourse.[13] The Issues

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1Petitioner states the issues in this wise: “A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a witness of the said report during the trial of this case before the lower court can be admitted in evidence to prove the alleged facts cited in the said report. “B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of fact of the Regional Trial Court which clearly and unequivocally held that the loss of the cargo subject of this case was caused by fortuitous event for which herein petitioner could not be held liable. “C. Whether or not the respondent, Court of Appeals, had committed serious error and grave abuse of discretion in disregarding the testimony of the witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the effect that the vessel ‘Judy VII’ was seaworthy at the time of incident and further in disregarding the testimony of the PAG-ASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that typhoon ‘Trining’ did not hit Metro Manila or Palawan.”[14] In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and (2) whether the survey report of Jesus Cortez is admissible in evidence. The Court’s Ruling The Petition has no merit. First Issue:Liability for Loss of Cargo Question of Fact The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous event. This issue involves primarily a question of fact, notwithstanding petitioner’s claim that it pertains only to a question of law. As a general rule, questions of fact may not be raised in a petition for review.[15] The present case serves as an exception to this rule, because the factual findings of the appellate and the trial courts vary.[16] This Court meticulously reviewed the records, but found no reason to reverse the CA. Rule on Common Carriers Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or both -- by land, water, or air -- when this service is offered to the public for compensation.[17] Petitioner is clearly a common carrier, because it offers to the public its business of transporting goods through its vessels.[18] Thus, the Court corrects the trial court’s finding that petitioner became a private carrier when Vulcan chartered it.[19] Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are distinguished as follows: “Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a

vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all.”[20] The distinction is significant, because a demise or bareboat charter indicates a business undertaking that is private in character. [21] Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers.[22] The Contract in the present case was one of affreightment, as shown by the fact that it was petitioner’s crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII.[23] Necessarily, petitioner was a common carrier, and the pertinent law governs the present factual circumstances. Extraordinary Diligence Required Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers they transport, as required by the nature of their business and for reasons of public policy.[24] Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery.[25] Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have transported.[26] This presumption can be rebutted only by proof that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the following causes:[27] “(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;“(2) Act of the public enemy in war, whether international or civil;“(3) Act or omission of the shipper or owner of the goods;“(4) The character of the goods or defects in the packing or in the containers;“(5) Order or act of competent public authority.”[28] Rule on Fortuitous Events Article 1174 of the Civil Code provides that “no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable.” Thus, if the loss or damage was due to such an event, a common carrier is exempted from liability.Jurisprudence defines the elements of a “fortuitous event” as follows: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.[29] To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and only cause of the loss.[30] Moreover, it should have exercised due diligence to prevent or

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1minimize the loss before, during and after the occurrence of the fortuitous event.[31] Loss in the Instant Case There is no controversy regarding the loss of the cargo in the present case. As the common carrier, petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that the loss had been occasioned by a fortuitous event -- an exempting circumstance. It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the loss of the cargo was due to the bad weather condition brought about by Typhoon Trining.[32] Evidence was presented to show that petitioner had not been informed of the incoming typhoon, and that the Philippine Coast Guard had given it clearance to begin the voyage.[33] On October 25, 1991, the date on which the voyage commenced and the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm warning was only “Signal No. 1.”[34]The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient. As required by the pertinent law, it was not enough for the common carrier to show that there was an unforeseen or unexpected occurrence. It had to show that it was free from any fault -- a fact it miserably failed to prove. First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during or after the alleged fortuitous event.[35] Its witness, Joey A. Draper, testified that he could no longer remember whether anything had been done to minimize loss when water started entering the barge.[36] This fact was confirmed during his cross-examination, as shown by the following brief exchange: ”Atty. Baldovino, Jr.: Other than be[a]ching the barge Judy VII, were there other precautionary measure[s] exercised by you and the crew of Judy VII so as to prevent the los[s] or sinking of barge Judy VII? x x x x x x x x x Atty. Baldovino, Jr.: Your Honor, what I am asking [relates to the] action taken by the officers and crew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking of barge Judy VII? x x x x x x x x x Court:Mr. witness, did the captain of that tugboat give any instruction on how to save the barge Judy VII? Joey Draper: I can no longer remember sir, because that happened [a] long time ago.”[37] Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a preponderance of evidence that the barge was not seaworthy when it sailed for Manila.[38] Respondent was able to prove that, in the hull of the barge, there were holes that might have caused or aggravated the sinking.[39] Because the presumption of negligence or fault applied to petitioner, it was incumbent upon it

to show that there were no holes; or, if there were, that they did not aggravate the sinking. Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna, testified that the barge was in “tip-top” or excellent condition,[40] but that he had not personally inspected it when it left Palawan.[41] The submission of the Philippine Coast Guard’s Certificate of Inspection of Judy VII, dated July 31, 1991, did not conclusively prove that the barge was seaworthy.[42] The regularity of the issuance of the Certificate is disputably presumed.[43] It could be contradicted by competent evidence, which respondent offered. Moreover, this evidence did not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage.[44] Second Issue:Admissibility of the Survey Report Petitioner claims that the Survey Report[45] prepared by Jesus Cortez, the cargo surveyor, should not have been admitted in evidence. The Court partly agrees. Because he did not testify during the trial,[46] then the Report that he had prepared was hearsay and therefore inadmissible for the purpose of proving the truth of its contents. The Survey Report Not the Sole Evidence The facts reveal that Cortez’s Survey Report was used in the testimonies of respondent’s witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis and Harding Company.[47] Soriano testified that the Survey Report had been used in preparing the final Adjustment Report conducted by their company.[48] The final Report showed that the barge was not seaworthy because of the existence of the holes. Manlapig testified that he had prepared that Report after taking into account the findings of the surveyor, as well as the pictures and the sketches of the place where the sinking occurred.[49] Evidently, the existence of the holes was proved by the testimonies of the witnesses, not merely by Cortez’ Survey Report. Rule on IndependentlyRelevant Statement That witnesses must be examined and presented during the trial,[50] and that their testimonies must be confined to personal knowledge is required by the rules on evidence, from which we quote: “Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A witness can testify only to those facts which he knows of his personal knowledge; that is, which are derived from his own perception, except as otherwise provided in these rules.”[51] On this basis, the trial court correctly refused to admit Jesus Cortez’s Affidavit, which respondent had offered as evidence.[52] Well-settled is the rule that, unless the affiant is presented as a witness, an affidavit is considered hearsay.[53]

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1 An exception to the foregoing rule is that on “independently relevant statements.” A report made by a person is admissible if it is intended to prove the tenor, not the truth, of the statements.[54] Independent of the truth or the falsity of the statement given in the report, the fact that it has been made is relevant. Here, the hearsay rule does not apply.[55] In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of the testimonies of respondent’s witnesses. The referral to Cortez’s Report was in relation to Manlapig’s final Adjustment Report. Evidently, it was the existence of the Survey Report that was testified to. The admissibility of that Report as part of the testimonies of the witnesses was correctly ruled upon by the trial court. At any rate, even without the Survey Report, petitioner has already failed to overcome the presumption of fault that applies to common carriers. WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against petitioner. SO ORDERED.

Act of Shipper 1734[3];1741

Compania Maritima v. CAG.R. No. L-31379 August 29, 1988

COMPAÑIA MARITIMA, petitioner, vs.COURT OF APPEALS and VICENTE CONCEPCION, respondents.

Rafael Dinglasan for petitioner.

Benjamin J. Molina for private respondent.

FERNAN, C.J.:

Petitioner Compañia Maritima seeks to set aside through this petition for review on certiorari the decision 1 of the Court of Appeals dated December 5, 1965, adjudging petitioner liable to private respondent Vicente E. Concepcion for damages in the amount of P24,652.97 with legal interest from the date said decision shall have become final, for petitioner's failure to deliver safely private respondent's payloader, and for costs of suit. The payloader was declared abandoned in favor of petitioner.

The facts of the case are as follows:

Private respondent Vicente E. Concepcion, a civil engineer doing business under the name and style of Consolidated Construction with office address at Room 412, Don Santiago Bldg., Taft Avenue, Manila, had a contract with the Civil Aeronautics Administration (CAA) sometime in 1964 for the construction of the airport in Cagayan de Oro City Misamis Oriental.

Being a Manila — based contractor, Vicente E. Concepcion had to ship his construction equipment to Cagayan de Oro City. Having shipped some of his equipment through petitioner and having settled

the balance of P2,628.77 with respect to said shipment, Concepcion negotiated anew with petitioner, thru its collector, Pacifico Fernandez, on August 28, 1964 for the shipment to Cagayan de Oro City of one (1) unit payloader, 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. 2

These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila on August 30, 1964 and arrived at Cagayan de Oro City in the afternoon of September 1, 1964. The Reo trucks and water tanks were safely unloaded within a few hours after arrival, but while 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. 3 The payloader was damaged and was thereafter taken to petitioner's compound in Cagayan de Oro City.

