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1. AMERICAN PRESIDENT LINES, LTD., Petitioner, v. RICHARD A. KLEPPER, ET AL.,Respondents.

[G.R. No. L-15671. November 29, 1960.]


Facts: Richard A. Klepper brought this action before the Court of First Instance of Manila to recover the sum of P6,729.50 as damages
allegedly sustained by his goods contained in a lift van which fell to the ground while being unloaded from a ship owned and operated by the
American President Lines, Ltd. to the pier, plus the sum of P2,000.00 as sentimental value of the damaged goods and attorneys fees.
On February 17, 1955, Klepper shipped on board the S.S. President Cleveland at Yokohama, Japan one life van under bill of lading No, 82,
containing personal and household effects. The ship arrived in the port of Manila on February 22, 1995 and while the lift van was being
unloaded by the Gantry crane operated by Delgado Brothers, Inc., it fell on the pier and its contents were spilled and scattered. A survey was
made and the result was that Klepper suffered damages totalling P6,729.50 arising out of the breakage, denting and smashing of the goods.
Trial court rendered decision ordering the shipping company to pay plaintiff the sum of P6,729.50, value of the goods damaged, plus P500.00 as
their sentimental value, with legal interest from the filing of the complaint, and the sum of P1,000.00 as attorneys fees. The court ordered that,
once the judgment is satisfied, co-defendant Delgado Brothers, Inc. should pay the shipping company the same amounts by way of
reimbursement.
Both defendants appealed to the Court of Appeals which affirmed in toto the decision of the trial court. The shipping company interposed the
present petition for review.
Issue: WON the petitioners liability as a common carrier is the amount of damage or only $500 under COGSA
Decision: The pertinent provision of the bill of lading alluded to is clause 17 which in part provides:

"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."

While it is apparent from the above that the carrier has expressly agreed that in case of any loss or damage to the goods in question exceeding
the sum of $500.00 per package the extent of its liability shall be deemed to be merely $500.00 per package, and not more.

". . . Later, as already said, he says that he was never a party to the contract of transportation and was a complete stranger to it, and that he is now suing on a tort
or a violation of his rights as a stranger (culpa aquiliana). If he does not invoke the contract of carriage entered into with the defendant company, then he would
hardly have any leg to stand on. His right to prompt delivery of the can of film at the Pili Air Port stems and is derived from the contract of carriage under which
contract, the PAL undertook to carry the can of film safely and to deliver it to him promptly. Take away or ignore that contract and the obligation to carry and to
deliver the right to prompt delivery disappear. Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the
right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into
by the parties.
x
x
x
"Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the stipulations of delivery to Mendoza as consignee. His
demand for the delivery of the can of film to him at the Pili Air Port may be regarded as a notice of his acceptance of the stipulation of the delivery in his favor
contained in the contract of carriage, such demand being one for the fulfillment of the contract of carriage and delivery. In this case he also made himself a party
to the contract, or at least has come to court to enforce it. His cause of action must necessarily be founded on its breach."

With regard to the contention that the Carriage of Goods by Sea Act should also control this case, the same is of no moment. Article 1753 1
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. This means the law of the Philippines, or our new 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 here we have
provisions that govern said rights and obligations (Articles 1736, 1737, and 1738). 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. In this respect, we agree to the
opinion of the Court of Appeals.
Wherefore, with the modification that petitioner shipping company should only pay to respondent the sum of $500.00 as value of the goods
damaged, the decision appealed from should be affirmed in all other respects, without pronouncement as to costs.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

Firstly, 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. 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. Respondent cannot elude its provisions simply because they prejudice him and take advantage of those that are
beneficial. Secondly, the fact that respondent shipped his goods on board the ship of petitioner and paid the corresponding freight thereon
shows that he impliedly accepted the bill of lading 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. These circumstances take this case out of our ruling in the Mirasol case (invoked by the
Court of Appeals) and places it within our doctrine in the case of Mendoza v. Philippines Air Lines, Inc., (90 Phil., 836), where we said:

2. JOAQUIN DE VILLATA, petitioner, vs. J.S. STANLEY, Acting Insular Collector of Customs, respondent
G.R. No. L-8154 December 20, 1915
FACTS: Joaquin de Villata is the master of SS Vizcaya of the coastwise trade. As such captain, on 6 July 1912,when sailing from the port of
Gubat to the port of Legaspi, Philippine Islands, he failed to notify the postmaster of the former port, in advance, of his intended sailing, and
therefore failed to carry the mails between said ports. The Collector of Customs (JS Stanley, Acting Insular Collector of Customs) was
threatening to suspend or revoke the license of de Villata by reason of said facts, under and by virtue of the terms of Customs Administrative
Circular 627. De Villata filed an application for a writ of prohibition directed against the Collector of Customs to restrain him from enforcing
Customs Administrative Circular 627 against de Villata. The case was submitted to the Supreme Court upon de Villatas demurrer to Stanleys
answer to the complaint.
ISSUE: WON a regulation requiring all coasting vessels licensed to engage in the interisland trade to carry the mails and give prompt advance
notice in all cases of intended sailings in ample time to permit dispatch of mails, and of changes of sailing hours, (manifestly with a view to make
it possible for the post-office officials to tender mail for transportation at the last practicable moment prior to the hour of departure) is a
reasonable regulation, made in the interests of the public
DECISION: Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is,
therefore, affected with a public interest, and is subject to public regulation.
The nature of the business in which they are engaged as a public employment, is such that it is clearly within the power of the state to impose
such just and reasonable regulations thereon as in the interest of the public it may deem proper. Of course such regulations must not have the
effect of depriving an owner of this property without due process of law, nor of confiscating or appropriating private property without just
compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise. But aside from
such constitutional limitations, the determination of the nature and extent of the regulations which should be prescribed rests in the hands of
the legislator. (New Jersey Steam Nav. Co. vs. Merchants' Bank, 6 How., 344, 382; Munn vs. Illinois, 94 U.S., 113, 130.)
Of course this power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating
fares and freights the state cannot require a railroad corporation to carry persons or property without reward. Nor can it do that which in law
amounts to a taking of private property for public use without just compensation, or without due process of law. (Chicago etc. R.
Co. vs.Miesota, 134 U.S., 418; Minneapolis Easter R. Co. vs. Minnesota, 134 U. S., 467.) But the judiciary ought not to interfere with regulations
established under legislative sanction unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking
of property for public use without such compensation as under all the circumstances is just both to the owner and to the public, that is, judicial
interference should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights and property under
the guise of regulations as to compel the court to say that the regulations in question will have the effect to deny just compensation for private
property taken for the public use. (Chicago etc. R. Co. vs. Wellman, 143 U.S., 339; Smyth vs. Ames, 169 U.S., 466, 524; Henderson Bridge
Co. vs. Henderson City, 173 U.S., 592, 614.) (Fisher vs. Yangco Steamship Co., 31 Phil. Rep., 1.)

Considerable expenditures of public money have been made in the past and continue to be made annually for the purpose of securing the safety
of vessels plying in Philippine waters. To this end lighthouses have been erected; wharfs and docks constructed; and buoys, bells and other
warning signals maintained at points of danger. Largely for the purpose of conveying timely warnings of threatening weather to those that go
down into the sea in ships, appropriations are made for the support of a Weather Bureau Coast and geodetic surveys are conducted to keep
them informed as to the dangers hidden beneath the treacherous sea. Licensed pilots are provided to insure safe entry into the dangerous ports
and harbors throughout the Islands. Maps, charts and general information as to condition affecting travel by water are kept up to date, and
furnished all vessels having need for them. In a word, the Government unhesitatingly spends a considerable part of the public funds wherever
and whenever it appears that the safety and even the convenience of the shipping in Philippine waters will be advanced thereby. Can it be fairly
contended that a regulation is unreasonable which requires vessels licensed to engaged in the interisland trade, in whose behalf the public funds
are so lavishly expended, to hold themselves in readiness to carry the public mails when duly tendered for transportation, and to give such
reasonable notice of their sailing hours as will insure the prompt dispatch of all mails ready for delivery at the hours thus designated?
It is urged, also, that the promulgation and enforcement of a law or regulation requiring coastwise trading vessels to make provisions for the
transportation of the mails when tendered, and to give notice of their sailing hours in ample time to permit the dispatch of the mails, is in effect
to deprive the owners of their property without due process of law, to deny them the equal protection of the laws, and to violate the provisions
of the Bill of Rights which prescribe that the rule of taxation shall be uniform.
We cannot agree with any of these propositions. It is only when the owner of a vessel enters the quasi-public employment of a common carrier
that regulations of this kind begin to affect or control the conduct of his business, and he cannot be heard to complain that he is deprived of his
property without due process of law when he elects, of his own free will and accord, to secure a license as a common carrier in Philippine

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

We are of opinion that a regulation requiring all coasting vessels licensed to engage in the interisland trade to carry the mails and
give prompt advance notice in all cases of intended sailings in ample time to permit dispatch of mails, and of changes of sailing
hours, (manifestly with a view to make it possible for the post-office officials to tender mail for transportation at the last practicable
moment prior to the hour of departure) is a reasonable regulation, made in the interests of the public, which the states has a right to
impose when it grants licenses to the vessels affected thereby. We are not now considering the question of the right of these vessels to
direct compensation for the transportation of such mail when tendered. We are considering merely the right of the state to require all licensed
coasting vessels to hold themselves in readiness to receive and to carry mail when duly tendered, and to give such reasonable notice as to their
sailing hours as may be necessary to secure ample time for the tender of the mail before the sailing hour. Certainly we would not be justified in
holding that such a regulation is "so plainly and palpably unreasonable" and "such a flagrant attack upon the rights of property under the guise
of regulations" as to compel the court to say that its enforcement would be "equivalent to the taking of property for public use without such
compensation as under all the circumstances is just both to the owner and to the public."

