028LOADSTAR SHIPPING CO., INC., petitioner, vs.

COURT OF

Quick Notes/Doctrine: The doctrine of limited liability

APPEALS and THE MANILA INSURANCE CO., INC.,

does not apply where there was negligence on the

respondentsG.R. No. 131621. September 28, 1999

part of the vessel owner or agent.

Topic: Limitation of Liability for Negligence

Facts: On November 19, 1984, Loadstar received on board its vessel M/V Cherokee the following goods for shipment:
1. 705 bales of lawanit hardwood
2. 27 boxes and crates of tilewood assemblies and others
3. 49 bundles of mouldings R & W (3) ApitongBolidenized
The goods, amounting to P6,067,178, were insured by Manila Insurance Co. The vessel is insured by Prudential
Guarantee and Assurance, Inc. On November 20, 1984, on its way to Manila from Agusan, the vessel sank off Limasawa
Island. MIC paid the consignee P6,075,000 for the value of the goods lost.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due
to the fault and negligence of LOADSTAR and its employees. In its answer, LOADSTAR denied any liability for the loss of
the shippers goods and claimed that the sinking of its vessel was due to force majeure. PGAI, on the other hand, averred
that MIC had no cause of action against it, LOADSTAR being the party insured.

MIC prayed that PGAI be ordered to

pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted from MICs claim from
LOADSTAR.When PGAI paid Loadstar, it was dropped from the complaint. The trial court ruled against Loadstar, and this
was affirmed by the Court of Appeals.
In dismissing LOADSTARs appeal, the appellate court made the following observations:
1)

LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper on that

fateful voyage. The court noted that the charter of the vessel was limited to the ship, but LOADSTAR retained control
over its crew.
2)

As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining the

rights and liabilities of the parties.

3)

The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been seaworthy,

it could have withstood the natural and inevitable action of the sea on 20 November 1984, when the condition of the sea
was moderate. The vessel sank, not because of force majeure, but because it was not seaworthy. LOADSTARS
allegation that the sinking was probably due to the convergence of the winds, as stated by a PAGASA expert, was not
duly proven at the trial. The limited liability rule, therefore, is not applicable considering that, in this case, there was an
actual finding of negligence on the part of the carrier.
4)

Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said provisions bind only

the shipper/consignee and the carrier. When MIC paid the shipper for the goods insured, it was subrogated to the latters

rights as against the carrier, LOADSTAR.

5)

There was a clear breach of the contract of carriage when the shippers goods never reached their destination.

LOADSTARs defense of diligence of a good father of a family in the training and selection of its crew is unavailing
because this is not a proper or complete defense in culpa contractual.
6)

Art. 361 (of the Code of Commerce) has been judicially construed to mean that 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. Transportation of the merchandise at the risk and venture of the shipper means that
the latter bears the risk of loss or deterioration of his goods arising from fortuitous events, force majeure, or the inherent
nature and defects of the goods, but not those caused by the presumed negligence or fault of the carrier, unless otherwise
proved.
Loadstar submits that the vessel was a private carrier because it was not issued a certificate of public convenience, it did
not have a regular trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a special cargo."
In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised below; hence,
it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood products for delivery to one
consignee, it was also carrying passengers as part of its regular business. Moreover, the bills of lading in this case made
no mention of any charter party but only a statement that the vessel was a "general cargo carrier." Neither was there any
"special arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo. The singular fact that
the vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a private
carrier.
LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of proving
otherwise devolved upon MIC. It also maintains that the vessel was seaworthy, and that the loss was due to force
majeure. LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what
transpired in this case, is valid. Since the cargo was being shipped at "owners risk," LOADSTAR was not liable for any
loss or damage to the same. Finally, LOADSTAR avers that MICs claim had already prescribed, the case having been
instituted beyond the period stated in the bills of lading for instituting the same suits based upon claims arising from
shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force
majeure, because the same concurred with LOADSTARs fault or negligence. Secondly, LOADSTAR did not raise the
issue of prescription in the court below; hence, the same must be deemed waived. Thirdly, the "limited liability" theory is
not applicable in the case at bar because LOADSTAR was at fault or negligent, and because it failed to maintain a
seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to negligence.