On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote Compañia Maritima to demand a replacement of the payloader which it was considering as a complete loss because of the extent of damage. 4 Consolidated Construction likewise notified petitioner of its claim for damages. Unable to elicit response, the demand was repeated in a letter dated October 2, 1964. 5

Meanwhile, petitioner 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 B-111 of Lading, petitioner denied the claim for damages of Consolidated Construction in its letter dated October 7, 1964, 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. 6

To replace the damaged payloader, Consolidated Construction in the meantime bought a new one at P45,000.00 from Bormaheco Inc. on December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed an action for damages against petitioner with the then Court of First Instance of Manila, Branch VII, docketed as Civil Case No. 61551, seeking to recover damages in the amount of P41,225.00 allegedly suffered for the period of 97 days that he was not able to employ a payloader in the construction job at the rate of P450.00 a day; P34,000.00 representing the cost of the damaged payloader; Pl 1, 000. 00 representing the difference between the cost of the damaged payloader and that of the new payloader; P20,000.00 representing the losses suffered by him due to the diversion of funds to enable him to buy a new payloader; P10,000.00 as attorney's fees; P5,000.00 as exemplary damages; and cost of the suit. 7

After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968 the complaint with costs against therein plaintiff, herein private respondent Vicente E. Concepcion, 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 as 2.5 tons instead of its true weight of 7.5 tons, which underdeclaration was intended to defraud Compañia Maritima of the payment of the freight charges and which likewise led the Chief Officer of the vessel to use the heel block of hatch No. 2 in unloading the payloader. 8

From the adverse decision against him, Vicente E. Concepcion appealed to the Court of Appeals which, on December 5, 1965 rendered a decision, the dispositive portion of which reads:

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1IN VIEW WHEREOF, judgment must have to be as it is hereby reversed; defendant is condemned to pay unto plaintiff the sum in damages of P24,652.07 with legal interest from the date the present decision shall have become final; the payloader is declared abandoned to defendant; costs against the latter. 9

Hence, the instant petition.

The principal issue in the instant case is whether or not the act of private respondent Vicente E. Concepcion in furnishing petitioner Compañia Maritima with an inaccurate weight of 2.5 tons instead of the payloader's actual weight of 7.5 tons was the proximate and only cause of the damage on the Oliver Payloader OC-12 when it fell while being unloaded by petitioner's crew, as would absolutely exempt petitioner from liability for damages under paragraph 3 of Article 1734 of the Civil Code, which provides:


xxx xxx xxx

(3) Act or omission of the shipper or owner of the goods.

Petitioner claims absolute exemption under this provision upon the reasoning that private respondent's act of furnishing it with an inaccurate weight of the payloader constitutes misrepresentation within the meaning of "act or omission of the shipper or owner of the goods" under the above- quoted article. It likewise faults the respondent Court of Appeals for reversing the decision of the trial court notwithstanding that said appellate court also found that by representing the weight of the payloader to be only 2.5 tons, private respondent had led petitioner's officer to believe that the same was within the 5 tons capacity of the heel block of Hatch No. 2. Petitioner would thus insist that the proximate and only cause of the damage to the payloader was private respondent's alleged misrepresentation of the weight of the machinery in question; hence, any resultant damage to it must be borne by private respondent Vicente E. Concepcion.

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. The responsibility of observing extraordinary diligence in the vigilance over the goods is further expressed in Article 1734 of the same Code, the article invoked by petitioner to avoid liability for damages.

Corollary is the rule that mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the place of destination in bad order, makes out prima facie case against the common carrier, so that if no explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common carrier must be held responsible. 10 Otherwise stated, 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, We are not persuaded by the proferred explanation of petitioner alleged to be the proximate cause of the fall of the

payloader while it was being unloaded at the Cagayan de Oro City pier. Petitioner 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 duty.

Thus, Article 1733 of the Civil Code provides:

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.

Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735 and 1745, Nos. 5, 6 and 7, ...

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage including such methods as their nature requires." 11 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.

Where, as in the instant case, petitioner, 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. As found by the respondent Court of Appeals, the fact is that petitioner used a 5-ton capacity lifting apparatus to lift and unload a visibly heavy cargo like a payloader. Private respondent has, likewise, sufficiently established the laxity and carelessness of petitioner's crew in their methods of ascertaining the weight of heavy cargoes offered for shipment before loading and unloading them, as is customary among careful persons.

It must be noted that the weight submitted by private respondent Concepcion appearing at the left-hand portion of Exhibit 8 12 as an addendum to the original enumeration of equipment to be shipped was entered into the bill of lading by petitioner, thru Pacifico Fernandez, a company collector, without seeing the equipment to be shipped. 13 Mr. Mariano Gupana, assistant traffic manager of petitioner, confirmed in his testimony that the company never checked the information entered in the bill of lading. 14 Worse, the weight of the payloader as entered in the bill of lading was assumed to be correct by Mr. Felix Pisang, Chief Officer of MV Cebu. 15

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. 16 Besides, common carriers can

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1protect themselves against mistakes in the bill of lading as to weight by exercising diligence before issuing the same. 17

While petitioner has proven that private respondent Concepcion did furnish it with an inaccurate weight of the payloader, petitioner is nonetheless liable, for 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 a heavy equipment. And circumstances clearly show that the fall of the payloader could have been avoided by petitioner's crew. Evidence on record sufficiently show that the crew of petitioner had been negligent in the performance of its obligation by reason of their having failed to take the necessary precaution under the circumstances which usage has established among careful persons, more particularly its Chief Officer, Mr. Felix Pisang, who is tasked with the over-all supervision of loading and unloading heavy cargoes and upon whom rests the burden of deciding as to what particular winch the unloading of the payloader should be undertaken. 18 While it was his duty to determine the weight of heavy cargoes before accepting them. Mr. Felix Pisang took the bill of lading on its face value and presumed the same to be correct by merely "seeing" it. 19 Acknowledging that there was a "jumbo" in the MV Cebu which has the capacity of lifting 20 to 25 ton cargoes, Mr. Felix Pisang chose not to use it, because according to him, since the ordinary boom has a capacity of 5 tons while the payloader was only 2.5 tons, he did not bother to use the "jumbo" anymore. 20

In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate weight of the payloader upon being asked by petitioner's collector, cannot be used by said petitioner as an excuse to avoid liability for the damage caused, as the same could have been avoided had petitioner utilized the "jumbo" lifting apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known to the Chief Officer of MV Cebu that the payloader was loaded aboard the MV Cebu at the Manila North Harbor on August 28, 1964 by means of a terminal crane. 21 Even if petitioner chose not to take the necessary precaution to avoid damage by checking the correct weight of the payloader, extraordinary care and diligence compel the use of the "jumbo" lifting apparatus as the most prudent course for petitioner.

While the act of private respondent in furnishing petitioner 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.

We find equitable the conclusion of the Court of Appeals reducing the recoverable amount of damages by 20% or 1/5 of the value of the payloader, which at the time the instant case arose, was valued at P34,000. 00, thereby reducing the recoverable amount at 80% or 4/5 of P34,000.00 or the sum of P27,200.00. Considering that the freight charges for the entire cargoes shipped by private respondent amounting to P2,318.40 remained unpaid.. the same would be deducted from the P27,000.00 plus an additional deduction of P228.63 representing the freight charges for the undeclared weight of 5 tons (difference between 7.5 and 2.5 tons) leaving, therefore, a final

recoverable amount of damages of P24,652.97 due to private respondent Concepcion.

Notwithstanding the favorable judgment in his favor, private respondent assailed the Court of Appeals' decision insofar as it limited the damages due him to only P24,652.97 and the cost of the suit. Invoking the provisions on damages under the Civil Code, more particularly Articles 2200 and 2208, private respondent further seeks additional damages allegedly because the construction project was delayed and that in spite of his demands, petitioner failed to take any steps to settle his valid, just and demandable claim for damages.

We find private respondent's submission erroneous. It is well- settled that an appellee, who is not an appellant, may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he may not do so if his purpose is to have the judgment modified or reversed, for, in such case, he must appeal. 22 Since private respondent did not appeal from the judgment insofar as it limited the award of damages due him, the reduction of 20% or 1/5 of the value of the payloader stands.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals is hereby AFFIRMED in all respects with costs against petitioner. In view of the length of time this case has been pending, this decision is immediately executory.

Gutierrez, Jr., Feliciano, Bidin and Cortes JJ., concur.

Tabacalera v. North Front[G.R. No. 119197. May 16, 1997]

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND INSURANCE CO., LTD., petitioners, vs. NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.D E C I S I O NBELLOSILLO, J.:

TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co., Ltd., in this petition for review on certiorari, assail the 22 December 1994 decision of the Court of Appeals and its Resolution of 16 February 1995 which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing their complaint for damages against North Front Shipping Services, Inc.

On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped on board North Front 777, a vessel owned by North Front Shipping Services, Inc. The cargo was consigned to Republic Flour Mills Corporation in Manila under Bill of Lading No. 001[1] and insured with the herein mentioned insurance companies. The vessel was inspected prior to actual loading by representatives of the shipper and was found fit to carry the merchandise. The cargo was covered with tarpaulins and wooden boards. The hatches were sealed and could only be opened by representatives of Republic Flour Mills Corporation.

The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour Mills Corporation was advised of its arrival but it did not immediately commence the unloading operations. There were days when unloading had to be stopped due to variable weather conditions and sometimes for no apparent reason at all. When the cargo was eventually unloaded there

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1was a shortage of 26.333 metric tons. The remaining merchandise was already moldy, rancid and deteriorating. The unloading operations were completed on 5 September 1990 or twenty (20) days after the arrival of the barge at the wharf of Republic Flour Mills Corporation in Pasig City.

Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of deterioration. A Certificate of Analysis was issued indicating that the corn grains had 18.56% moisture content and the wetting was due to contact with salt water. The mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for consumption. In fact the mold growth could still be arrested by drying.

Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping Services, Inc., payment for the damages suffered by it. The demands however were unheeded. The insurance companies were perforce obliged to pay Republic Flour Mills Corporation P2,189,433.40.

By virtue of the payment made by the insurance companies they were subrogated to the rights of Republic Flour Mills Corporation. Thusly, they lodged a complaint for damages against North Front Shipping Services, Inc., claiming that the loss was exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the insurance companies conducted a survey and found cracks in the bodega of the barge and heavy concentration of molds on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front Shipping Services, Inc., thus making it possible for water to seep in. They also discovered that the bulkhead of the barge was rusty.

North Front Shipping Services, Inc., averred in refutation that it could not be made culpable for the loss and deterioration of the cargo as it was never negligent. Captain Solomon Villanueva, master of the vessel, reiterated that the barge was inspected prior to the actual loading and was found adequate and seaworthy. In addition, they were issued a permit to sail by the Coast Guard. The tarpaulins were doubled and brand new and the hatches were properly sealed. They did not encounter big waves hence it was not possible for water to seep in. He further averred that the corn grains were farm wet and not properly dried when loaded.

The court below dismissed the complaint and ruled that the contract entered into between North Front Shipping Services, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary diligence in the care of goods was required of North Front Shipping Services, Inc. The inspection of the barge by the shipper and the representatives of the shipping company before actual loading, coupled with the Permit to Sail issued by the Coast Guard, sufficed to meet the degree of diligence required of the carrier.

On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of diligence North Front 777 satisfactorily complied with all the requirements hence was issued a Permit to Sail after proper inspection. Consequently, the complaint was dismissed and the motion for reconsideration rejected.

The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any way convert the common carrier into a private carrier. We have already

resolved this issue with finality in Planters Products, Inc. v. Court of Appeals[2] thus -

A 'charter-party' is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight x x x x Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship.

Upon the other hand, the term 'common or public carrier' is defined in Art. 1732 of the Civil Code. The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation x x x x

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter (underscoring supplied).

North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe extraordinary diligence in its vigilance over the goods it transports.[3]. When goods placed in its care are lost or damaged, the carrier is presumed to have been at fault or to have acted negligently.[4] North Front Shipping Services, Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo.

North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by representatives of the shipper and was found fit to take a load of corn grains. They were also issued Permit to Sail by the Coast Guard. The master of the vessel testified that the corn grains were farm wet when loaded. However, this testimony was disproved by the clean bill of lading issued by North Front Shipping Services, Inc., which did not contain a notation that the corn grains were wet and improperly dried. Having been in the service since 1968, the master of the vessel would have known at the outset that corn grains that were farm wet and not properly dried would eventually deteriorate when stored in sealed and hot compartments as in hatches of a ship. Equipped with this knowledge, the master of the vessel and his crew should have undertaken precautionary measures to avoid or lessen the cargo's possible deterioration as they were presumed knowledgeable about the nature of such cargo. But none of such measures was taken.

In Compania Maritima v. Court of Appeals[5] we ruled -

x x x x Mere proof of delivery of the goods in good order to a common carrier, and of their arrival at the place of destination in bad order, makes out prima facie case against the common carrier, so that if no explanation is given as to how the loss, deterioration or destruction of the goods occurred, the common carrier must be held responsible. Otherwise stated, it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to

78

Choco NotesTransportation Law cases – Common Carrier of Goods part 1accident or some other circumstances inconsistent with its liability x x x x

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and 'to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires' (underscoring supplied).

In fine, we find that the carrier failed to observe the required extraordinary diligence in the vigilance over the goods placed in its care. The proofs presented by North Front Shipping Services, Inc., were insufficient to rebut the prima facie presumption of private respondent's negligence, more so if we consider the evidence adduced by petitioners.

It is not denied by the insurance companies that the vessel was indeed inspected before actual loading and that North Front 777 was issued a Permit to Sail. They proved the fact of shipment and its consequent loss or damage while in the actual possession of the carrier. Notably, the carrier failed to volunteer any explanation why there was spoilage and how it occurred. On the other hand, it was shown during the trial that the vessel had rusty bulkheads and the wooden boards and tarpaulins bore heavy concentration of molds. The tarpaulins used were not new, contrary to the claim of North Front Shipping Services, Inc., as there were already several patches on them, hence, making it highly probable for water to enter.

Laboratory analysis revealed that the corn grains were contaminated with salt water. North Front Shipping Services, Inc., failed to rebut all these arguments. It did not even endeavor to establish that the loss, destruction or deterioration of the goods was due to the following: (a) flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) act of the public enemy in war, whether international or civil; (c) act or omission of the shipper or owner of the goods; (d) the character of the goods or defects in the packing or in the containers; (e) order or act of competent public authority.[6] This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is rightly liable therefor.

However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for consumption. For its contributory negligence, Republic Flour Mills Corporation should share at least 40% of the loss.[7]

WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its Resolution of 16 February 1995 are REVERSED and SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to pay petitioners Tabacalera Insurance Co., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance

Co. Ltd., P1,313,660.00 which is 60% of the amount paid by the insurance companies to Republic Flour Mills Corporation, plus interest at the rate of 12% per annum from the time this judgment becomes final until full payment.

SO ORDERED.

Character of Goods 1734[4];1742

Government v. Ynchausti,September 29, 1919

G.R. No. 14191THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellant,vs.YNCHAUSTI & COMPANY, defendant-appellee.

Attorney-General Paredes for the appellant. Charles C. Cohn for the appellee.

JOHNSON, J.:

The purpose of this action was to recover the sum of P200 as damages to certain cargo of roofing tiles shipped by the plaintiff from Manila to Iloilo on a vessel belonging to the defendant. The tiles were delivered by the defendant to the consignee of the plaintiff at Iloilo. Upon delivery it was found that some of the tiles had been damaged; that the damage amounted to about P200. Upon a submission of that question to the lower court a judgment was rendered against the plaintiff in favor of the defendant, absolving the latter from all liability under the complaint.

There seems to be no dispute about the facts, except whether or not the tiles were broken by the negligence of the defendant. The defendant denied that the tiles were broken by reason of its negligence. The defendant proved, and the plaintiff did not attempt to dispute, that the roofing tiles in question were of a brittle and fragile nature; that they were delivered by the plaintiff to the defendant in bundles of ten each, tied with bejuco [rattan], without any packing or protective covering. The plaintiff did not even attempt to prove any negligence on the part of the defendant. On the hand, the defendant offered proof to show that there was no negligence on its part, by showing that the tiles were loaded, stowed, and discharged by handlabor, and not be mechanical devices which might have caused the breakage in question.

It appears from the record that the tiles in question were received by the defendant from the plaintiff, as representative on a Government bill of lading known as "General Form No. 9-A," which was made out and submitted by a representative of the Bureau of Supply to the defendant. (Exhibit A.) At the head of Exhibit A is found the following:

You are hereby authorized to receive, carry, and deliver the following described merchandise to treasurer of Iloilo at Iloilo in accordance with the authorized and prescribed rates and classifications, and according to the laws of common carriers in force on the date hereof, settlement and payment of charges to be made by Bureau of Supply. (Sgd.) T. R. SCHOON, Chief Division of Supplies, Bureau of Supply.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1On the said bill of lading we find the following, which was attempted thereon by the defendant:

The goods have been accepted for transportation subject to the conditions prescribed by the Insular Collector of Customs in Philippine Marine Regulations, page 16, under the heading "Bill of Lading Conditions."

The lower court, in discussing the said bill of lading with the two conditions found thereon, reached the conclusion that the plaintiff was bound by the terms of the bill of lading as issued by the defendant and not by the terms which the plaintiff attempted to impose, - that is to say, that such merchandise was to be carried at owner's risk only; that there was no presumption of negligence on the part of the defendant from the fact that the tiles were broken when received by the consignee; and that since the plaintiff did not prove negligence on the part of the defendant, the former was not entitled to recover damages from the latter. The lower court rendered judgment absolving the defendant from all liability under the complaint.

The important questions presented by the appeal are: (a) Where the terms and conditions stamped by the defendant upon the Government's bill of lading binding upon the plaintiff? (b) Was there a presumption of negligence on the part of the defendant?

The record shows that ever since the Government began to use the bill of lading, General Form No. 9-A, the shipowners had always used the "stamp" in question; that in the present case the defendant placed said stamp upon the bill of lading before the plaintiff shipped the tiles in question; that having shipped the goods under the said bill of lading, with the terms and conditions of the carriage stamped thereon, the appellant must be deemed to have assented to the said terms and conditions thereon stamped.

The appellant contends also that it was not bound by the terms and conditions inserted by the appellee, because (a) the reference made by the appellee to the "Philippine Marine Regulations" prescribed by the Collector of Customs was vague; that the appellee should have expressed the conditions fully and clearly on the face of the bill of lading; and (b) that the Insular Collector of Customs had no authority to issue such regulations.