2. JOAQUIN DE VILLATA, petitioner, vs. J.S. STANLEY, Acting Insular Collector of Customs, respondent
G.R. No. L-8154 December 20, 1915
waters, and to engage in a business, one of the conditions of which is that he will comply with such regulations. Under the law in force in these
Islands at the time of the change of sovereignty, and of the enactment of the Act of Congress the owners of all licensed coasting vessels were
required to comply with regulations of this character, as one of the conditions upon which they were permitted to engage in the quasi-public
employment of carriers in the interisland trade. Manifestly there is no merit in a claim by the owner of one of these vessels that the enforcement
of these regulations amounts to a deprivation of property without due process of law. The owner of every coasting vessels in these Islands
licensed to engage in the interisland trade, prior to the promulgation of Customs Administration Circular No. 627, took out his license and
dedicated his vessel to the quasi-public employment of a common carrier with full knowledge of the existence of regulations such as that now
under consideration, and of the assertion and assumption by the Government of power to promulgate and enforce such regulations. It is futile,
therefore, for any such owner to contend that the promulgation or enforcement by the Government through its proper agencies of any
reasonable order of this kind, deprives him of property without due process of law. No one is compelled to comply with these regulations unless
he voluntarily enters upon the business which they affect, and if he does enter such business he cannot claim that he is unlawfully deprived,
without due process of law, of that which he voluntarily agrees to surrender.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

SC ruled that twenty days hereafter, let the complaint be dismissed at the costs of the petitioner unless amended so as to set forth a cause of
action, and ten days thereafter let the record be filed in the archives of original actions in this court. So ordered.

3. BATANGAS TRANSPORTATION CO., petitioner-appellant, vs.CAYETANO ORLANES, respondent-appellee


G.R. No. L-28865

December 19, 1928

FACTS: The appellee Orlanes, in his application for a permit, alleges that he is the holder of a certificate of public convenience issued by the
Public Service Commission in case No. 7306, to operate an autobus line from Taal to Lucena, passing through Batangas, Bolbok and Bantilan,
in the Province of Batangas, and Candelaria and Sariaya, in the Province of Tayabas, without any fixed schedule; that by reason of the
requirements of public convenience, he has applied for a fixed schedule from Bantilan to Lucena and return; that in case No. 7306, he cannot
accept passengers or cargo from Taal to any point before Balbok, and vice versa; that the public convenience requires that he be converted into
what is known as a regular operator on a fixed schedule between Taal and Bantilan and intermediate points, and for that purpose, he has
submitted to the Commission proposed schedule for a license to make trips between those and intermediate points. He then alleges that by
reason of increase of traffic, the public convenience also requires that he be permitted to accept passengers and cargo at points between Taal
and Bantilan, and he asked for authority to establish that schedule, and to accept passengers at all points between Taal and Bantilan.
On the other hand, the Batangas Transportation Company appeared and filed an application for a permit, in which it alleged that it is
operating a regular service of auto trucks between the principal municipalities of the Province of Batangas and some of those of the Province of
Tayabas; that since 1918, it has been operating a regular service between Taal and Rosario, and that in 1920, its service was extended to the
municipality of San Juan de Bolbok, with a certificate of public convenience issued by the Public Servise Commission; that in the year 1925
Orlanes obtained from the Commission a certificate of public convenience to operate an irregular service of auto trucks between Taal, Province
of Batangas, and Lucena, Province of Tayabas, passing through the municipalities of Bauan, Batangas, Ibaan, Rosario, and San Juan de Bolbok,
with the express limitation that he could not accept passengers from intermediate points between Taal and Bolbok, except those which were
going to points beyond San Juan de Bolbok or to the Province of Tayabas; that he inaugurated this irregular in March, 1926, but maintained it
on that part of the line between Taal and Bantilan only for about three months, when he abandoned that portion of it in the month of June and
did not renew it until five days before the hearing of case No. 10301, which was set for November 24, 1926, in which hearing the Batangas
Transportation Company asked for additional hours for its line between Batangas and Bantilan; that in June, 1926, Orlanes sought to obtain a
license as a regular operator on that portion of the line between Bantilan and Lucena without having asked for a permit for tat portion of the
line between Bantilan and Taal; that from June, 1926, Orlanes and the Batangas Transportation Company were jointly operating a regular service
between Bantilan and Lucena, with trips every half an hour, and Orlanes not having asked for a regular service between Bantilan and Taal, the
Batangas Transportation Company remedied this lack of service under the authority of the Commission, and increased its trips between Bantilan
and Tayabas to make due and timely connections in Bantilan on a half-hour service between Bantilan and Batangas with connections there for
Taal and all other points in the Province of Batangas. It is then alleged that the service maintained by the company is sufficient to satisafy the
convenience of the public, and that the public convenience does not require the granting of the permit for the service which Orlanes petitions,
and that to do so would result in ruinous competition and to the grave prejudice of the company and without any benefit to the public, and it
prayed that the petition of Orlanes to operate a regular service be denied.
After the evidence was taken upon such issues, the Public Service Commission granted the petition of Orlanes, as prayed for, and the company
then filed a motion for a rehearing, which was denied, and the case is now before this court.
ISSUE: WON the Commission can issue certificate of public convenience going to be issued to a second operator (Orlanes) to operate a public
utility in a field where, and in competition with, a first operator (Batangas) who is already operating, adequate and satisfactory service

A certificate authorizing through motor carrier service should not authorize local service between points served by the holders of a certificate, without
first giving the certificate holders an opportunity to render additional service desired.

In the National Coal Company case (47 Phil., 356), this court said:

When there is no monopoly. There is no such thing as a monopoly where a property is operated as a public utility under the rules and regulations of
the Public Utility Commission and the terms and provision of the Public Utility Act.

Upon the question of "Reason and Rule for Regulation," in section 775, Pond says:

The policy of regulation, upon which our present public utility commission plan is based and which tends to do away with competition among public
utilities as they are natural monopolies, is at once the reason and the justification for the holding of our courts that the regulation of an existing system
of transportation, which is properly serving a given field or may be required to do so, is to be preferred to competition among several independent
systems. While requiring a proper service from a single system for a city or territory in consideration for protecting it as a monopoly for all the service
required and in conserving its resources, no economic waste results and service may be furnished at the minimum cost. The prime object and real
purpose of commission control is to secure adequate sustained service for the public at the least possible cost, and to protect and conserve investments
already made for this purpose. Experience has demonstrated beyond any question that competition among natural monopolies is wasteful
economically and results finally in insufficient and unsatisfactory service and extravagant rates. Neither the number of the individuals demanding other
service nor the question of the fares constitutes the entire question, but rather what the proper agency should be to furnish the best service to the
public generally and continuously at the least cost. Anything which tends to cripple seriously or destroy an established system of transportation that is
necessary to a community is not a convenience and necessity for the public and its introduction would be a handicap rather than a help ultimately in
such a field.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION: There is no claim or pretense that the Batangas Transportation Company has violated any of the terms and conditions of its
license. Neither does the Public Service Commission find as a fact that the granting of a license to Orlanes as a regular operator between the
points in question is required or necessary for the convenience of the traveling public, or that there is any complaint or criticism by the public of
the services rendered by the Batangas Transportation Company over the route in question.
So long as the first licensee keeps and performs the terms and conditions of its license and complies with the reasonable rules and
regulations of the Commission and meets the reasonable demands of the public, it should have more or less of a vested and preferential right
over a person who seeks to acquire another and a later license over the same route. Otherwise, the first license would not have protection on his
investment, and would be subject to ruinous competition and thus defeat the very purpose and intent for which the Public Service Commission
was created.
It does not appear that the public has ever made any complaint the Batangas Transportation Company, yet on its own volition and to
meet the increase of its business, it has applied to the Public Service Commission for authority to increase the number of daily trips to nineteen,
thus showing a spirit that ought to be commended.
And in Re Mount Baker Development Co., the Public Service Commission of Washington (P. U. R., 1925D, 705), held:

3. BATANGAS TRANSPORTATION CO., petitioner-appellant, vs.CAYETANO ORLANES, respondent-appellee


G.R. No. L-28865

December 19, 1928

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

We are clearly of the opinion that the order of the Commission granting the petition of Orlanes in question, for the reason therein stated, is null
and void, and that it is in direct conflict with the underlying and fundamental principles for which the Commission was created.1awphi1.net
The question presented is very important and far-reaching and one of first impression in this court, and for such reasons we have given this case
the careful consideration which its importance deserves. The Government having taken over the control and supervision of all public utilities, so
long as an operator under a prior license complies with the terms and conditions of his license and reasonable rules and regulation for its
operation and meets the reasonable demands of the public, it is the duty of the Commission to protect rather than to destroy his investment by
the granting of a subsequent license to another for the same thing over the same route of travel. The granting of such a license does not serve its
convenience or promote the interests of the public.
The decision of the Public Service Commission, granting to Orlanes the license in question, is revoked and set aside, and the case is remanded to
the Commission for such other and further proceedings as are not inconsistent with this opinion. Neither party to recover costs on this appeal.

4. HOME INSURANCE COMPANY, plaintiff-appellee, vs. AMERICAN STEAMSHIP AGENCIES, INC. and
LUZON STEVEDORING CORPORATION, defendants, AMERICAN STEAMSHIP AGENCIES, INC., defendantappellant.
FACTS: "Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute bags of Peruvian fish meal
through SS Crowborough, covered by clean bills of lading Numbers 1 and 2, both dated January 17, 1963. The cargo, consigned to San Miguel
Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on March 7, 1963 and
was discharged into the lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc., there
were shortages amounting to P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and
the American Steamship Agencies, owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 the insurance value of the loss, as
full settlement of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship
Agencies, Home Insurance Company, as subrogee to the consignee, filed against them on March 6, 1964 before the Court of First Instance of
Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and quality that
it had received the same from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366 of the Code of Commerce stating
that the claim must be made within 24 hours from receipt of the cargo. American Steamship Agencies denied liability by alleging that under the
provisions of the Charter party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or damage of the
cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and that as a mere forwarding agent, it was not responsible
for losses or damages to the cargo.
The Court of First Instance, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered
what it received from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay plaintiff P14,870.71 with
legal interest plus P1,000 attorney's fees.
ISSUE: WON the stipulation in the charter party of the owner's non-liability valid so as to absolve the American Steamship Agencies from
liability for loss.
DECISION: The appellant is absolved from liability to plaintiff.
A perusal of the charter party referred to shows that while the possession and control of the ship were not entirely transferred to the
charterer, the vessel was chartered to its full and complete capacity. Furthermore, the, charter had the option to go north or south or viceversa, loading, stowing and discharging at its risk and expense.6 Accordingly, the charter party contract is one of affreightment over the whole
vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of
stipulation.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods caused by personal want of due
diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that she be properly manned, equipped and
supplied or by the personal act or default of the owner or its manager. Said paragraph, however, 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 on board, for whose acts the owner would ordinarily be liable except for said paragraph.
Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of the Code of Commerce making the ship
agent civilly liable for indemnities suffered by third persons arising from acts or omissions of the captain in the care of the goods and Article
1744 of the Civil Code under which a stipulation between the common carrier and the shipper or owner limiting the liability of the former for
loss or destruction of the goods to a degree less than extraordinary diligence is valid provided it be reasonable, just and not contrary to public
policy. The release from liability in this case was held unreasonable and contrary to the public policy on common carriers.

Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting
as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its
agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is
not involved, as in the case of a ship totally chartered for the use of a single party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal
contemplation merely a receipt and a document of title not a contract, for the contract is the charter party. The consignee may not claim
ignorance of said charter party because the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading
must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder, for loss or damage to the cargo, against
the shipowners, unless the same is due to personal acts or negligence of said owner or its manager, as distinguished from its other agents or
employees. In this case, no such personal act or negligence has been proved.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

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.

5. HERMINIO L. NOCUM, plaintiff-appellee, vs. LAGUNA TAYABAS BUS COMPANY, defendant-appellant


G.R. No. L-23733

October 31, 1969

FACTS: Appeal of the Laguna Tayabas Bus Co., defendant in the Court below, from a judgment of the said court (Court of First Instance of
Batangas) in its Civil Case No. 834, wherein appellee Herminio L. Nocum was plaintiff, sentencing appellant to pay appellee the sum of
P1,351.00 for actual damages and P500.00 as attorney's fees with legal interest from the filing of the complaint plus costs. Appellee, who was a
passenger in appellant's Bus No. 120 then making a trip within the barrio of Dita, Municipality of Bay, Laguna, was injured as a consequence of
the explosion of firecrackers, contained in a box, loaded in said bus and declared to its conductor as containing clothes and miscellaneous items
by a co-passenger. The findings of fact of the trial court are not assailed. The appeal is purely on legal questions.
ISSUE/S: WON Laguna Tayabas Bus Co. has any liability towards its passenger for not exercising extraordinary diligence as a common carrier.
DECISION: Laguna Tayabas Co. does not have any liability towards it passengers as it had exercised extraordinary diligence as a common
carrier by inspecting the package and the passenger, Nocum, informing them that what is inside the box are his clothings when, in fact, it was
not.
There is no question that Bus No. 120 was road worthy when it left its Manila Terminal for Lucena that morning of December 5,
1960. The injuries suffered by the plaintiff were not due to mechanical defects but to the explosion of firecrackers inside the bus which was
loaded by a co-passenger.
In this particular case before Us, it must be considered that while it is true the passengers of appellant's bus should not be made to
suffer for something over which they had no control, as enunciated in the decision of this Court cited by His Honor, fairness demands that in
measuring a common carrier's duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of
responsibility of all the passengers in regard to their common safety. It is to be presumed that a passenger will not take with him anything
dangerous to the lives and limbs of his co-passengers, not to speak of his own. Not to be lightly considered must be the right to privacy to
which each passenger is entitled. He cannot be subjected to any unusual search, when he protests the innocuousness of his baggage and nothing
appears to indicate the contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger's baggage
when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Calling a
policeman to his aid, as suggested by the service manual invoked by the trial judge, in compelling the passenger to submit to more rigid
inspection, after the passenger had already declared that the box contained mere clothes and other miscellaneous, could not have justified
invasion of a constitutionally protected domain. Police officers acting without judicial authority secured in the manner provided by law are not
beyond the pale of constitutional inhibitions designed to protect individual human rights and liberties. Withal, what must be importantly
considered here is not so much the infringement of the fundamental sacred rights of the particular passenger herein involved, but the constant
threat any contrary ruling would pose on the right of privacy of all passengers of all common carriers, considering how easily the duty to inspect
can be made an excuse for mischief and abuse. Of course, when there are sufficient indications that the representations of the passenger
regarding the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police authorities may be
solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of
propriety and, above all, the constitutional rights of the passenger. It is in this sense that the mentioned service manual issued by appellant to its
conductors must be understood.
Appellant further invokes Article 1174 of the Civil Code which relieves all obligors, including, of course, common carriers like
appellant, from the consequence of fortuitous events. The court a quo held that "the breach of contract (in this case) was not due to fortuitous
event and that, therefore, the defendant is liable in damages." Since We hold that appellant has succeeded in rebutting the presumption of
negligence by showing that it has exercised extraordinary diligence for the safety of its passengers, "according to the circumstances of the (each)
case", We deem it unnecessary to rule whether or not there was any fortuitous event in this case.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

Sirs discussion: It was already sufficient that the common carrier had inquired the passenger what are the contents of the package.
However, when there are sufficient indications that the representations of the passenger regarding the nature of his baggage may
not be true, in the interest of the common safety of all, the assistance of the police authorities may be solicited, not necessarily to
force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of propriety and, above
all, the constitutional rights of the passenger.
(CASE IS DIFFERENT IN AIRPORT SECURITY)

6. COMPAIA MARITIMA, petitioner, vs.INSURANCE COMPANY OF NORTH AMERICA, respondent.


G.R. No. L-18965
October 30, 1964
FACTS: Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compaia
Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for
their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed by
a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compaia Maritima's branch office in Davao in
compliance with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was completed on
October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both barges issued the
corresponding carrier's receipts and that issued by the.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same place to
await the arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded. During the night of October
29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. On
October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The damaged
hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying. During the period from
November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned
hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of 116,835.00. After reclassification, the value of the
reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30 representing
Macleod's expenses in checking, grading, rebating, and other fees for washing, cleaning and redrying in the amount of P19.610.00, the total loss
adds up to P60,421.02.
ISSUES: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was loaded on a
barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the hemp
to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the cargo or the sinking of the barge where it was loaded
due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability?;

... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the cotton been completely
surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and nothing remains to be
done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark.
333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R.
Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).