Issues:(1) Whether Loadstar was a common carrier or a private carrier

(2) Whether Loadstar exercised the degree of diligence required under the circumstances

(3) Whether the stipulation that the goods are at the owners risk is valid
(4) Whether the action has prescribed

Held:(1) We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic,
occasional, episodic or unscheduled. There was no charter party. The bills of lading failed to show any special
arrangement, but only a general provision to the effect that the M/V "Cherokee" was a "general cargo carrier." Further, the
bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental,
is not reason enough to convert the vessel from a common to a private carrier, especially where, as in this case, it was
shown that the vessel was also carrying passengers.
(2) The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent.
LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite
knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as force
majeure, inasmuch as the wind condition in the area where it sank was determined to be moderate. Since it was remiss in
the performance of its duties, LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the
loss of the vessel and its cargo.
(3) Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and
all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation
of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless
the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority,
the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable. Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated
to all the rights which the latter has against the common carrier, LOADSTAR.
(4) MICs cause of action had not yet prescribed at the time it was concerned. Inasmuch as 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. This one-year prescriptive period also applies to the insurer of the goods.
In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year
period is null and void; it must, accordingly, be struck down.

Dispositive Rule: WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the
Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED
Relation/Pertinent Law/Notes

1. 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.

2. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary
certificate of public convenience, would be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory requirements. The business of a common
carrier impinges directly and intimately upon the safety and well being and property of those members of the
general community who happen to deal with such carrier. The law imposes duties and liabilities upon common
carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier
to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
3. MICs cause of action had not yet prescribed at the time it was concerned. Inasmuch as 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. This one-year prescriptive period also
applies to the insurer of the good. In this case, the period for filing the action for recovery has not yet elapsed.
Moreover, a stipulation reducing the one-year period is null and void; it must, accordingly, be struck down.

029 VALENZUELA HARDWOOD AND INDUSTRIAL

AUTHOR: CA Lofranco

SUPPLY INC., petitioner,

NOTES:

vs.

Validity of the stipulation in a charter party that "(o)wners

COURT

OF

APPEALS

AND

SEVEN

BROTHERS

shall not be responsible for loss, split, short-landing,

SHIPPING CORPORATION, respondents.

breakages and any kind of damages to the cargo."

[G.R. No. 102316

Petition for Review assailing the Decision of Respondent

June 30, 1997]

TOPIC: Limitation of Liability for Negligence

Court of Appeals which REVERSED and SET ASIDE the

PONENTE: PANGANIBAN, J.

judgment of the RTC in so far as the liability of the Seven

Brothers Shipping Corporation to the plaintiff is concerned.
Petition is DENIED.

FACTS:

1. On 16 January 1984, plaintiff Valenzuela Hardwood and Industrial Supply, Inc. (Valenzuela) entered into an agreement
with the defendant Seven Brothers Shipping Corporation (Shipping Corp.) whereby the latter undertook to load on
board its vessel M/V Seven Ambassador (Vessel) the former's lauan round logs numbering 940 at the port of
Maconacon, Isabela for shipment to Manila.
2. On 20 January 1984, Valenzuela insured the logs against loss and/or damage with defendant South Sea Surety and
Insurance Co., Inc. (Surety Company) for P2 million and the latter issued its Marine Cargo Insurance Policy for
P2million on said date.
3. On 24 January 1984, the Valenzuela gave the check in payment of the premium on the insurance policy to Mr. Victorio
Chua (authorized agent).
4. In the meantime, the said Vessel sank on 25 January 1984 resulting in the loss of the Valenzuela's insured logs.
5. On 30 January 1984, a check for P5,625.00 to cover payment of the premium and documentary stamps due on the
policy was tendered due to the insurer but was not accepted. Instead, the Insurance Company cancelled the insurance
policy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 of
the Insurance Code.
6. On 2 February 1984, Valenzuela demanded from the Insurance Company the payment of the proceeds of the policy
but the latter denied liability under the policy. Valenzuela likewise filed a formal claim with defendant Shipping Corp. for
the value of the lost logs but the latter denied the claim.
RTC
7. After due hearing and trial, the court a quo rendered judgment in favor of Valenzuela and against defendants (Shipping
Corp. and the Surety Company).
a) The non-liability clause of the Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is
void for being contrary to public policy invoking article 1745 of the New Civil Code.
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to
public policy:
(1)
(2)
(3)
(4)

That the goods are transported at the risk of the owner or shipper;
That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
That the common carrier need not observe any diligence in the custody of the goods;
That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or
of a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account
of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of
carriage.
b) Defendant-appellant Shipping Corporation liable in the alternative and ordering/directing it to pay Valenzuela the
amount of P2 million pesos representing the value of the logs plus legal interest from date of demand until fully
paid.
CA
8. The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of the Surety Company, but modified

it by holding that the Shipping Company was not liable for the lost cargo.
Ratio:

9.
10.