As to the first contention, it seems that the appellant fully knew the import and significance of the reference made in said regulations. The appellant attempted to show that prior to the transaction in question the Government notified the defendant and other shipowners that it would not be bound by the "stamp" that was placed by the shipowners on the Government's bill of lading.

With reference to the contention of the appellant that the Collector of Customs had no authority to make such regulations, it may be said in the present case that the binding effect of the conditions stamped on the bill of lading did not proceed from the authority of the Collector of Customs but from the actual contract which the parties made in the present case. Each bill of lading is a contract and the parties thereto are bound by its terms.

Findings as we do that the tiles in question were shipped at the owner's risk, under the law in this jurisdiction, the carrier is only liable where the evidence shows that he was guilty of some negligence and that the damages claimed were the result of such negligence. As was said above, the plaintiff offered no proof whatever to show negligence on the part of the defendant.

The plaintiff cites some American authorities to support its contention that the carrier is an absolute insurer of merchandise shipped and that the proof of breakage or damage to goods shipped in the hands of the carrier makes out a prima facie case of negligence against him, and that the burden of proof is thrown on him to show due care and diligence.

The law upon that question in this jurisdiction is found in articles 361 and 362 of the Commercial Code. Article 361 provides:

ART. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary be not expressly stipulated.

Therefore, all damages and impairment, suffered by the goods in transportation by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper.

The proof of these accidents is incumbent upon the carrier.

Article 362 provides:

ART. 362. The carrier, however, shall be liable for the losses and damages arising from the causes mentioned in the foregoing article, if it be proved against him that they occurred on account of his negligence or because he did not take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading stating that the goods were of a class or quality different from what they really were. . . .

Under the provisions of article 361 the defendant, in order to free itself from liability, was only obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of article 362 the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred on account of its negligence or because the defendant did not take the precaution usually adopted by careful persons.

The defendant herein proved, and the plaintiff did not attempt to dispute, that the tiles in question were of a brittle and fragile nature and that they were delivered by the plaintiff to the defendant without any packing or protective covering. The defendant also offered proof to show that there was no negligence on its part, by showing that the tiles were loaded, stowed, and discharged in a careful and diligent manner.

In this jurisdiction there is no presumption of negligence on the part of the carriers in case like the present. The plaintiff, not having proved negligence on the part of the defendant, is not entitled to recover damages.

For the foregoing reasons, the judgment of the lower court is hereby affirmed, with costs. So ordered.

Southern Lines v. CAG.R. No. L-16629 January 31, 1962

SOUTHERN LINES, INC., petitioner, vs.COURT OF APPEALS and CITY OF ILOILO, respondents.

Jose Ma. Lopez Vito, Jr. for petitioner.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1The City Fiscal for respondents.

DE LEON, J.:

This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 15579-R affirming that of the Court of First Instance of Iloilo which sentenced petitioner Southern Lines, Inc. to pay respondent City of Iloilo the amount of P4,931.41.

Sometime in 1948, the City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (hereafter referred to as NARIC) in Manila. On August 24 of the same year, NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo on board the SS "General Wright" belonging to the Southern Lines, Inc. Each sack of rice weighed 75 kilos and the entire shipment as indicated in the bill of lading had a total weight of 129,450 kilos. According to the bill of lading, the cost of the shipment was P63,115.50 itemized and computed as follows: .

Unit Price per bag P36.25 P62,567.50Handling at P0.13 per bag 224.38Trucking at P2.50 per bag 323.62T o t a l . . . . . .. . . . .63,115.50On 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 with a net weight of 13,319 kilos, the proportionate value of which was P6,486.35.

On February 14, 1951 the City of Iloilo filed a complaint in the Court of First Instance of Iloilo against NARIC and the Southern Lines, Inc. 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 the Southern Lines, Inc. 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.

The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the judgment of the trial court. Hence, this petition for review.

The only question to be determined in this petition is whether or not the defendant-carrier, the herein petitioner, is liable for the loss or shortage of the rice shipped.

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.1äwphï1.ñët

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 establisbed 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 the provisions of Article 361, the defendant-carrier in order to free itself from liability, was only obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the provisions of Article 362, the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods by virtue of their nature, occurred on account of its negligence or because the defendant did not take the precaution adopted by careful persons. (Government v. Ynchausti & Co., 40 Phil. 219, 223).

Petitioner claims exemption from liability by contending 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 respondent City of Iloilo in receiving the shipment. The contention is untenable, for, 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 thereform. (9 Am Jur. 869.) Furthermore, according to the Court of Appeals, "appellant (petitioner) itself frankly 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 finding, which is binding upon this Court, shows that the shortage resulted from the negligence of petitioner.

Invoking the provisions of Article 366 of the Code of Commerce and those of the bill of lading, petitioner further contends that respondent 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 above-cited 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.) It is significant to note that in the American case of Hoye v. Pennsylvania Railroad Co., 13 Ann. Case. 414, it has been said: .

... "It has been held that a stipulation in the contract of shipment requiring the owner of the goods to present a notice of his claim to

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1the carrier within a specified time after the goods have arrived at their destination is in the nature of a condition precedent to the owner's right to enforce a recovery, that he must show in the first instance that be has complied with the condition, or that the circumstances were such that to have complied with it would have required him to do an unreasonable thing. The weight of authority, however, sustains the view that such a stipulation is more in the nature of a limitation upon the owner's right to recovery, and that the burden of proof is accordingly on the carrier to show that the limitation was reasonable and in proper form or within the time stated." (Hutchinson on Carrier, 3d ed., par. 44) Emphasis supplied.

In the case at bar, the record shows that petitioner failed to plead this defense in its answer to respondent'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 Court of Appeals has said: .

... the records reveal that the appellee (respondent) filed the present action, within a reasonable time after the short delivery in the shipment of the rice was made. It should be recalled that 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 appellee (respondent) 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.

WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all respects and the petition for certiorari denied.

Calvo v. UCPB[G.R. No. 148496. March 19, 2002]

VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co., Inc.) respondent.D E C I S I O NMENDOZA, J.:

This is a petition for review of the decision,[1] dated May 31, 2001, of the Court of Appeals, affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00 with legal interest, representing the value of damaged cargo handled by petitioner, 25% thereof as attorney’s fees, and the cost of the suit.

The facts are as follows:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC’s warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.

On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board “M/V Hayakawa Maru” and, after 24 hours, were unloaded from the vessel to the custody of the arrastre

operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC’s warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were “wet/stained/torn” and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00.

SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for the damage to the shipment.

The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. “E”); the Damage Report (Exh. “F”) with entries appearing therein, classified as “TED” and “TSN”, which the claims processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the middle of the subject damaged cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. “H” - “H-4-A”) confirms the fact of the damaged condition of the subject cargoes. The surveyor[s’] report (Exh. “H-4-A”) in particular, which provides among others that:

“ . . . we opine that damages sustained by shipment is attributable to improper handling in transit presumably whilst in the custody of the broker . . . .”

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not liable. Defendant by reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she] performed to prevent [the] said incident, hence the presumption is that the moment the defendant accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo.

. . . .

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they have observed the extraordinary diligence required by law. The burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has exercised the extraordinary diligence required by law. Thus, it has been held that the mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstances inconsistent with its liability.” (cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

82


Defendant, being a customs brother, warehouseman and at the same time a common carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the 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 the same.[3]

Accordingly, the trial court ordered petitioner to pay the following amounts ¾

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyer’s fee;

3. Costs of suit.[4]

The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review on certiorari.

Petitioner contends that:

I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.

II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]

It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a common carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed not liable beyond what ordinary diligence in the vigilance over the goods transported by her, would require.[6] Consequently, any damage to the cargo she agrees to transport cannot be presumed to have been due to her fault or negligence.

Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is not a common carrier but a private carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her services out to the public but only offers the same to select parties with whom she may contract in the conduct of her business.

The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a similar contention and held the party to be a common carrier, thus ¾

The Civil Code defines “common carriers” in the following terms:

“Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.”

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article 1732 also carefully avoids making any distinction between a

person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the “general public,” i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions.

So understood, the concept of “common carrier” under Article 1732 may be seen to coincide neatly with the notion of “public service,” under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, “public service” includes:

“ x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. x x x” [8]

There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her business. To uphold petitioner’s contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner’s business.

Now, as to petitioner’s liability, Art. 1733 of the Civil Code provides:

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. . . .

In Compania Maritima v. Court of Appeals,[9] the meaning of “extraordinary diligence in the vigilance over goods” was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and “to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.”

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the “spoilage or wettage” took place while the goods were in the custody of either the carrying vessel “M/V

83

Choco NotesTransportation Law cases – Common Carrier of Goods part 1Hayakawa Maru,” which transported the cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of the containers were deformed, cracked, or otherwise damaged, as noted in the Marine Survey Report (Exh. H), to wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose

PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.[10]

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no personal knowledge on whether the container vans were first stored in petitioner’s warehouse prior to their delivery to the consignee. She likewise claims that after withdrawing the container vans from the arrastre operator, her driver, Ricardo Nazarro, immediately delivered the cargo to SMC’s warehouse in Ermita, Manila, which is a mere thirty-minute drive from the Port Area where the cargo came from. Thus, the damage to the cargo could not have taken place while these were in her custody.[11]

Contrary to petitioner’s assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors indicates that when the shipper transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange Report (EIR) and, when petitioner’s employees withdrew the cargo from the arrastre operator, they did so without exception or protest either with regard to the condition of container vans or their contents. The Survey Report pertinently reads ¾

Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30’ x 20’ secure metal vans, covered by clean EIRs. Except for slight dents and paint scratches on side and roof panels, these containers were deemed to have [been] received in good condition.