The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from Davao
City to Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the
receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good
order and condition." On the other hand, the authorities are to the effect that a bill of lading is not indispensable for the creation of a contract
of carriage.

Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of lading, although article 350 of the Code of Commerce provides
that "the shipper as well as the carrier of merchandise or goods may mutually demand that a bill of lading is not indispensable. As regards the form of
the contract of carriage it can be said that provided that there is a meeting of the minds and from such meeting arise rights and obligations, there
should be no limitations as to form." The bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations
of railroad companies, or as a condition imposed in the contract by the agreement of the parties themselves. The bill of lading is juridically a
documentary proof of the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other
words, the Code does not demand, as necessary requisite in the contract of transportation, the delivery of the bill of lading to the shipper, but gives
right to both the carrier and the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin,
Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13)

The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal
execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION:
1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by telephone the
services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped
to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the shipper's branch office,
Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the patrons of said lighters were
employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary therefor so much
so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein as follows: .
The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship
Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory
step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was
taken and the hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby subjecting them to the
principles and usages of the maritime law. In other words, here we have a complete contract of carriage the consummation of which has already
begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized
employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier
to the full payment of its freight upon completion of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are
received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on
their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the
vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the
time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded
directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of
landing is applicable to the goods as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied)

6. COMPAIA MARITIMA, petitioner, vs.INSURANCE COMPANY OF NORTH AMERICA, respondent.


G.R. No. L-18965
October 30, 1964
provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the
carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim offorce majeure or storm which
occurred on the night of October 29, 1952. But the evidence fails to bear this out.
Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions or measures
taken by the carrier to prevent the loss as may be inferred from the following findings of the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which
admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4) conclusively
showing that the barge was not seaworthy it should be noted that on the night of the nautical accident there was no storm, flood, or other natural
disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao on October
29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour;
and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as storm (Northern
Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025 to the
'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission
of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'." We are not
prepared to dispute this finding of the Court of Appeals.

7. LU DO & LU YM CORPORATION, petitioner-defendant, vs. I. V. BINAMIRA, respondent-plaintiff.


G.R. No. L-9840
April 22, 1957
FACTS: On April 4, 1954, plaintiff filed an action in the Court of First Instance of Cebu against defendant to recover the sum of P324.63 as
value of certain missing shipment, P150 as actual and compensatory damages, and P600 as moral and pecuniary damages. After trial, the court
rendered judgment ordering defendant to pay plaintiff the sum of P216.84, with legal interest. On appeal, the Court of Appeals affirmed the
judgment, hence the present petition for review. The Delta Photo Supply Company of New York shipped on board the M/S "FERNSIDE" at
New York, U.S.A., six cases of films and/or photographic supplies consigned to the order of respondent I. V. Binamira. For this shipment, Bill
of Lading No. 29 was issued. The ship arrived at the port of Cebu on September 23, 1951 and discharged her cargo on September 23, and 24,
1951, including the shipment in question, placing it in the possession and custody of the arrastre operator of said port, the Visayan Cebu
Terminal Company, Inc.
Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to unload its cargo. During the discharge, good order cargo was
separated from the bad order cargo on board the ship, and a separate list of bad order cargo was prepared by Pascual Villamor, checker of the
stevedoring company. All the cargo unloaded was received at the pier by the Visayan Cebu Terminal Company Inc, arrastre operator of the port.
This terminal company had also its own checker, Romeo Quijano, who also recorded and noted down the good cargo from the bad one. The
shipment in question, was not included in the report of bad order cargo of both checkers, indicating that it was discharged from the, ship in
good order and condition.
Three days after the goods were unloaded from the ship, respondent took delivery of his six cases of photographic supplies from the arrastre
operator. He discovered that the cases showed signs of pilferage and, consequently, he hired marine surveyors, R. J. del Pan & Company, Inc., to
examine them. The surveyors examined the cases and made a physical count of their contents in the presence of representatives of petitioner,
respondent and the stevedoring company. The finding of the surveyors showed that some films and photographic supplies were missing valued
at P324.63. It appears from the evidence that the six cases of films and photographic supplies were discharged from the ship at the port of Cebu
by the stevedoring company hired by petitioner as agent of the carrier. All the unloaded cargo, including the shipment in question, was received
by the Visayan Cebu Terminal Company Inc., the arrastre operator appointed by the Bureau of Customs. It also appears that during the
discharge, the cargo was checked both by the stevedoring company hired by petitioner as well as by the arrastre operator of the port, and the
shipment in question, when discharged from the ship, was found to be in good order and condition. But after it was delivered to respondent
three days later, the same was examined by a marine surveyor who found that some films and supplies were missing valued at P324.63.
ISSUE: Is the carrier responsible for the loss considering that the same occurred after the shipment was discharged from the ship and placed in
the possession and custody of the customs authorities?

1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay, nondelivery or misdelivery, or loss of or damage to the goods occurring
while the goods are not in the actual custody of the Carrier. . . . (Emphasis ours.)
(Paragraph 1, Exhibit "1")
2. . . . The responsibility of the Carrier in any capacity shall altogether cease and the goods shall be considered to be delivered and at their own risk and
expense in every respect when taken into the custody of customs or other authorities. The Carrier shall not be required to give any notification of
disposition of the goods. . . . (Emphasis ours.)
(Paragraph 12, Exhibit "1")
3. Any provisions herein to the contrary notwithstanding, goods may be . . . by Carrier at ship's tackle . . . and delivery beyond ship's tackle shall been
tirely at the option of the Carrier and solely at the expense of the shipper or consignee.
(Paragraph 22, Exhibit "1")

It therefore appears clear that the carrier does not assume liability for any loss or damage to the goods once they have been "taken into the
custody of customs or other authorities", or when they have been delivered at ship's tackle. These stipulations are clear. They have been adopted
precisely to mitigate the responsibility of the carrier considering the present law on the matter, and we find nothing therein that is contrary to
morals or public policy that may justify their nullification. We are therefore persuaded to conclude that the carrier is not responsible for the loss
in question, it appearing that the same happened after the shipment had been delivered to the customs authorities.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION: As a rule, a common carrier is responsible for the loss, destruction or deterioration of the goods it assumes to carry from one
place to another unless the same is due to any to any of the causes mentioned in Article 1734 on the new Civil Code, and that, if the goods are
lost, destroyed or deteriorated, for causes other that those mentioned, the common carrier is presumed to have been at fault or to have acted
negligently, unless it proves that it has observed extraordinary diligence in their care (Article 1735, Idem.), and that this extraordinary liability
lasts from the time the goods are placed in the possession of the carrier until they are delivered to the consignee, or "to the person who has the
right to receive them" (Article 1736, Idem.), but these provisions only apply when the loss, destruction or deterioration takes place while the
goods are in the possession of the carrier, and not after it has lost control of them. The reason is obvious. While the goods are in its possession,
it is but fair that it exercise extraordinary diligence in protecting them from damage, and if loss occurs, the law presumes that it was due to its
fault or negligence. This is necessary to protect the interest the interest of the owner who is at its mercy. The situation changes after the goods
are delivered to the consignee.
While we agree with the Court of Appeals that while delivery of the cargo to the consignee, or to the person who has a right to receive them",
contemplated in Article 1736, because in such case the goods are still in the hands of the Government and the owner cannot exercise dominion
over them, we believe however that the parties may agree to limit the liability of the carrier considering that the goods have still to through the
inspection of the customs authorities before they are actually turned over to the consignee. This is a situation where we may say that the carrier
losses control of the goods because of a custom regulation and it is unfair that it be made responsible for what may happen during the
interregnum. And this is precisely what was done by the parties herein. In the bill of lading that was issued covering the shipment in question,
both the carrier and the consignee have stipulated to limit the responsibility of the carrier for the loss or damage that may because to the goods
before they are actually delivered by insert in therein the following provisions:

8. AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees, vs. PHILIPPINE STEAM NAVIGATION


CO., defendant-appellant
FACTS: The facts culled from the pleadings and the stipulations submitted by the parties are as follows:
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the appellant's vessel, FS-176, for carriage from Manila
to Pulupandan, Negros Occidental, the following cargoes, to wit:
Clara Uy Bico
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando
44 cartons of colored paper,
toys and general merchandise valued at P1,070.50;
as evidenced by the corresponding bills of lading issued by the appellant.

Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were discharged, complete and in good order, unto
the warehouse of the Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse was razed by a fire of unknown origin,
destroying appellees' cargoes. Before the fire, however, appellee Uy Bico was able to take delivery of 907 cavans of rice 2 Appellees' claims for
the value of said goods were rejected by the appellant.
RTC rules in favor of Bico and Servando and held the carrier liable.
ISSUE: WON the carrier should be held liable.
DECISION: The carrier is NOT liable.
Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary diligence from the moment the goods are
unconditionally placed in their possession "until the same are delivered, actually or constructively, by the carrier to the consignee or to the
person who has a right to receive them, without prejudice to the provisions of Article 1738. "
The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the delivery contemplated
by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss is
chargeable against the appellant.
It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit the responsibility of
the carrier for the loss or damage that may be caused to the shipment by inserting therein the following stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless such loss or damage is due to negligence of
carrier. Nor shall carrier be responsible for loss or damage caused by force majeure, dangers or accidents of the sea or other waters; war; public
enemies; . . . fire . ...

We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy.
Appellees would contend that the above stipulation does not bind them because it was printed in fine letters on the back-of the bills of lading;
and that they did not sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu vs. Court of Appeals, promulgated
June 29, 1979, 3 where the same issue was resolved in this wise:
While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is nevertheless bound by the provisions thereof. 'Such
provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of
knowledge or assent to the regulation'. It is what is known as a contract of 'adhesion', in regards which it has been said that contracts of
adhesion wherein one party imposes a readymade form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely
prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent." (Tolentino, Civil Code,
Vol. IV, 1962 Ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of the basic principle of law written in Article 1174 of the
Civil Code:

Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from liability for nonperformance. The Partidas, 4 the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito' as 'an event that takes place by accident
and could not have been foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robbers.'
In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5 says: "In a legal sense and, consequently, also in relation to
contracts, a 'caso fortuito' presents the following essential characteristics: (1) the cause of the unforeseen and unexpected occurrence, or of the
failure of the debtor to comply with his obligation, must be independent of the human will; (2) it must be impossible to foresee the event which
constitutes the 'caso fortuito', or if it can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be free from any participation in the aggravation of the injury
resulting to the creditor." In the case at bar, the burning of the customs warehouse was an extraordinary event which happened independently of
the will of the appellant. The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier, incurred in delay in the performance of its obligation. It appears that appellant had
not only notified appellees of the arrival of their shipment, but had demanded that the same be withdrawn. In fact, pursuant to such demand,
appellee Uy Bico had taken delivery of 907 cavans of rice before the burning of the warehouse.
Nor can the appellant or its employees be charged with negligence. The storage of the goods in the Customs warehouse pending withdrawal
thereof by the appellees was undoubtedly made with their knowledge and consent. Since the warehouse belonged to and was maintained by the
government, it would be unfair to impute negligence to the appellant, the latter having no control whatsoever over the same.
In the present case that the cause of the fire that broke out in the Custom's warehouse was in any way attributable to the negligence of
the appellant or its employees, under the circumstances, the carrier is plainly not responsible.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were
inevitable.

9. PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE AIR LINES, INC., defendant and appellant
G.R. No. L-20099
July 7, 1966
FACTS: Parmanand Shewaram was, on November 23, 1959, a paying passenger with ticket No. 4-30976, on defendant's aircraft flight No.
976/910 from Zamboanga City bound for Manila; that defendant is a common carrier engaged in air line transportation in the Philippines,
offering its services to the public to carry and transport passengers and cargoes from and to different points in the Philippines; that on the
above-mentioned date of November 23, 1959, he checked in three (3) pieces of baggages a suitcase and two (2) other pieces; that the suitcase
was mistagged by defendant's personnel in Zamboanga City, as I.G.N. (for Iligan) with claim check No. B-3883, instead of MNL (for Manila).
When plaintiff Parmanand Shewaram arrived in Manila on the date of November 23, 1959, his suitcase did not arrive with his flight because it
was sent to Iligan. So, he made a claim with defendant's personnel in Manila airport and another suitcase similar to his own which was the only
baggage left for that flight, the rest having been claimed and released to the other passengers of said flight, was given to the plaintiff for him to
take delivery but he did not and refused to take delivery of the same on the ground that it was not his, alleging that all his clothes were white and
the National transistor 7 and a Rollflex camera were not found inside the suitcase, and moreover, it contained a pistol which he did not have nor
placed inside his suitcase; that after inquiries made by defendant's personnel in Manila from different airports where the suitcase in question
must have been sent, it was found to have reached Iligan and the station agent of the PAL in Iligan caused the same to be sent to Manila for
delivery to Mr. Shewaram and which suitcase belonging to the plaintiff herein arrived in Manila airport on November 24, 1959; that it was also
found out that the suitcase shown to and given to the plaintiff for delivery which he refused to take delivery belonged to a certain Del Rosario
who was bound for Iligan in the same flight with Mr. Shewaram; that when the plaintiff's suitcase arrived in Manila as stated above on
November 24, 1959, he was informed by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport of the arrival of his suitcase but of
course minus his Transistor Radio 7 and the Rollflex Camera; that Shewaram made demand for these two (2) items or for the value thereof but
the same was not complied with by defendant.
ISSUE: Whether the carrier is only liable for P100.00 as printed at the back of the plane ticket or the amount of the lost package.
DECISION: In Article 1750 of the New Civil Code which provides as follows:
A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely agreed upon.

In accordance with the above-quoted provision of Article 1750 of the New Civil Code, the pecuniary liability of a common carrier may, by
contract, be limited to a fixed amount. It is required, however, that the contract must be "reasonable and just under the circumstances and has
been fairly and freely agreed upon.
The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its
pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case before us We believe that
the requirements of said article have not been met. It cannot be said that the appellee had actually entered into a contract with the appellant,
embodying the conditions as printed at the back of the ticket stub that was issued by the appellant to the appellee. The fact that those conditions
are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the appellee was
aware of those conditions such that he had "fairly and freely agreed" to those conditions. The trial court has categorically stated in its decision
that the "Defendant admits that passengers do not sign the ticket, much less did plaintiff herein sign his ticket when he made the flight on
November 23, 1959." We hold, therefore, that the appellee is not, and cannot be, bound by the conditions of carriage found at the back of the
ticket stub issued to him when he made the flight on appellant's plane on November 23, 1959.
The liability of the appellant in the present case should be governed by the provisions of Articles 1734 and 1735 of the New Civil Code:

It having been clearly found by the trial court that the transistor radio and the camera of the appellee were lost as a result of the negligence of
the appellant as a common carrier, the liability of the appellant is clear it must pay the appellee the value of those two articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in support of its decision, this Court had laid down the rule that
the carrier cannot limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence.
Corpus Juris, volume 10, p. 154, says:

"Par. 194, 6. Reasonableness of Limitations. The validity of stipulations limiting the carrier's liability is to be determined by their reasonableness and their
conformity to the sound public policy, in accordance with which the obligations of the carrier to the public are settled. It cannot lawfully stipulate for exemption
from liability, unless such exemption is just and reasonable, and unless the contract is freely and fairly made. No contractual limitation is reasonable which is
subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible. a. Negligence (1) Rule in America (a) In Absence of Organic or Statutory Provisions Regulating
Subject aa. Majority Rule. In the absence of statute, it is settled by the weight of authority in the United States, that whatever limitations against its commonlaw liability are permissible to a carrier, it cannot limit its liability for injury to or loss of goods shipped, where such injury or loss is caused by its own negligence.
This is the common law doctrine and it makes no difference that there is no statutory prohibition against contracts of this character.
"Par. 196. bb. Considerations on which Rule Based. The rule, it is said, rests on considerations of public policy. The undertaking is to carry the goods, and to
relieve the shipper from all liability for loss or damage arising from negligence in performing its contract is to ignore the contract itself. The natural effect of a
limitation of liability against negligence is to induce want of care on the part of the carrier in the performance of its duty. The shipper and the common carrier are
not on equal terms; the shipper must send his freight by the common carrier, or not at all; he is therefore entirely at the mercy of the carrier unless protected by
the higher power of the law against being forced into contracts limiting the carrier's liability. Such contracts are wanting in the element of voluntary assent.
"Par. 197. cc. Application and Extent of Rule (aa) Negligence of Servants. The rule prohibiting limitation of liability for negligence is often stated as a
prohibition of any contract relieving the carrier from loss or damage caused by its own negligence or misfeasance, or that of its servants; and it has been
specifically decided in many cases that no contract limitation will relieve the carrier from responsibility for the negligence, unskillfulness, or carelessness of its
employer." (Cited in Ysmael and Co. vs. Barreto, 51 Phil. 90, 98, 99).