11.
12.

a) It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in
case of loss.
b) The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of
the shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting
as such but as a private carrier.
c) Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special
person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability even
for the negligence of its agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies,
Inc., 23 SCRA 24).
d) The Shipping Corporation should not therefore be held liable for the loss of the logs.
Surety Company and Valenzuela filed separate petitions for review.
Petition of Surety Company was denied. The Court found no reason to reverse the factual findings of the trial court and
the Court of Appeals that Chua was indeed an authorized agent of South Sea when he received Valenzuela's premium
payment for the marine cargo insurance policy which was thus binding on the insurer.
The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the CA Decision which
exempted Seven Brothers from any liability for the lost cargo.
Valenzuelas contentions:
a) The stipulation is void for being contrary to Articles 586 and 587 of the Code of Commerce 14 and Articles 1170
and 1173 of the Civil Code.
b) The rule in Home Insurance is not applicable to the present case because it "covers only a stipulation exempting a
private carrier from liability for the negligence of his agent, but it does not apply to a stipulation exempting a private
carrier like private respondent from the negligence of his employee or servant which is the situation in this case."

ISSUE(S):WoN the stipulation in the charter party executed between the petitioner and the private respondent exempting
the latter from liability for the loss of petitioner's logs arising from the negligence of its (Shipping Corp.s) captain is valid.

HELD: YES. In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely
on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence
of the ship captain.
Dispositive: WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible
error on the part of Respondent Court. The assailed Decision is AFFIRMED.

RATIO:
Stipulation is VALID.
It is undisputed that private respondent had acted as a private carrier in transporting petitioner's lauan logs. Thus, Article
1745 and other Civil Code provisions on common carriers which were cited by Valenzuela may not be applied unless
expressly stipulated by the parties in their charter party.
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the
ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of
private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common
carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common

carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or
remove the protection given by law in contracts involving common carriers.
Home Insurance Co. vs. American Steamship Agencies, Inc is applicableto the case at bar.
In that case, the trial court similarly nullified a stipulation identical to that involved in the present case for being contrary to
public policy based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce. Consequently, the trial
court held the shipowner liable for damages resulting for the partial loss of the cargo. This Court reversed the trial court
and laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and doctrine:
The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American
jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only,
becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of
its agent is not against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from
liability for loss due to the negligence of its agent would be void if the strict public policy governing common
carriers is applied. Such policy has no force where the public at large is not involved, as in this case of a ship
totally chartered for the used of a single party.
Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a contract of
transportation with common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres
to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the common carrier.
Thus, the law on common carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoices
or other documents over which the riding public has no understanding or, worse, no choice. Compared to the general
public, a charterer in a contract of private carriage is not similarly situated. It can and in fact it usually does enter into
a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carrier's
obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a
charterer, in exchange for convenience and economy, may opt to set aside the protection of the law on common carriers.
When the charterer decides to exercise this option, he takes a normal business risk.
The case Home Insurance specifically dealt with "the liability of the shipowner for acts or negligence of its captain and
crew" and a charter party stipulation which "exempts the owner of the vessel from any loss or damage or delay arising
from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner
onboard, for whose acts the owner would ordinarily be liable except for said paragraph." Undoubtedly, Home Insurance is
applicable to the case at bar.

CASE LAW/ DOCTRINE:

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the

charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the
ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public order, or public policy.

DISSENTING/CONCURRING OPINION(S):

030 Planters Products Inc v CA

AUTHOR:

G.R. No. 101503 September 15, 1993

NOTES:

TOPIC: Limitation of Liability for Negligence

PONENTE: Belosillo, J.
FACTS:
1.On 17 May 1974, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter was
entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan.
2. Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A.,
9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo
vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Alaska, USA to La
Union, Philippines.
3. Before loading the fertilizer aboard the vessel, four (4) of her holdswere all inspected and found fit by inspected by the
charterer's representative to take a load of urea in bulk
3.After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel
hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches
remained closed and tightly sealed throughout the entire voyage.
4. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the
consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to
pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the
cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable,
raining occasionally while the discharge was in progress
5. After PPI unloaded the cargo, a survey report by a private marine and cargo surveyor hired by PPI to determine the
"outturn" of the cargo shipped, by taking draft readings of the vessel revealed a shortage in the cargo of 106.726 M/T and
that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt.
6. PPI filed an action for damages with the CFI. The defendant carrier argued that the strict public policy governing
common carriers does not apply to them because they have become private carriers by reason of the provisions of the
charter-party. CFI ruled in favor of PPI.
7. CA reversed the CFI and absolved the carrier from liability for the value of the cargo that was lost or damaged. Relying
on the 1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., it ruled that the cargo vessel M/V "Sun
Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time chartererparty. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find
application in the case at bar.
8. PPI theorizes that the Home Insurance case has no bearing on the present controversy because the issue raised
therein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner for loss or damage to
goods cause by want of due deligence on its part or that of its manager to make the vessel seaworthy in all respects, and
not whether the presumption of negligence provided under the Civil Code applies only to common carriers and not to
private carriers. PPI further argues that since the possession and control of the vessel remain with the shipowner, absent
any stipulation to the contrary, such shipowner should be made liable for the negligence of the captain and crew. In fine,
PPI faults the appellate court in not applying the presumption of negligence against respondent carrier, and instead
shifting the onus probandi on the shipper to show want of due diligence on the part of the carrier, when he was not even at