. . . .

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30’ x 20’ cargo containers was [withdrawn] by Transorient Container Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignee’s storage warehouse located at Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre, Marina Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange Reports (EIRs). Had there been any damage to the shipment, there would have been a report to that effect made by the arrastre operator. The cargoes were withdrawn by the defendant-appellant from the arrastre still in good order and condition as the same were received by the former without exception, that is, without any report of damage or loss. Surely, if the container vans were deformed, cracked, distorted or dented, the defendant-appellant would report it immediately to the consignee or make an exception on the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these took place. To put it simply, the defendant-appellant received the shipment in good order and condition and delivered the same to the consignee damaged. We can only conclude that the damages to the cargo occurred while it was in the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault, unless there is proof to the contrary. No proof was proffered to rebut this legal presumption and the presumption of negligence attached to a common carrier in case of loss or damage to the goods.[13]

Anent petitioner’s insistence that the cargo could not have been damaged while in her custody as she immediately delivered the containers to SMC’s compound, suffice it to say that to prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used “all reasonable means to ascertain the nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the handling [thereof].” Petitioner failed to do this.

Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides ¾

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:

. . . .

(4) The character of the goods or defects in the packing or in the containers.

. . . .

For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom.[14] In this case, petitioner accepted the cargo without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the presumption of negligence as provided under Art. 1735[15] holds.

WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1SO ORDERED.

Belgian Overseas v. PFIC[G.R. No. 143133. June 5, 2002]

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondent.D E C I S I O NPANGANIBAN, J.:

Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor.

Statement of the Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision[1] and the May 2, 2000 Resolution[2] of the Court of Appeals[3] (CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as follows:

“WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following:

‘1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual damages, representing the value of the damaged cargo, plus interest at the legal rate from the time of filing of the complaint on July 25, 1991, until fully paid;

‘2) Attorney’s fees amounting to 20% of the claim; and

‘3) Costs of suit.’”[4]


The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as follows:

“WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendant’s counterclaim.”[5]

The Facts

The factual antecedents of the case are summarized by the Court of Appeals in this wise:

“On June 13, 1990, CMC Trading A.G. shipped on board the MN ‘Anangel Sky’ at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the

consignee Philippine Steel Trading Corporation declared the same as total loss.

“Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee’s claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter’s rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured.

“Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.”[6]

Ruling of the Trial Court

The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law.[7]

It likewise debunked petitioners’ counterclaim, because respondent’s suit was not manifestly frivolous or primarily intended to harass them.[8]


In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers.

The CA further held as inadequately proven petitioners’ claim that the loss or the deterioration of the goods was due to pre-shipment damage.[9] It likewise opined that the notation “metal envelopes rust stained and slightly dented” placed on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.[10]

As to the extent of petitioners’ liability, the CA held that the package limitation under COGSA was not applicable, because the words “L/C No. 90/02447” indicated that a higher valuation of the cargo had been declared by the shipper. The CA, however, affirmed the award of attorney’s fees.


Issues

In their Memorandum, petitioners raise the following issues for the Court’s consideration:

I

“Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code;

85


II

“Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law;

III

“Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and to exempt herein defendants from liability;

IV

“Whether or not the “PACKAGE LIMITATION” of liability under Section 4 (5) of COGSA is applicable to the case at bar.”[12]

In sum, the issues boil down to three:

1. Whether petitioners have overcome the presumption of negligence of a common carrier

2. Whether the notice of loss was timely filed

3. Whether the package limitation of liability is applicable



First Issue:Proof of Negligence

Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony offered by private respondent. The contention is untenable.

Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.[13] Thus, common carriers are required to render service with the greatest skill and foresight and “to use all reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.”[14] The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.[15]

This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a contract of transportation with common carriers.[16] Even if it wants to, it cannot submit its own stipulations for their approval.[17] Hence, it merely adheres to the agreement prepared by them.

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 they transported deteriorated or got lost or destroyed.[18] That is, unless they prove that they exercised extraordinary diligence in transporting the goods.[19] In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence.[20]

However, the presumption of fault or negligence will not arise[21] if the loss is due to any of the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority.[22] This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.[23]

Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.[24]

That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent.[25]

First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany.[26]

Second, prior to the unloading of the cargo, an Inspection Report[27] prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty.

Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage.[29]

Fourth, the Certificate of Analysis[30] stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water.

Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition.

These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions of his testimony are reproduce hereunder:

“Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you are connected?

A. BM Santos Checkers Agency, sir.

Q. How is BM Santos Checkers Agency related or connected with defendant Jardine Davies Transport Services?

A. It is the company who contracts the checkers, sir.

Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities?

A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes.

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x x x x x x x x x

Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker?

A. Yes, sir.

Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY?

A. Yes, sir, I was there.

x x x x x x x x x

Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY?

ATTY. MACAMAY:

Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is the document itself, Your Honor that shows the condition of the steel sheets.

COURT:

Let the witness answer.

A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides.”[32]

All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils while in the possession of petitioner,[33] who notably failed to explain why.[34]

Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow, to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.[35]

True, the words “metal envelopes rust stained and slightly dented” were noted on the Bill of Lading; however, there is no showing that petitioners exercised due diligence to forestall or lessen the loss.[36] Having been in the service for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when not properly stored while in transit.[37] Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was taken.[38] Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage to the four coils.[39]

In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of the Civil Code. They cite the notation “metal envelopes rust stained and slightly dented” printed on the Bill of Lading as evidence that the

character of the goods or defect in the packing or the containers was the proximate cause of the damage. We are not convinced.

From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition noted on the Bill of Lading.[40] The aforecited exception refers to cases when goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals.[41] None of these is present in the instant case.

Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition.[42] Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the present case.[43]

Second Issue:Notice of Loss

Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act[44] (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.[45]

We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report[46] as to the condition of the goods was prepared and signed by representatives of both parties.[47]

Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year.[48] This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.[49]

In Loadstar Shipping Co., Inc. v. Court of Appeals,[50] we ruled that a claim is not barred by prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.:

“Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar.”

In the present case, the cargo was discharged on July 31, 1990, while the Complaint[51] was filed by respondent on July 25, 1991, within the one-year prescriptive period.

Third Issue:Package Limitation

Assuming arguendo they are liable for respondent’s claims, petitioners contend that their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)[52] of COGSA.[53]

87


On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or “L/C No. 90/02447” in the said Bill of Lading.[54]

A bill of lading serves two functions. First, it is a receipt for the goods shipped.[55] Second, it is a contract by which three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities and assume stipulated obligations.[56] In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract.[57]

Further, a stipulation in the bill of lading limiting to a certain sum the common carrier’s liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value[58] -- is sanctioned by law.[59] There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties.[60] The rationale for, this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.[61]

It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per package.[62] In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws.[63] Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the bill of lading.[64] The provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties.[65]

In the case before us, there was no stipulation in the Bill of Lading[66] limiting the carrier’s liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words “L/C No. 90/02447 cannot be the basis for petitioners’ liability.

First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.[67] That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.[68]

Second, in Keng Hua Paper Products v. Court of Appeals,[69] we held that a bill of lading was separate from the Other Letter of Credit arrangements. We ruled thus:

“(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis-à-vis the commercial invoice

and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioner’s obligation to private respondent arising from the contract of transportation.”[70]

In the light of the foregoing, petitioners’ liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.[71] In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court[72] we explained the meaning of package:

“When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the ‘package’ referred to in the liability limitation provision of Carriage of Goods by Sea Act.”

Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as the shipping unit subject to the US$500 limitation.

WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners’ liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs.

SO ORDERED.

Iron Bulk Shipping v. Remington[G.R. No. 136960. December 8, 2003]

IRON BULK SHIPPING PHILIPPINES, CO., LTD., petitioner, vs. REMINGTON INDUSTRIAL SALES CORPORATION, respondent.D E C I S I O NAUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the August 28, 1998 Decision[1] and the December 24, 1998 Resolution of the Court of Appeals in CA-G.R. CV No. 49725,[2] affirming in toto the decision of the Regional Trial Court of Manila (Branch 9).

The factual background of the case is summarized by the appellate court, thus:

Sometime in the latter part of 1991, plaintiff Remington Industrial Sales Corporation (hereafter Remington for short) ordered from defendant Wangs Company, Inc. (hereafter Wangs for short) 194 packages of hot rolled steel sheets, weighing 686.565 metric tons, with a total value of $219,380.00, then equivalent to P6,469,759.17. Wangs forwarded the order to its supplier, Burwill (Agencies) Ltd., in Hongkong. On or about November 26, 1991, the 194 packages were loaded on board the vessel MV ‘Indian Reliance’ at the Port of Gdynia, Poland, for transportation to the Philippines, under Bill of Lading No. 27 (Exh. ‘C’). The vessel’s owner/charterer is represented in the Philippines by defendant Iron Bulk Shipping Phils., Inc. (hereafter Iron Bulk for short).