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

ART. 1734. Common carries are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following
causes only:
(1) Flood, storm, earthquake, 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.
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.

10. PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND
KYOSEI KISEN KABUSHIKI KAISHA, respondents.
FACTS: 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 Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines,
as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior to its
voyage, 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. 3Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to
the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th
of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected by the charterer's representative and found
fit to take a load of urea in bulk. 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. Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were
opened with the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump trucks which were parked
alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-partly (which provided for an
F.I.O.S. clause). The hatches remained open throughout the duration of the discharge. 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. The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an
opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed
in-between and alongside the trucks to contain spillages of the ferilizer.
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th).10 A private marine and cargo
surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft
readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 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. The same
results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered
was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and
dirt. Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier,
KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to
have been contaminated with dirt.
RTC rules in favor of Planters and held Kyosei liable against the damage incurred. CA reversed RTCs ruling.
ISSUE:
1. WON a charter-party between a shipowner and a charterer transform a common carrier into a private one
2. (in connection with the 1st issue) WON the carrier was presumed to be negligence in case of loss or damage to its cargo

1.
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; Charter parties are of two types:
(a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for
others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. 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 vessel only, either for a determinate period of time or
for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and 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. The distinction between a "common or public carrier" and a "private or special carrier" lies
in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although
involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier.
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary
diligence in the vigilance over the goods they carry. In the case of private carriers, however, the exercise of ordinary diligence in the carriage of
goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault
or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such presumption applies to private
carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the
carrier.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION:

10. PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND
KYOSEI KISEN KABUSHIKI KAISHA, respondents.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately
for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of
the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the
crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident
in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other
technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner.
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. It is only
when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least
insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the property of the charterer.
1.
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the
fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the
burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or
deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability.
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence.
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.
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if
caused by the charterer of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and
deterioration which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the
goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier, nonetheless,
shall be liable for the loss and damage resulting from the preceding causes 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 has established among careful persons.

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. The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It
rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it
was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with 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.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of bulk shipping. Mr.
Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound consisting mostly of
ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull
does not exceed eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell,
losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The
primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials
during the unloading process. The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high
temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its
particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original
market value. The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact
that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy condition of the various
pieces of equipment used in transporting and hauling it.

11. EASTERN SHIPPING LINES, INC., Petitioner, v. THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA
FIRE & MARINE INSURANCE CO., LTD., Respondents.
FACTS: On or before June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc., 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. 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. On May 11, 1978, respondent Development Insurance & Surety Corporation 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. 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. It contended
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 because of fire was established, the burden of proving negligence of the vessel is shifted to the cargo shipper.
The lower court ruled in favor the respondents.
ISSUE: WON petitioner-carrier should be held liable.
DECISION: It is liable. The court is 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. It does not fall within the category of an act of God unless caused by lightning or
by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier. The burden to prove that it has exercised
the required extraordinary diligence is therefore on the petitioner-carrier. However, it has been found that:
"The cargoes in question were, according to the witnesses for the defendant, placed in hatches No. 2 and 3 of the vessel. Boatswain
Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No. 3; 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; that carbon dioxide was ordered released
and the crew was ordered to open the hatch covers of No. 2 hold for commencement of fire fighting by sea water; that all of these efforts
were not enough to control the fire.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

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. Defendants evidence did not likewise show the 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.
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.

12. SAMAR MINING COMPANY, INC., vs. NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC.,
FACTS: The case arose from an importation made by SAMAR MINING COMPANY, INC., of one (1) crate Optima welded wedge wire
sieves through the M/S SCHWABENSTEIN owned by defendant-appellant NORDEUTSCHER LLOYD, (represented in the Philippines by
its agent, C.F. SHARP & CO., INC.), which shipment is covered by Bill of Lading No. 18 duly issued to consignee SAMAR MINING
COMPANY, INC. Upon arrival of the aforesaid vessel at the port of Manila, the aforementioned importation was unloaded and delivered in
good order and condition to the bonded warehouse of AMCYL. The goods were however never delivered to, nor received by, the consignee at
the port of destination Davao. When the letters of complaint sent to defendants failed to elicit the desired response, plaintiff filed a formal
claim but the former neither paid. Hence, the filing of the instant suit to enforce payment. Defendants-appellants brought in AMCYL as third
party defendant.
Bill of Lading No. 18 sets forth in page 2 thereof that one (1) crate of Optima welded wedge wire sieves was received by the carrier
NORDEUTSCHER LLOYD at the "port of loading" which is Bremen, Germany, while the freight had been prepaid up to the port of
destination or the "port of discharge of goods in this case, Davao, the carrier undertook to transport the goods in its vessel, M/S
SCHWABENSTEIN only up to the "port of discharge from ship-Manila. Thereafter, the goods were to be transshipped by the carrier to the
port of destination or "port of discharge of goods. Under its Section 1, 3rd paragraph, the liability of the carrier are spelled out: The carrier shall not
be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter ship's tackle to be loaded or after the goods leave ship's tackle to be
discharged, transshipped or forwarded. Also its Section 11 states that:
Whenever the carrier or m aster may deem it advisable or in any case where the goods are placed at carrier's disposal at or
consigned to a point where the ship does not expect to load or discharge, the carrier or master may, without notice, forward the whole or
any part of the goods before or after loading at the original port of shipment, ... This carrier, in making arrangements for any transshipping
or forwarding vessels or means of transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper
and without any other responsibility whatsoever even though the freight for the whole transport has been collected by him. ... Pending or
during forwarding or transshipping the carrier may store the goods ashore or afloat solely as agent of the shipper and at risk and expense of
the goods and the carrier shall not be liable for detention nor responsible for the acts, neglect, delay or failure to act of anyone to whom
the goods are entrusted or delivered for storage, handling or any service incidental thereto.

It was the contention of the defendants that they have discharged the goods in full and good condition unto the custody of AMCYL
at the port of discharge from ship Manila, and therefore, pursuant to the aforequoted stipulation (Sec. 11) in the bill of lading, their
responsibility for the cargo had ceased.
The trial court rendered judgment in favor of plaintiff. However, the Court stated that defendants may recoup whatever they may pay
plaintiff by enforcing the judgment against third party defendant AMCYL which had earlier been declared in default.

DECISION: THE CARRIER IS NOT LIABLE.


There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where the goods
had already reached their place of destination and are stored in the warehouse of the carrier. The subject goods were still awaiting transshipment
to their port of destination, and were stored in the warehouse of a third party when last seen and/or heard of. However, Article 1736 is
applicable to the instant suit. Under said article, the carrier may be relieved of the responsibility for loss or damage to the goods upon actual or
constructive delivery of the same by the carrier to the consignee, or to the person who has a right to receive them. In sales, actual delivery has
been defined as the ceding of corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by some
person authorized by him to receive the goods as his representative for the purpose of custody or disposal. By the same token, there is actual
delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a
reasonable time is given him to remove the goods. The court a quo found that there was actual delivery to the consignee through its duly
authorized agent, the carrier.
Two undertakings appeared embodied and/or provided for in the Bill of Lading in question. The first is FOR THE TRANSPORT
OF GOODS from Bremen, Germany to Manila. The second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao,
with appellant acting as agent of the consignee. At the hiatus between these two undertakings of appellant which is the moment when the
subject goods are discharged in Manila, its personality changes from that of carrier to that of agent of the consignee. Thus, the character of
appellant's possession also changes, from possession in its own name as carrier, into possession in the name of consignee as the latter's agent.
Such being the case, there was, in effect, actual delivery of the goods from appellant as carrier to the same appellant as agent of the consignee.
Upon such delivery, the appellant, as erstwhile carrier, ceases to be responsible for any loss or damage that may befall the goods from that point
onwards. This is the full import of Article 1736, as applied to the case before Us.
But even as agent of the consignee, the appellant cannot be made answerable for the value of the missing goods, It is true that the
transshipment of the goods, which was the object of the agency, was not fully performed. However, appellant had commenced said
performance, the completion of which was aborted by circumstances beyond its control. An agent who carries out the orders and instructions of
the principal without being guilty of negligence, deceit or fraud, cannot be held responsible for the failure of the principal to accomplish the
object of the agency.
The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the Philippines.
Neither is there any showing of notorious incompetence or insolvency on the part of AMCYT, which acted as appellant's substitute in storing
the goods awaiting transshipment.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

ISSUE: WON the carrier should be held responsible.