hand to witness what transpired during the entire voyage.

ISSUE(S): whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence
required of him under the law.

HELD:
Yes. The court agrees with the respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the
risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar.
This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the
inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its
packaging which further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that
the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

RATIO:
Home Insurance Co. vs. American Steamship Agencies, Inc is not applicable to the case at bar.
It is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party
exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter
on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special
cargo is not a common carrier, does not find application in our jurisdiction, for we have observed that the growing concern
for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of
admiralty laws, more particularly, the rules governing common carriers.
Respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of
negligence.
The master of the carrying vessel, Captain Lee Tae Bo testified that before the fertilizer was loaded, the four (4) hatches of
the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the
steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins
which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight
of the steel covers made it impossible for a person to open without the use of the ship's boom.
The period during which private respondent was to observe the degree of diligence required of it as a public carrier began
from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed
scrutiny by the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee,
but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard
"GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge
of the cargo was to be done by the charterer, free from all risk and expense to the carrier. Moreover, a shipowner is liable
for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him,
and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the
employ of the latter.

The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds
during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed,
making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or
contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the
dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo
surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in
their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel
and segregated from the rest of the cargo.

CASE LAW/ DOCTRINE:

031 Belgian Overseas Chartering and Shipping

AUTHOR: Drei Mauricio

vs. First Insurance Co., Inc.

NATURE OF THE CASE: Petition for Review under Rule 45

[G.R. No. 123133; June 5, 2003]

assailing that the July 1998 and May 2000 Resolution of the CA

TOPIC: Limitation of Liability of Negligence

which REVERSED and SET ASIDE the decision of the RTC.

FACTS:
1. In June 1990, CMC Trading A.G. (herein after called CMC Trading) shipped on board the MN Anangel Sky 242
coils of various Prime Cold Rolled Steel sheets from Hamburg, Germany to Manila consigned to the Philippine
Steel Trading Corporation (hereinafter called Philippine Steel).
2. In July 1990, upon arrival of MN Anangel Sky in Manila, 4 coils were found to be in bad order and unfit for its
intended purpose. In effect, Philippine Steel declared the same as total loss.
3. Despite receipt of the formal demand, CMC Trading refused to pay Philippine Steel which prompted the latter to
recover from its insurer, First Insurance Co (hereinafter called First Insurance). First Insurance paid P506,086.50
representing the damage/loss of the 4 coils.
CMC Trading assails: (1) that they exercised due diligence and foresight required by law to prevent any
damage/loss to said shipment; (2) that the damage/loss was due to the pre-shipment damages, to the
inherent nature, vice or defect of the goods, or the 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; and (3) that their liability, if any, should not exceed the limitations of liability as provided in
the bill of lading and other pertinent laws.
4. RTC: dismissed the Complaint because respondent failed to prove its claims with the quantum of proof required by
law. It also debunked petitioners counter-claim because the respondents suit was not manifested frivolous or
primarily intended to harass them.
5. CA: reversed the TC and affirmed the award of attorneys fees.
Petitioners were liable for the loss of the damage of the goods shipped, because they had failed to
overcome the presumption of negligence imposed on common carriers.
Petitioners claim that the loss or the deteriorarion of the goods was due to pre-shipment damage was
inadequately proven. CA further 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 4 coils.
As to the extent of the petitioners liability the package limitation under Carrier of Goods by Sea Act
(hereinafter referred as 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.

ISSUE(S):
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.
HELD:
1. NO. The 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. 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.
2. YES. The facts reveal that the cargo was discharge on July 31, 1990 while the Complaint was filed by
respondenton July 25, 1991 within the one-year prescriptive period.
3. YES.
RATIO:
Proof of Negligence It is a well-settled 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. Thus, common carriers are required to render service with the greatest skill and foresight and
to use all reasonable 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.