88

Choco NotesTransportation Law cases – Common Carrier of Goods part 1Remington had the cargo insured for P6,469,759.17 during the voyage by Marine Insurance Policy No. 7741 issued by defendant Pioneer Asia Insurance Corporation (hereafter Pioneer for short).

On or about January 3, 1992, the MV ‘Indian Reliance’ arrived in the Port of Manila, and the 194 packages of hot rolled steel sheets were discharged from the vessel. The cargo was inspected twice by SGS Far East Ltd. and found to be wet (with slight trace of salt) and rusty, extending from 50% to 80% of each plate. Plaintiff filed formal claims for loss amounting to P544,875.17 with Pioneer, Iron Bulk, Manila Port Services, Inc. (MPS) and ESE Brokerage Corporation (ESE). No one honored such claims.

Thus, plaintiff filed an action for collection, plus attorney’s fees, against Wangs, Pioneer and Iron Bulk. . . .”[3]

and affirmed in toto the following findings of the trial court, on February 1, 1995, to wit:

…

The evidence on record shows that the direct and immediate cause of the rusting of the goods imported by the plaintiff was the water found inside the cargo hold of M/V ‘Indian Reliance’ wherein those goods were stored during the voyage, particularly the water found on the surface of the merchandise and on the floor of the vessel hatch. And even at the time the cargoes were being unloaded by crane at the Pier of Manila, Iron Bulk’s witnesses noticed that water was dripping from the cargoes. (TSN dated July 20, 1993, pp. 13-14; TSN dated May 30, 1994, pp. 8-9, 14, 24-25; TSN dated June 3, 1994, pp. 31-32; TSN dated July 14, 1994, pp. 10-11).

SGS Far East Limited, an inspection agency hired by defendant Wangs, issued Certificate of Inspection and Analysis No 6401/35071 stating the following findings:

Results of tests indicated that a very slight trace of salt was present in the sample as confirmed by the test of Sodium. The results however does not necessarily indicate that the rusty condition of the material was caused by seawater.

Tan-Gatue Adjustment Co., Inc., a claims adjustment firm hired by defendant Pioneer, submitted a Report (Exh. 10-Pioneer) dated February 20, 1992 to Pioneer which pertinently reads as follows:

All the above 3,971 sheets were heavily rusty at sides/ends/edges/surfaces. Pieces of cotton were rubbed by us on different rusty steel sheets and submitted to Precision Analytical Services, Inc. to determine the cause of wetting. Result thereof as per Laboratory Report No. 077-92 of this firm showed that: ‘The sample was wetted/contaminated by fresh water.

After considering the foregoing test results and the other evidence on record, the Court found no clear and sufficient proof showing that the water which stayed in the cargo hold of the vessel and which contaminated the merchandise was seawater. The Court, however, is convinced that the subject goods were exposed to salt conditions as evidenced by the presence of about 17% Sodium on the rust sample tested by SGS.

As to the source of the water found in the cargo hold, there is also no concrete and competent evidence on record establishing that such water leaked from the pipe installed in Hatch No. 1 of M/V ‘Indian Reliance’, as claimed by plaintiff. Indeed, the plaintiff based such

claim only from information it allegedly received from its supplier, as stated in its letter to defendant Iron Bulk dated March 28, 1992 (Exh. K-3). And no one took the witness stand to confirm or establish the alleged leakage.

Nevertheless, since Iron Bulk’s own evidence shows that there was water inside the cargo hold of the vessel and that the goods stored therein were wet and full of rust, without sufficient explanation on its part as to when and how water found its way into the vessel holds, the Court finds and so holds that Iron Bulk failed to exercise the extraordinary diligence required by law in the handling and transporting of the goods.

. . . . .

Iron Bulk did not even exercise due diligence because admittedly, water was dripping from the cargoes at the time they were being discharged from the vessel. Had Iron Bulk done so, it could have discovered by ordinary inspection that the cargo holds and the cargoes themselves were affected by water and it could have provided some remedial measures to prevent or minimize the damage to the cargoes. But it did not, showing its lack of care and diligence over the goods.

Besides, since the goods were undoubtedly damaged, and as Iron Bulk failed to establish by any clear and convincing evidence any of the exempting causes provided for in Article 1734 of the Civil Code, it is presumed to have been at fault or to have acted negligently.

. . . . .

WHEREFORE, the Court finding preponderance of evidence for the plaintiff hereby renders judgment in favor of it and against all the defendants herein as follows:

1. Ordering defendant Pioneer Asia Insurance Corporation to pay plaintiff the following amounts:

a) P544,875.17 representing the loss allowance for the goods insured, plus interest at the legal rate (6% p.a.) reckoned from the time of filing of this case until full payment is made;

b) P50,000.00 for and as attorney’s fees; and

c) the cost of suit.

2. Ordering defendant Iron Bulk Shipping Co. Inc. immediately upon payment by defendant Pioneer of the foregoing award to the plaintiff, to reimburse defendant Pioneer the total amount it paid to the plaintiff, in respect to its right of subrogation.

3. Denying the counterclaims of all the defendants and the cross-claim of defendant Wangs Company, Incorporated and Iron Bulk Shipping Co., Inc. for lack of merit.

4. Granting the cross-claim of defendant Pioneer Asia Insurance Corporation against defendant Iron Bulk by virtue of its right of subrogation.

5. Dismissing the case against defendant Wangs Company, Inc.

SO ORDERED.[4]

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1Only Iron Bulk filed the present petition raising the following Assignment of Errors:

FIRSTLY, the Court of Appeals erred in its insistent reliance on the pro forma Bills of Lading to establish the condition of the cargo upon loading;

SECONDLY, the Court of Appeals erred in not exculpating petitioner since the cargo was not contaminated during the time the same was in possession of the vessel, as evidenced by the express finding of the lower court that the contamination and rusting was chemically established to have been caused by fresh water;

THRIDLY, the Court of Appeals erred in making a sweeping finding that the petitioner as carrier failed to exercise the requisite diligence under the law, which is contrary to what is demonstrated by the evidence adduced; and

FINALLY, the Court of Appeals erred in affirming the amount of damages adjudicated by the Court below, which is at best speculative and not supported by damages.[5]

The general rule is that only questions of law are entertained in petitions for review by certiorari under Rule 45 of the Rules of Court. The trial court’s findings of fact, which the Court of Appeals affirmed, are generally binding and conclusive upon this court.[6] There are recognized exceptions to this rule, among which are: (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of facts are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the finding of absence of facts is contradicted by the presence of evidence on record; (8) the findings of the CA are contrary to the findings of the trial court; (9) the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the CA are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties.[7] Petitioner failed to demonstrate that its petition falls under any one of the above exceptions, except as to damages which will be discussed forthwith.

Anent the first assigned error: That the Court of Appeals erred in relying on the pro forma Bills of Lading to establish the condition of the cargo upon landing.

There is no merit to petitioner’s contention that the Bill of Lading covering the subject cargo cannot be relied upon to indicate the condition of the cargo upon loading. It is settled that a bill of lading has a two-fold character. In Phoenix Assurance Co., Ltd. vs. United States Lines, we held that:

[A] bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality and value. As a contract, it names the contracting parties, which include the consignee, fixes the route, destination, and freight rate or charges, and stipulates the rights and obligations assumed by the parties.[8]

We find no error in the findings of the appellate court that the questioned bill of lading is a clean bill of lading, i.e., it does not indicate any defect in the goods covered by it, as shown by the

notation, “CLEAN ON BOARD”[9] and “Shipped at the Port of Loading in apparent good condition on board the vessel for carriage to Port of Discharge”.[10]

Petitioner presented evidence to prove that, contrary to the recitals contained in the subject bill of lading, the cargo therein described as clean on board is actually wet and covered with rust. Indeed, having the nature of a receipt, or an acknowledgement of the quantity and condition of the goods delivered, the bill of lading, like any other receipts, may be explained, varied or even contradicted.[11] However, we agree with the Court of Appeals that far from contradicting the recitals contained in the said bill, petitioner’s own evidence shows that the cargo covered by the subject bill of lading, although it was partially wet and covered with rust was, nevertheless, found to be in a “fair, usually accepted condition” when it was accepted for shipment.[12]

The fact that the issued bill of lading is pro forma is of no moment. If the bill of lading is not truly reflective of the true condition of the cargo at the time of loading to the effect that the said cargo was indeed in a damaged state, the carrier could have refused to accept it, or at the least, made a marginal note in the bill of lading indicating the true condition of the merchandise. But it did not. On the contrary, it accepted the subject cargo and even agreed to the issuance of a clean bill of lading without taking any exceptions with respect to the recitals contained therein. Since the carrier failed to annotate in the bill of lading the alleged damaged condition of the cargo when it was loaded, said carrier and the petitioner, as its representative, are bound by the description appearing therein and they are now estopped from denying the contents of the said bill.