13. SMITH BELL AND CO. (PHILS.), INC., vs. HON. PEDRO M. GIMENEZ, as Auditor General
FACTS: Upon requisition by the Municipal Treasurer of Paniqui, Tarlac, the Bureau of Supply Coordination sent an order to petitioner for 1
Underwood Typewriter, Model SX 161, 15" carriage, elite type, at a price of P820.00 taxes included at a term of sale of F.O.B Manila.
Government Bill of Lading No. 49226 signed by Eutiquio Flores, Principal Storekeeper of Supply Coordination, authorized the Phil-American
Freight Forwarding Services, Inc., to receive, carry and deliver the typewriter to the Municipal Treasurer of Paniqui. An agent of the carrier
signed for the receipt of the typewriter, on August 28, 1958 in apparent good order, but "contents and condition of contents of sealed packages
unknown". By Commercial Way Bill No. 1114 of the Phil.-American Freight Forwarding Services, Inc., the carrier acknowledged on August 28,
1958 sending one carton Underwood Typewriter, Model Brand New from consignor Smith Bell at Manila to the consignee the Municipal
Treasurer of Paniqui. On September 9, 1958, at dawn, the municipal building of Paniqui was totally razed by fire. After the delivery, petitioner
sent a bill covering the typewriters cost. On October 25, 1958, the Municipal Council of Paniqui adopted Resolution No. 111 in effect
requesting petitioner to condone the payment of the said typewriter, it having been burned 10 days after it was bought with all the office
equipment when the municipal building was totally razed by fire. Petitioner declined the request.
The Municipal Treasurer of Paniqui, thereafter submitted to the Provincial Treasurer of Tarlac a voucher covering the payment of the
typewriter. It was referred to the administrative deputy for investigation and was found that there was actual delivery of the typewriter and that
the municipality was liable for the payment thereof. The Provincial Treasurer in viewof this report, indorsed the papers to the Provincial
Auditor, with the statement that payment be effected as soon as possible. The Provincial Auditor, instead, forwarded the papers to the Auditor
General for final decision, which latter official disapproved the claim and held that the Municipality of Paniqui is not liable. In refusing to pass
the claim in audit, respondent held that there was no delivery, and that the article in question was never presented for inspection and verification
as agreed upon and consequently, the ownership of the typewriter did not pass to the consignee, and the risk of loss remained with the seller.

DECISION: The municipality of Paniqui is legally bound to pay for the price of the typewriter involved herein and, therefore, the decision of
the Auditor General is hereby reversed.
There was actual delivery of the typewriter. First, the records of the carrier proves it; the testimony of the policemanon guard at the
municipal building of Paniqui at the time of its delivery in the afternoon of Saturday, August 30, 1958 and who personally received the same,
establishes it; and testimony of the then municipal mayor who saw the delivery and ordered the taking of the typewriter to his office,
undisputably corroborates it. Second, a verification of the debris after the fire, conclusively shows that there was one additional typewriter
burned in the premises, more than those formerly present in the municipal building before said fire. If these were not sufficient, the official act
of the municipal council in adopting the resolution of October 25, 1958, requesting the petitioner herein, in effect, to condone the payment of
the typewriter purchased by the municipality, shows beyond doubt that the typewriter was actually delivered to, and received by said
municipality. The Auditor General, in his decision, depended more on the technicalities when he based his refusal to pass in audit the claim of
petitioner, on the mere fact that the delivery of the machine was made not to the municipal treasurer personally (who was the consignee named
in the bill of lading), or to his duly authorized representative as required in the bill of lading, but to a policeman of the same municipality. But
this circumstance has been explained both by the municipal treasurer himself and the policeman and the mayor who took delivery of the
machine, to the effect that the delivery, was made on a Saturday afternoon when the municipal treasurer's office was already closed, and that the
municipal treasurer went to Manila on official business from September 2 to 6, returning to Paniqui only on the following Saturday, September
7, when he went to his office late in the afternoon just to fix his papers. In this Connection, let it be noted that the non-compliance of the
condition in the bill of lading that delivery must be made to the consignee or his representative, is attributable to the carrier and not to the
petitioner. And, since the carrier was chosen and authorized to make the delivery by the Bureau of Supply Coordination itself, certainly the
petitioner cannot be held responsible for such misdelivery, if at all it was one.
The fact that the typewriter purchased by the municipality was of a 15-inch carriage-type and that none of those found in the debris
had such make, is no sufficient reason to conclude that the typewriter ordered was not delivered to the municipality. The fact remains that there
was one additional typewriter that was burned, which under the circumstances could be none other than one delivered to the municipality 10
days before the fire.
With respect to the claim that the petitioner failed to call the General Auditing Office for inspection and checking of the typewriter
before making delivery thereof, as contained in condition No. 2 in the mimeographed contract-order Exhibit B-1, it appears undisputed that this
is a condition embodied in the old forms used before 1957. However, as of January 22 of that year (1957), General Auditing Office circular No.
45 was promulgated providing that "effective immediately, employees of the General Auditing Office will no longer participate in an agency's
inspection of supplies, materials and equipment upon receipt, where the amount of the order is P2,000.00 or less." This circular was
supplemented by GAO Provincial Auditor's circular No. 35 of April 24, 1957 to the effect that "deliveries of supplies, materials and equipment
of P2,000.00 or less per order need not be submitted to the Auditor for inspection."
Lastly, the fact that the municipal officials of Paniqui took delivery of the typewriter in question and made use thereof for a period of
10 days, constitutes proof that said typewriter was accepted and the municipality thereby, as a buyer, became liable for the payment to the claim.
ART. 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods
have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after
the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. (New Civil Code).

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

ISSUE: WON the Municipality should be held liable.

14. INTERNATIONAL HARVESTER COMPANY OF THE PHILIPPINES, vs. CRISANTO ARAGON, Judge of Municipal
Court of Manila, and YARAS and COMPANY, FAR EAST
FACTS: On July 9, 1947, Yaras and Company, Far East, filed a complaint in the Municipal Court of Manila against the Manila Terminal Co.,
Inc., and International Harvester Company of the Philippines. On September 27, 1946, the S/S Belle of the Sea took on board at LA, California,
USA goods for shipment to Manila, Philippines, and covered by Bill of Lading No. 105. It arrived in Manila on December 23, 1946, and
discharged her cargo at the Government piers under the supervision and custody of the defendant Manila Terminal Co., Inc., in-charge of the
custody and delivery of the cargoes to the respective owners. However, out of the goods covered by the bill of lading, one carton of assorted
samples with a stipulated value of P200 was not delivered to Yaras and Company; and said merchandise was lost through the negligence either
of the Manila Terminal Co., Inc., or of the International Harvester Company of the Philippines (agent in the Phils of the vessel Belle of the Sea).
Before the trial, the International Harvester of the Philippines filed a motion to dismiss on the ground that the Municipal Court of Manila had no
jurisdiction to try case because the action involves admiralty or maritime jurisdiction. Said motion was overruled. Thereafter, it filed a petition for prohibition.
After trial, the Court of First Instance of Manila rendered judgment in favor of the petitioners, International Harvester Company of the
Philippines, ordering the respondent judge of the municipal court to desist from taking cognizance of civil case No. IV-262 as against the
International Harvester Company of the Philippines.
ISSUE: WON the court has jurisdiction