Responsibility of common carriers last 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.

Given this high degree of diligence required of the common carriers, as a general rule they are presumed to have been at
fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods. In order to avoid the responsibility for any loss or damage,
therefore, they have the burden of proving that they observed such diligence.

The presumption of negligence will not arise, if the loss is due to any of the following causes***:
1.
2.
3.
4.
5.

Floods, storm, earthquake, lightning, or other natural disaster or calamity;

An act of the public enemy in war (international or civil);
An act or omission of the shipper or owner of the goods;
The character of the goods or defects in the packing or the container; or
An order or act of competent public authority.

***this is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then
the carrier is liable therefor.

Mere proof of delivery in the goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes prima facie case of fault or negligence against the carrier.

The petitioners in this case failed to rebut the prima facie presumption of negligence based on records as follows, as
confirmed by RupertoEsmerio the head checker of BM Santos Checkers Agency:
1. In the Bill of Lading petitioners received subject shipment in good order and condition in Germany.
2. Before unloading, in the Inspection Report the steel bands broken, the metal envelopes rust-stained and heavily
buckled, and the contents thereof exposed and rusty. This was prepared and signed by both parties.
3. In the Bad Order Tally Sheet 4 coils were in bad order and condition. A request of bad order survey was made
and said goods were presumed loss or damage.
4. In the Certificate of Analysis based on the sample submitted and tested, the steel sheets found in bad order
were wet with fresh water.
5. In a Letter (addressed to Philippine Steel) it was admitted that they were aware of the condition of the 4 coils
found in bad order and condition.
In this case, while it is true that the metal envelopes rust stained and slightly dented were noted on the Bill of Lading,
there is no showing that petitioners exercised due diligence to forestall or lessen the loss. They have 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 no properly stored. 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 were taken.

Notice of Loss Petitioners assail that pursuant to Sec. 3 (6) of the COGSA, respondent should have filed its Notice of
Loss within 3 days from delivery. However, the SC is not persuaded.

The Court provides that COGSA provides that the notice of claim need not be given if the state of goods, at the time of
their receipt, has been the subject of a joint inspection or survey. First, as provided earlier, prior to the unloading of the
cargo, and Inspection Report as to the condition of the goods was prepared and signed by the representatives of both
parties. Second, a failure to file notice of claim within three days will not bar recovery if it is nonetheless filed within one
year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal
holder of the bill of lading.

Moreover in Loadstar Shipping Co., Inc. v. Court of Appeals it was held that a claim is not barred prescription as long
as the one-year period has not lapsed.
Package Limitation Respondent argues that Sec. 4 (5) of the COGSA is inapplicable because the value of the subject
shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit
or L/C No. 90/02447 in the said Bill of Lading.

The Bill of Lading serves 2 functions: (1) receipt for the goods shipped, and (2) contract by which three parties, namely the
shipper, carrier, and the consignee, undertake specific responsibilities and assume stipulated obligations. 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.
If a bill of lading limits to a certain sum the common carriers liability for loss or destruction of a cargo, unless the shipper or
owner declares a greater value is sanctioned by law. Provided the following conditions must 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. The
rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.

The Court further qualifies that the Civil Code does not limit the liability of the common carrier to a fixed amount per
package. In all matters not covered by the Civil Code pertaining to the right and obligations of common carriers shall be
governed by the Code of Commerce and special Law. Thus, COGSA shall only apply suppletory to the provisions of the
Civil Code.
In this case, there was no stipulation in the bill of lading limiting the carriers liability. Neither did the shipper declare a
higher valuation of the goods to be shipped. In fact, a notation in the bill of lading which indicated the amount of the letter
credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value o fthe goods as
required by the bill. Such notation was made for the purpose of facilitating the convenience of the shipper and the bank
processing the letter of credit. Moreover, in the Kung Hua Paper Products vs. Court of Appeals, it held that a bill of
lading was a separate from the other letter of credit arrangements.
Based on the aforementioned principles, the petitioners liability should be computed based on the USD 500 per package
and not the per ton metric price declared in the letter of credit. In the Eastern Shipping Lines, Inc. vs. Court of Appeals,

a package has been held to be each unit shipped in the container supplied by the carriers and the number of such units is
disclosed in the shipping documents.
Therefore, the units are indeed subject to the USD 500 limitation per package and the petitioners total liability has the total
amount USD 2,000 (excluding interests etc.).