Petitioner presented in evidence the Mate’s Receipts[13] and a Survey Report[14] to prove the damaged condition of the cargo. However, contrary to the asseveration of petitioner, the Mate’s Receipts and the Survey Report which were both dated November 6, 1991, are unreliable evidence of the true condition of the shipment at the time of loading since said receipts and report were issued twenty days prior to loading and before the issuance of the clean bill of lading covering the subject cargo on November 26, 1991. Moreover, while the surveyor, commissioned by the carrier to inspect the subject cargo, found the inspected steel goods to be contaminated with rust he, nonetheless, estimated the merchandise to be in a fair and usually accepted condition.

Anent the second and third assigned errors: That the Court of Appeals erred in not finding that the contamination and rusting was chemically to have been caused by fresh water; and that the appellate court erred in finding that petitioner failed to exercise the requisite diligence under the law.

Petitioner’s arguments in support of the assigned errors are not plausible. Even granting, for the sake of argument, that the subject cargo was already in a damaged condition at the time it was accepted for transportation, the carrier is not relieved from its responsibility to exercise due care in handling the merchandise and in employing the necessary precautions to prevent the cargo from further deteriorating. It is settled that the extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery.[15] It requires common carriers to render service with the greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1methods as their nature requires.[16] Under Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of the goods should be caused, among others, by the character of the goods, the common carrier must exercise due diligence to forestall or lessen the loss. This 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 a right to receive them.[17] In the instant case, if the carrier indeed found the steel sheets to have been covered by rust at the time that it accepted the same for transportation, such finding should have prompted it to apply additional safety measures to make sure that the cargo is protected from corrosion. This, the carrier failed to do.

Article 1734 of the Civil Code states that:

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:






Except in the cases mentioned under Article 1734, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required under the law.[18] The Court of Appeals did not err in finding that no competent evidence was presented to prove that the deterioration of the subject cargo was brought about by any of the causes enumerated under the aforequoted Article 1734 of the said Code. We likewise agree with appellate court’s finding that the carrier failed to present proof that it exercised extraordinary diligence in its vigilance over the goods. The presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence.

Anent the last assigned error: That the Court of Appeals erred in affirming the amount of damages awarded by the trial court.

We agree with the contention of the petitioner in its last assigned error that the amount of damages adjudicated by the trial court and affirmed by the appellate court is not in consonance with the evidence presented by the parties. The judgments of both lower courts are based on misapprehension of facts as we find no competent evidence to prove the actual damages sustained by respondent.

Based on the Packing List issued by Burwill (Agencies) Limited, the supplier of the steel sheets, the cargo consigned to Remington consisted of hot rolled steel sheets with lengths of eight feet and twenty feet. The eight-foot length steel sheets contained in 142 packages had a weight of 491.54 metric tons while the twenty-foot steel sheets which were contained in 52 packages weighed 194.25 metric tons.[19] The goods were valued at $320.00 per metric ton.[20]

It is not disputed that at the time of inspection of the subject merchandise conducted by SGS Far East Limited on January 21-24, 1992 and January 27-28, 1992, only 30% of said goods originally consigned to Remington was available for examination at Remington’s warehouse in Manila and that Remington had already disposed of the remaining 70%. In the Certificate of Inspection issued by SGS, dated February 18, 1992, it was reported that the surface of the steel sheets with length of twenty feet were found to be rusty “extending from 60% to 80% per plate”.[21] However, there was no proof to show how many metric tons of twenty-foot and eight-foot length steel sheets, respectively, comprise the remaining 30% of the cargo. No competent evidence was presented to prove the weight of the remaining twenty-foot length steel sheets, on the basis of which the amount of actual damages could have been ascertained.

Remington claims that 70% of the twenty-foot length steel sheets were damaged. Remington’s general manager, Rowina Tan Saban, testified that the “70%” figure was based on the reports submitted by SGS and Tan-Gatue and Remington’s independent survey to confirm these reports.[22] Saban further testified that on the basis of these reports, Remington came up with a summary of the amount of damages sustained by the subject cargo, to wit:

Plates 8 ft lengths 491.540 MT - US$157,292.80Quantity Damaged 25%Loss Allowance 13%Total Plates 8 ft lengths US$ 15,211.56

Plates 20 ft lengths 194.025 MT - US$ 62,088.00Quantity Damaged 70%Loss Allowance 35%Total Plates 20 ft lengths P544,875.71

with the following detailed computation:

Plates under 8 ft lengths 491.540 MT @ $320./MT US $157,292.80Multiply by 25% Qty. damaged $ 39,323.2013% Loss allowance $ 5,112.02

Plates under 20 ft. lengths 194.025 MT @ $320./MT US $ 62,088.00Multiple 70% Qty. damaged US $ 43,461.6035% Loss allowance $ 15,211.56

Total claim US $ 5,112.02 $15,211.56 US $20,323.58 @ $26.81 = P544,875.17

and which the trial court based the actual damages awarded in favor of Remington.

However, after a careful examination of the reports submitted by SGS and Tan-Gatue, we find nothing in the said reports and computation to justify the claim of Remington that 70% of the twenty-foot length steel sheets were damaged. Neither does the alleged survey conducted by Remington consisting only of photographs,[23] prove the quantity of the damaged cargo.

As to the eight-foot length steel sheets, SGS reported that they were found oiled all over which makes it hard to determine the rust condition on its surface.[24] On the other hand, the report issued by Tan-Gatue did not specify the extent of damage done to the said merchandise.[25] There is also no proof of the weight of the

91

Choco NotesTransportation Law cases – Common Carrier of Goods part 1remaining eight-foot length steel sheets. From the foregoing, it is evident that the extent of actual damage to the subject cargo is likewise not satisfactorily proven.

It is settled that actual or compensatory damages are not presumed and should be proven before they are awarded. In Spouses Quisumbing vs. Meralco[26], we held that

Actual damages are compensation for an injury that will put the injured party in the position where it was before it was injured. They pertain to such injuries or losses that are actually sustained and susceptible of measurement. Except as provided by law or stipulation, a party is entitled to an adequate compensation only for such pecuniary loss as it has duly proven.

Hence, for failure of Remington to present sufficient evidence which is susceptible of measurement, it is not entitled to actual damages.

Nonetheless, since it was established that the subject steel sheets sustained damage by reason of the negligence of the carrier, albeit no competent proof was presented to justify the award of actual damages, we find that Remington is entitled to temperate damages in accordance with Articles 2216, 2224 and 2225 of the Civil Code, to wit:

Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case.

Art. 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty.

Art. 2225. Temperate damages must be reasonable under the circumstances.

Thirty percent of the alleged cost of damages, i.e., P544, 875.17 or P165,000.00 is reasonable enough for temperate damages.

We likewise agree with petitioner’s claim that it should not be held liable for the payment of attorney’s fees because it was always willing to settle its liability by offering to pay 30% of Remington’s claim and that it is only Remington’s unwarranted refusal to accept such offer that led to the filing of the instant case. As found earlier, there is no evidence that the 70% of the 20-foot length steel sheets which had been disposed of had been damaged. Neither is there competent evidence proving the actual extent of damage sustained by the eight-foot length steel sheets. Petitioner was therefore justified in refusing to satisfy the full amount of Remington’s claims.

WHEREFORE, the assailed Decision of the Court of Appeals dated August 28, 1998 and the Resolution dated December 24, 1998, in CA-G.R. CV No. 49725 are MODIFIED as follows: The award of actual damages and attorney’s fees are deleted. Respondent is awarded temperate damages in the amount of P165,000.00. In all other respects, the appealed decision and resolution are affirmed.

No pronouncement as to costs.

SO ORDERED.

AF Sanchez Brokerage v. CA[G.R. No. 147079. December 21, 2004]

A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and FGU INSURANCE CORPORATION, respondents.D E C I S I O NCARPIO MORALES, J.:

Before this Court on a petition for Certiorari is the appellate court’s Decision[1] of August 10, 2000 reversing and setting aside the judgment of Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the complaint of respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez Brokerage).

On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc.[2] The Femenal tablets were placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which were packed together in one (1) LD3 aluminum container, while the Trinordial tablets were packed in two pallets, each of which contained 30 cartons.[3]

Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy No. 138.[4]

Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),[5] it was discharged “without exception”[6] and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.[7]

In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which had been its licensed broker since 1984.[8] As its customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.[9]

On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for which, Official Receipt No. 016992,[10] was issued. On the receipt, another representative of Sanchez Brokerage, M. Sison,[11] acknowledged that he received the cargoes consisting of three pieces in good condition.[12]

Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes[13] which were thereupon stripped from the aluminum containers[14] and loaded inside two transport vehicles hired by Sanchez Brokerage.[15]

Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and Tony Akas,[16] employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of FGU Insurance.

Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City for quality control check.

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1[17] The delivery receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery consisted of one container with 144 cartons of Femenal and Nordiol and 1 pallet containing Trinordiol.[18]

On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the cargoes by affixing his signature on the delivery receipt.[19] Upon inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol tablets were in bad order.[20] He thus placed a note above his signature on the delivery receipt stating that 44 cartons of oral contraceptives were in bad order. The remaining 160 cartons of oral contraceptives were accepted as complete and in good order.

Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report[21] dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets were “wetted” (sic).[22]

The Elite Surveyors later issued Certificate No. CS-0731-1538/92[23] attached to which was an “Annexed Schedule” whereon it was indicated that prior to the loading of the cargoes to the broker’s trucks at the NAIA, they were inspected and found to be in “apparent good condition.”[24] Also noted was that at the time of delivery to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could account for the wetting of the 44 cartons of Femenal and Nordiol tablets.[25]

On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report[26] confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily damaged with water and emitted foul smell.

On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection[27] of 38 cartons of Femenal and 3 cartons of Nordiol on the ground that they were “delivered to Hizon Laboratories with heavy water damaged (sic) causing the cartons to sagged (sic) emitting a foul order and easily attracted flies.”[28]

Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from Sanchez Brokerage the payment of P191,384.25 representing the value of its loss arising from the damaged tablets.

As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against FGU Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its claim under Marine Risk Note Number 4995.

Wyeth-Suaco thus issued Subrogation Receipt[30] in favor of FGU Insurance.

On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by letter[31] of January 7, 1993, disclaimed liability for the damaged goods, positing that the damage was due to improper and insufficient export packaging; that when the sealed containers were opened outside the PSI warehouse, it was discovered that some of the loose cartons were wet,[32] prompting its (Sanchez Brokerage’s) representative Morales to inform the Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter advised to still deliver them to Hizon Laboratories where an adjuster would assess the damage.[33]

Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of Makati City against the Sanchez Brokerage.

The trial court, by Decision[34] of July 29, 1996, dismissed the complaint, holding that the Survey Report prepared by the Elite Surveyors is bereft of any evidentiary support and a mere product of pure guesswork.[35]

On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez Brokerage engaged not only in the business of customs brokerage but also in the transportation and delivery of the cargo of its clients, hence, a common carrier within the context of Article 1732 of the New Civil Code.[36]

Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order and condition but were in a damaged state when delivered to Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed negligent and upon it rested the burden of proving that it exercised extraordinary negligence not only in instances when negligence is directly proven but also in those cases when the cause of the damage is not known or unknown.[37]

The appellate court thus disposed:

IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The Decision of the Court a quo is REVERSED. Another Decision is hereby rendered in favor of the Appellant and against the Appellee as follows:

1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181, 431.49, with interest thereupon at the rate of 6% per annum, from the date of the Decision of the Court, until the said amount is paid in full;

2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as and by way of attorney’s fees; and

3. The counterclaims of the Appellee are DISMISSED.[38]

Sanchez Brokerage’s Motion for Reconsideration having been denied by the appellate court’s Resolution of December 8, 2000 which was received by petitioner on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6, 2001.

In the main, petitioner asserts that the appellate court committed grave and reversible error tantamount to abuse of discretion when it found petitioner a “common carrier” within the context of Article 1732 of the New Civil Code.

Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner should have taken was to file a petition for review on certiorari since the sole office of a writ of certiorari is the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction and does not include correction of the appellate court’s evaluation of the evidence and factual findings thereon.

On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to overcome the presumption of negligence, it being documented that petitioner withdrew from the warehouse of PSI the subject shipment entirely in good order and condition.[39]

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1The petition fails.

Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case.[40]

The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for reconsideration of its Decision of August 10, 2000 was received by petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days or on or before January 20, 2001, the appellate court’s decision had become final and executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as a substitute for the lost remedy of appeal.

In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not merely reversible error but also grave abuse of discretion amounting to lack or excess of jurisdiction.

Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial court based on its finding that petitioner is liable for the damage to the cargo as a common carrier. What petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly the subject of an ordinary appeal.

Where the issue or question involves or affects the wisdom or legal soundness of the decision – not the jurisdiction of the court to render said decision – the same is beyond the province of a petition for certiorari.[41] The supervisory jurisdiction of this Court to issue a cert writ cannot be exercised in order to review the judgment of lower courts as to its intrinsic correctness, either upon the law or the facts of the case.[42]

Procedural technicalities aside, the petition still fails.

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit:

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the services the firm offers include the delivery of goods to the warehouse of the consignee or importer.

ATTY. FLORES:

Q: What are the functions of these license brokers, license customs broker?

WITNESS:

As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of the importer, we prepare the entry together for processing and claims from customs and finally deliver the goods to the warehouse of the importer.[43]

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such

carrying only as an ancillary activity.[44] The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

In this light, petitioner as a common carrier is mandated to observe, under Article 1733[45] of the Civil Code, extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence.[46]

The concept of “extra-ordinary diligence” was explained in Compania Maritima v. Court of Appeals:[47]

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and “to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.”[48]

In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in NAIA in good order and condition;[49] and that upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad order, as noted in the Delivery Receipt[50] issued by petitioner, and as indicated in the Survey Report of Elite Surveyors[51] and the Destruction Report of Hizon Laboratories, Inc.[52]

In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they were damaged due to the fault or negligence of the shipper for failing to properly pack them and to the inherent characteristics of the goods[53]; and that it should not be faulted for following the instructions of Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed to the latter that some of the cartons, on examination outside the PSI warehouse, were found to be wet.[54]

While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common carrier from liability if the loss or damage is due to the character of the goods or defects in the packing or in the containers, the rule is that if the improper packing is known to the carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such condition, he is not relieved of liability for the resulting damage.[56]

If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true, then it should naturally have received the cargo under protest or with reservations duly noted on the receipt issued by PSI. But it made no such protest or reservation.[57]

Moreover, as observed by the appellate court, if indeed petitioner’s employees only examined the cargoes outside the PSI warehouse and found some to be wet, they would certainly have gone back to PSI, showed to the warehouseman the damage, and demanded then and

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1there for Bad Order documents or a certification confirming the damage.[58] Or, petitioner would have presented, as witness, the employees of the PSI from whom Morales and Domingo took delivery of the cargo to prove that, indeed, part of the cargoes was already damaged when the container was allegedly opened outside the warehouse.[59]

Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead, it asserts that some of the cargoes were already wet on delivery by PSI outside the PSI warehouse but such notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon Laboratories, Inc.

While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he failed to specifically declare what time he received the call. As to whether the call was made at the PSI warehouse when the shipment was stripped from the airport containers, or when the cargoes were already in transit to Antipolo, it is not determinable. Aside from that phone call, petitioner admitted that it had no documentary evidence to prove that at the time it received the cargoes, a part of it was wet, damaged or in bad condition.[60]

The 4-page weather data furnished by PAGASA[61] on request of Sanchez Brokerage hardly impresses, no witness having identified it and interpreted the technical terms thereof.

The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral contraceptives were damaged by rainwater while in transit to Antipolo City is more likely then. Sanchez himself testified that in the past, there was a similar instance when the shipment of Wyeth-Suaco was also found to be wet by rain.

ATTY. FLORES:

Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the NAIA were damaged and claimed by the Wyeth-Suaco without any question?

WITNESS:

A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did not claim anything against us.

ATTY. FLORES:

Q: HOW IS IT?

WITNESS:

A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted (sic) up to the bottom are wet specially during rainy season.[62]

Since petitioner received all the cargoes in good order and condition at the time they were turned over by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent on petitioner to prove that it exercised extraordinary diligence in the carriage of the goods. It did not, however. Hence, its presumed negligence under Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

Order of Competent Authority;1734[5]; 1743

Ganzon v. CAG.R. No. L-48757 May 30, 1988

MAURO GANZON, petitioner, vs.COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.

Antonio B. Abinoja for petitioner.

Quijano, Arroyo & Padilla Law Office for respondents.

SARMIENTO, J.:

The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based on culpa contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:

On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<äre||anº•1àw> The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).

After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)

On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering defendant-appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees. Costs against defendant-appellee Ganzon. 3

In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:

I

THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN FACT AND IN LAW.

II

THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.

III

THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4

The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his custody and control to make him liable. However, he completely agrees with the respondent Court's finding that on December 1, 1956, the private respondent delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his employees, actually received the scraps is freely admitted. Significantly, there is not the slightest allegation or showing of any condition, qualification, or restriction accompanying the delivery by the private respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the contrary, soon after the scraps were delivered to, and received by the petitioner-common carrier, loading was commenced.

By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them. 5 The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier, albeit still unloaded.

The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil Code, namely:






Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the court is not even required to make an express finding of fault or negligence before it could hold the petitioner answerable for the breach of the contract of carriage. Still, the petitioner could have been exempted from any liability had he been able to prove that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove that he exercised such extraordinary diligence.

It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability because the loss of the scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article 1174 of the Civil Code. 7

We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was due to an "order or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals which ruled that:

... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was accilmillated by the appellant through separate purchases here and there from private individuals (Record on Appeal, pp. 38-39). The fact remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to shakedown the appellant for P5,000.00. The order of the acting mayor did not constitute valid authority for appellee Mauro Ganzon and his representatives to carry out.

Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow. In any case, 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. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. 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 fullfilment of the obligation is not considered force majeure. We

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Choco NotesTransportation Law cases – Common Carrier of Goods part 1agree with the private respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with the local officials concerned was settled, the scraps could then be delivered in accordance with the contract of carriage.

There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration arising from the causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were caused by the fault or negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of the excepted causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only ordinary diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.

Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these were not sufficiently controverted by the petitioner.

WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioner.

This decision is IMMEDIATELY EXECUTORY.

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