032 Belgian Overseas Chartering and Shipping vs. First Insurance Co., Inc.

AUTHOR: Drei Mauricio

[G.R. No. 123133; June 5, 2003]

NOTES:

TOPIC: Limitation of Liability of Negligence

NATURE OF THE CASE: Petition for Review under Rule 45 assailing that the July 1998 and May 2000 Resolution of the
CA which REVERSED and SET ASIDE the decision of the RTC.
FACTS:
6. In June 1990, CMC Trading A.G. (herein after called CMC Trading) shipped on board the MN Anangel Sky 242
coils of various Prime Cold Rolled Steel sheets from Hamburg, Germany to Manila consigned to the Philippine
Steel Trading Corporation (hereinafter called Philippine Steel).
7. In July 1990, upon arrival of MN Anangel Sky in Manila, 4 coils were found to be in bad order and unfit for its
intended purpose. In effect, Philippine Steel declared the same as total loss.
8. Despite receipt of the formal demand, CMC Trading refused to pay Philippine Steel which prompted the latter to
recover from its insurer, First Insurance Co (hereinafter called First Insurance). First Insurance paid P506,086.50
representing the damage/loss of the 4 coils.
CMC Trading assails: (1) that they exercised due diligence and foresight required by law to prevent any
damage/loss to said shipment; (2) that the damage/loss was due to the pre-shipment damages, to the
inherent nature, vice or defect of the goods, or the 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; and (3) that their liability, if any, should not exceed the limitations of liability as provided
in the bill of lading and other pertinent laws.
9. RTC: dismissed the Complaint because respondent failed to prove its claims with the quantum of proof required
by law. It also debunked petitioners counter-claim because the respondents suit was not manifested frivolous or
primarily intended to harass them.
10. CA: reversed the TC and affirmed the award of attorneys fees.
Petitioners were liable for the loss of the damage of the goods shipped, because they had failed to
overcome the presumption of negligence imposed on common carriers.
Petitioners claim that the loss or the deteriorarion of the goods was due to pre-shipment damage was
inadequately proven. CA further 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 4 coils.
As to the extent of the petitioners liability the package limitation under Carrier of Goods by Sea Act
(hereinafter referred as 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.
ISSUE(S):
4. Whether petitioners have overcome the presumption of negligence of a common carrier.
5. Whether the notice of loss was timely filed.
6. Whether the package limitation of liability is applicable.
HELD:
4. NO. The 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. 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.
5. YES. The facts reveal that the cargo was discharge on July 31, 1990 while the Complaint was filed by respondent
on July 25, 1991 within the one-year prescriptive period.
6. YES.
RATIO:
Proof of Negligence It is a well-settled 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. Thus, common carriers are required to render service with the greatest skill and foresight and
to use all reasonable 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.

Responsibility of common carriers last 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.

Given this high degree of diligence required of the common carriers, as a general rule they are presumed to have been at
fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods. In order to avoid the responsibility for any loss or damage,
therefore, they have the burden of proving that they observed such diligence.

The presumption of negligence will not arise, if the loss is due to any of the following causes***:
6.
7.
8.
9.
10.

Floods, storm, earthquake, lightning, or other natural disaster or calamity;

An act of the public enemy in war (international or civil);
An act or omission of the shipper or owner of the goods;
The character of the goods or defects in the packing or the container; or
An order or act of competent public authority.

***this is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then
the carrier is liable therefor.

Mere proof of delivery in the goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes prima facie case of fault or negligence against the carrier.

The petitioners in this case failed to rebut the prima facie presumption of negligence based on records as follows, as
confirmed by Ruperto Esmerio the head checker of BM Santos Checkers Agency:
6. In the Bill of Lading petitioners received subject shipment in good order and condition in Germany.
7. Before unloading, in the Inspection Report the steel bands broken, the metal envelopes rust-stained and heavily
buckled, and the contents thereof exposed and rusty. This was prepared and signed by both parties.
8. In the Bad Order Tally Sheet 4 coils were in bad order and condition. A request of bad order survey was made
and said goods were presumed loss or damage.
9. In the Certificate of Analysis based on the sample submitted and tested, the steel sheets found in bad order
were wet with fresh water.
10. In a Letter (addressed to Philippine Steel) it was admitted that they were aware of the condition of the 4 coils
found in bad order and condition.
In this case, while it is true that the metal envelopes rust stained and slightly dented were noted on the Bill of Lading,
there is no showing that petitioners exercised due diligence to forestall or lessen the loss. They have 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 no properly stored. 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 were taken.
Notice of Loss Petitioners assail that pursuant to Sec. 3 (6) of the COGSA, respondent should have filed its Notice of
Loss within 3 days from delivery. However, the SC is not persuaded.

The Court provides that COGSA provides that the notice of claim need not be given if the state of goods, at the time of

their receipt, has been the subject of a joint inspection or survey. First, as provided earlier, prior to the unloading of the
cargo, and Inspection Report as to the condition of the goods was prepared and signed by the representatives of both
parties. Second, a failure to file notice of claim within three days will not bar recovery if it is nonetheless filed within one
year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal
holder of the bill of lading.

Moreover in Loadstar Shipping Co., Inc. v. Court of Appeals it was held that a claim is not barred prescription as long
as the one-year period has not lapsed.
Package Limitation Respondent argues that Sec. 4 (5) of the COGSA is inapplicable because the value of the subject
shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of
Credit or L/C No. 90/02447 in the said Bill of Lading.

The Bill of Lading serves 2 functions: (1) receipt for the goods shipped, and (2) contract by which three parties, namely
the shipper, carrier, and the consignee, undertake specific responsibilities and assume stipulated obligations. 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.
If a bill of lading limits to a certain sum the common carriers liability for loss or destruction of a cargo, unless the shipper
or owner declares a greater value is sanctioned by law. Provided the following conditions must 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.
The rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.

The Court further qualifies that the Civil Code does not limit the liability of the common carrier to a fixed amount per
package. In all matters not covered by the Civil Code pertaining to the right and obligations of common carriers shall be
governed by the Code of Commerce and special Law. Thus, COGSA shall only apply suppletory to the provisions of the
Civil Code.
In this case, there was no stipulation in the bill of lading limiting the carriers liability. Neither did the shipper declare a
higher valuation of the goods to be shipped. In fact, a notation in the bill of lading which indicated the amount of the letter
credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value o fthe goods as
required by the bill. Such notation was made for the purpose of facilitating the convenience of the shipper and the bank
processing the letter of credit. Moreover, in the Kung Hua Paper Products vs. Court of Appeals, it held that a bill of
lading was a separate from the other letter of credit arrangements.
Based on the aforementioned principles, the petitioners liability should be computed based on the USD 500 per package
and not the per ton metric price declared in the letter of credit. In the Eastern Shipping Lines, Inc. vs. Court of
Appeals, a package has been held to be each unit shipped in the container supplied by the carriers and the number of
such units is disclosed in the shipping documents.
Therefore, the units are indeed subject to the USD 500 limitation per package and the petitioners total liability has the

total amount USD 2,000 (excluding interests etc.).

CASE LAW/ DOCTRINE:

DISSENTING/CONCURRING OPINION(S):

033American President Lines (APL) v Klepper

GR L-15671
Nov. 29, 1960
J. Angelo Bautista

Facts:

1. Richard Klepper shipped his personal and household effects inside a life van from Yokohama, Japan to here in
the PH.
1.1 he had it shipped on board the SS President Cleveland
1.2 date of shipment: Feb. 17, 1955
2. SS Cleveland arrived in Manila on Feb. 22, 1955
2.1 while the life van was being unloaded by the gantry crane, the contents spilled and were scattered.
2.2 The crane was being operated by the Delgado Brothers, Inc.
2.3 A survey was made and the damages were determined at P 6,729.50
3. Klepper filed a case against the shipping company APL and against Delgado Bros. Inc.
3.1 for the damages + P500 sentimental value + P1,000 attys fees.
4. RTC: in favour of Klepper
4.1 APL pays Klepper, then Delgado Bros., Inc. pays APL by way of reimbursement
5. Both APL and Delgado Bros., Inc. filed appealed to the CA.
6. CA: decision of RTC affirmed in toto.
6.1 CA: The party primarily liable to plaintiff is appellant American President Lines, Ltd., the carrier whose duty it
was to deliver the cargo in good order to the consignee.
7. Hence, this petition for review by APL.
7.1 APL contends that although it is liable, it is limited only to the amount of $500.00 because of the stipulation in
the Bill of Lading and because of Sec. 4(5) of CA No. 65 (Carriage of Goods by Sea Act)

Issue:

Whether or not APL is liable for the whole amount of the loss?

Held: No.

Ratio:

1. Philippine Laws apply in this case (hence CA No. 65 suppletorily applies).

1.1 Article 1753 of the Civil Code provides that the law of the country to which the goods are to be transported
shall govern the liability of the common carrier in case of loss, destruction or deterioration.
1.2 This means the law of the Philippines, or the Civil Code. Under Article 1766, "In all matters not regulated by
this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by
special laws," and in the Civil Code there are provisions that govern said rights and obligations (Articles 1736,
1737 and 1738).
1.3 Therefore, although Section 4 (5) of the Carriage of Goods by Sea Act states that the carrier shall not be
liable in an amount exceeding $500.00 per package unless the value of the goods had been declared by the
shipper and inserted in the bill of lading, said section is merely suppletory to the provisions of the Civil Code.
2. Respondent is estopped already (because they signed the bill of lading)

2.1 we cannot but take note of the following clause printed in red ink that appears on the very face of the bill of
lading: "IN ACCEPTING THIS BILL OF LADING the shipper, consignee and owner of the goods agree to be
bound by all its stipulations, exceptions, and conditions whether written, printed, or stamped on the front or
back hereof, any local customs or privileges to the contrary notwithstanding." This clause is very revealing.
2.2 It says that a shipper or consignee who accepts the bill of lading becomes bound by all stipulations contained
therein whether on the front or back thereof.
2.3 Respondent cannot elude its provisions simply because they prejudice him and take advantage of those that
are beneficial.
2.4 The fact that respondent shipped his goods on board the ship of petitioner and paid the corresponding freight
thereon shows that he impliedly accepted the bill of lading which was issued in connection with the shipment
in question, and so it may be said that the same is binding upon him as if it has been actually signed by him
or by any other person in his behalf. This is more so where respondent is both the shipper and the consignee
of the goods in question.
2.5 There is a stipulation in the bill of lading limiting the liability of the carrier if the true values of the goods are not
declared in the bill of lading.
2.5.1 17. In case of any loss or damage to or in connection with goods exceeding in actual value $500
lawful money of the United States, per package, . . . the value of the goods shall be deemed to be
$500 per package . . . on which basis the freight is adjusted and the Carriers liability, if any, shall be
determined on the basis of a value of $500 per package . . . or pro rata in case of partial loss or
damage, unless the nature of the goods and a valuation higher than $500 shall have been declared in
writing by the shipper upon delivery to the Carrier and inserted in this bill of lading and extra freight
paid if required and in such case if the actual value of the goods per package . . . shall exceed such
declared value, the value shall nevertheless be deemed to be the declared value and the Carriers
liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted
pro rata on the basis of such declared value."

EDGAR COKALIONG SHIPPING LINES, INC., petitioner,

AUTHOR: twinkle

vs. UCPB GENERAL INSURANCE COMPANY, INC.,

NOTES: (if applicable)

respondent.
TOPIC: Limitation of liability for negligence
G.R. No. 146018. June 25, 2003

PONENTE: Panganiban, J.

FACTS:

1.

2.
3.

December 11, 1991 - Nestor Angelia (both the shipper and consignee of the cargo valued, on the face thereof, in
the amount of P6,500.00) delivered to the Edgar Cokaliong Shipping Lines, Inc. [pet] cargo (one carton of
Christmas dcor and 2sacks of plastic toys) to be transported on board the M/V Tandag on from Cebu City, on
December 12, 1991, to Tandag, Surigao del Sur.
P issued Bill of Lading No. 58, freight prepaid, covering the cargo.
Zosimo Mercado likewise delivered cargo to P, 2 cartons of plastic toys and Christmas decor, 1roll of floor mat and
1bundle of various or assorted goods for transportation. P issued Bill of Lading No. 59 covering the cargo valued
P14,000.00. Zosimo Mercado was both the shipper and consignee of the cargo.

4.

On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB
General Insurance Co., Inc., [resp] for P100,000.00 against all risks and Bill of Lading No. 58, for P50,000.00.

5.

The vessel left port with 34passengers and assorted cargo on board, including 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.

6.

Feliciana Legaspi filed a claim, with R submitting 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 P110,056.00, and also for bill of lading 58.

7.

R 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. R also approved her claim for bill of lading 58 (P49,500.00). In settlement of her
claim after which she executed a Subrogation Receipt/Deed, for said amount, in favor of R.

8.

On July 14, 1992, R, as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], with
the RTC Makati for the collection of the total principal amount of P148,500.00, which it paid to Feliciana Legaspi
for the loss of the cargo.

9.

RTC: For Res

CA: For Res

ISSUE(S): (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability?
HELD: Pet partly meritorious.

1) YES. P did not present any evidence to prove the sea worthiness of the vessel
2) Only to the amount stated in the Bill of Lading
RATIO:

1) 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.

Where 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 drydocked 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.
2) Art. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and
fairly agreed upon.
In the present case, the stipulation limiting petitioners 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 only violate
a valid contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier liable for
more than the amount it declared in the bill of lading.
CASE LAW/ DOCTRINE:
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.
DISSENTING/CONCURRING OPINION(S):