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION: It is clear that the International Harvester Company of the Philippines is alternatively being held liable for the loss of the cargo in
question through its negligence. It may be held liable only on the assumption that the goods had been lost in transit or being discharged at the
pier. Its liability is predicated on the contract of carriage by sea between the International Harvester Company of the Philippines and
Yaras and Company as evidenced by Bill of Lading No. 105, independently of the liability of the Manila Terminal Co., Inc, as operator of an
arrastre service.
Admiralty has jurisdiction over all maritime contracts, in whatever form, wherever they were executed or are to be performed, but not
over non-maritime contracts. Whether or not a contract is maritime depends not on the place where the contract is made and is to be executed,
making the locality the test, but on the subject-matter of the contract, making the true criterion a maritime service or a maritime transaction.
Specifically, admiralty has jurisdiction of a proceeding in rem or in personam for the breach of a contract of affreightment, whether evidenced
by a bill of lading or a charter party e.g. a suit of one party against the other for loss of or damage to the cargo (w/c is the topic of this case).
The contention of the respondent Yaras and Company that admiralty jurisdiction is not involved herein because the contract in
question was made upon land and to be terminated upon land, merely reflects the English rule which had long been rejected in the United
States. It is now settled in the latter country that "the jurisdiction of admiralty in matters of contract depends upon the subject-matter, i.e., the
nature and character of the contract, and that the English rule which conceded jurisdiction (with few exceptions) only to contracts made upon
and to be performed upon navigable waters, is inadmissable, the true criterion being that the contract has reference to maritime service or
maritime transaction."
The respondent Yaras and Company cannot invoke the rule against multiplicity of suits, for the simple reason that said rule has to be
subservient to the superior requirement that the court must have jurisdiction. In view of our conclusion that the cause of action of said
respondent against International Harvester Company of the Philippines involves admiralty over which the courts of first instance have original
jurisdiction (Par. 4, Sec. 56, Act No. 136 of the Philippine Commission, as reproduced in sec. 43 [d] of Republic Act No. 296), and to which the
jurisdiction of the justice of the peace courts (including municipal courts) does not extend (sec. 68, Act No. 136 of the Philippine Commission,
as amended by Commonwealth Act No. 4090, reproduced in par, 2, sec. 88, Republic Act No. 296), the respondent judge was properly
restrained from further proceeding with civil case No. IV-262.
We hold also that prohibition is the proper remedy, since the respondent judge was taking cognizance of the case over which he had
no jurisdiction and his order overruling the motion to dismiss filed by the petitioner-appellee is interlocutory and therefore not appealable.
The appealed judgment is therefore affirmed, with costs against the appellant Yaras and Company.

15. ELITE SHIRT FACTORY, INC., vs. THE HON. W. L. CORNEJO and/or THE CITY COURT OF MANILA,
COMPAIA MARITIMA and THE PHILIPPINE STEAM NAVIGATION CO., INC.,
FACTS: Elite Shirt Factory, Inc., delivered to respondent Compaia Maritima for shipment to designated consignees several cartons of
merchandise. While such cargo was stored in the bodega of respondent Compaia Maritima at Pulupandan, Negros Occidental, and before they
could be delivered to the consignees, a fire broke out, as a result of which appellant allegedly suffered damages in the amount of P2,124.00. A
complaint was filed for the reimbursement of said amount as actual damages in the City Court of Manila. A motion to dismiss said complaint
was filed by defendant on the ground that the city court does not have jurisdiction over said case, the same being in the nature of maritime and
admiralty, and within the jurisdiction of courts of first instance. Said motion to dismiss was denied by the city court for lack of merit, after which
defendant filed an answer to the complaint impleading respondent-appellee Philippine Steam Navigation Co., Inc., as third party defendant on
the ground, among others, that the fire which gutted the warehouse of Compaia Maritima and destroyed the goods stored therein started from
the section occupied by the third-party defendant and caused by the latter's negligence. As the impleaded party failed to appear by reason of
which an ex parte judgment was rendered against it and Compaia Maritima agreed to pay the petitioner plus interest at the legal rate so a
judgment by consent was rendered against it. Upon petition of the Philippine Steam Navigation Co., Inc. to set aside such judgment on the
ground that its failure to appear on the date of the hearing was due to an excusable neglect, respondent Judge set aside the decision rendered by
him. Necessarily, a motion for execution of such decision filed by petitioner was denied. A petition for certiorari with preliminary injunction was
filed by the petitioner w/ the CFI. The defendant invoked the question of jurisdiction alleging that the matter was within the exclusive admiralty
and maritime jurisdiction of the CFI in accordance w/ the Judiciary Act, respondent judge therefore being without power in the premises. This
contention was favored by the lower court.
The appellate court rendered a decision as follows:
"As regards the contention of the petitioner that the liability of the carrier, Compaia Maritima, from the time the shipment
was deposited in its warehouse in Pulupandan, Negros Occidental, was no longer as a common carrier but as a depository, is not well taken
for the reason that the warehouse in which the cargo was deposited at the time it was burned was owned by the carrier, Compaia
Maritima, itself. Hence, the ruling in the cases of Macondray & Co., Inc. vs. Delgado Bros., G.R. No. L-13116, April 28, 1960, and Delgado
Bros. vs. Home Insurance Company, G.R. No. L-15567, March, 1961, cited by the petitioner, to the effect that from the moment the
goods are discharged in the port of destination, the liability of the same receiving the goods and keeping them until they are delivered to
their designated consignees is that merely of a depositary, is not applicable to the present case for the simple reason that in those two cases
the shipments were delivered by the carrier to the Customs Arrastre Service, the arrastre operator of the Port of Manila. While the ruling in
said cases insofar as it states that the liability of the carrier ceases upon the discharge of the goods in the port of destination is correct, the
same cannot be correctly applied to the present case inasmuch as the goods in question were delivered not to another party but to the ware
house in Pulupandan, Negros Occidental, owned by the carrier, Compaia Maritima, which undertook the delivery of said goods to the
corresponding consignees by virtue of a maritime contract. Unfortunately, the said cargo was burned before the Compaia Maritima could
comply with its maritime obligation to deliver the same to the consignees."

However, the petitioner contended that "That is why if the goods were lost, burned or damaged after they were discharged at the port
of destination and while they were at the warehouse of the defendant and the latter is sued for the loss damage of the goods, then he is sued in
his capacity as a [depositary] and not that of a shipowner or as a common carrier. If that is so, then the one keeping the goods is not engaged in
maritime proper and therefore subject to the jurisdiction of the city court. The act of keeping the goods for safekeeping until they are delivered
to the consignee is merely incidental to the business or trade of navigation. So where the defendant is primarily sued for its liability as a
[depositary] of the goods and not as shipowner or as a common carrier, as in the instant case, whatever issue relative to maritime is merely
incidental to the main issue. It is well-settled that in cases where the goods were burned, lost or damaged while in store before they are delivered
to the consignees, then ordinary courts have jurisdiction."
ISSUE: WON the court has jurisdiction

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION: The admiralty jurisdiction as decided by us in a leading case, International Harvester Co. v. Aragon, extends over all maritime
contracts in whatever form entered into, whether executed or still to be performed. As long as the subject matter thereof is maritime service or a
maritime transaction, then it is embraced within such a concept. When, as in this case, the proceeding in effect is one for a breach of a contract
of shipment, the jurisdiction of the court of first instance under the specific provision of the Judiciary Act is undeniable. The view cannot be accepted, as
petitioner would insist both here and in the lower court, that the obligation of respondent Compaia Maritima from the contract entered into by
it with the petitioner had ceased the moment the goods were discharged in the port of destination. It was still under duty to deliver the same to
the consignees. Until there be compliance therewith, it cannot be said that the contract of affreightment was at an end. That remained the basis
of whatever liability, a point not passed upon in this proceeding, would attach to respondent Compaia Maritima.
The decision of the lower court of June 16, 1966 is affirmed. With costs against petitioner-appellant.

16. SOUTHERN LINES, INC., vs. COURT OF APPEALS and CITY OF ILOILO
FACTS: In 1948, the City of Iloilo requisitioned for rice from the National Rice and Corn Corporation in Manila. On August 24 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 and
costs P63,115.50. On September 3, 1948, the City 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."
Said shortage was equivalent to 41 sacks of rice with a the proportionate value of P6,486.35. To recover the said amount, the City filed a
complaint in the CFI of Iloilo against NARIC and the Southern Lines, Inc. 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 amount claimed and P1,554.94
representing the latter's counterclaim for handling and freight. The CA affirmed the judgment of the lower court.
ISSUE: WON the defendant-carrier, the herein petitioner, is liable for the loss or shortage of the rice shipped.
DECISION: 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.
Petitioners contention that it is exempted from liability on the ground 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, is untenable. If the fact of improper packing is known to the
carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of
liability for loss or injury resulting therefrom. 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."
Also, its contention that the respondent is precluded from filing an action for damages on account of its failure to present a claim w/n
24 hours from receipt of the shipment, it being a condition precedent to the accrual of the right of action to recover damages, is likewise
untenable. 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 the 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."

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 and cannot be raised for the first time at the trial or on appeal. 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.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

WHEREFORE, the decision of the Court of Appeals is hereby affirmed in all respects and the petition for certiorari denied.

17. FREIXAS AND COMPANY vs. PACIFIC MAIL STEAMSHIP CO


FACTS: The plaintiff, a regular general copartnership, caused to be delivered on board the defendant's steamship Colusa, then in the harbor of
San Francisco, California, one case of hat bands, described in the bill of lading as one case of dry goods, properly boxed and marked of
transportation to the port of Manila. The plaintiff paid the freight - not on ad valorem value but on space - on said merchandise from San Francisco to
Manila, in advance, to the defendant's authorized representatives in San Francisco. The Colusa arrived in the port of Manila on or about June 19,
1918, but neither the master thereof nor the defendant herein delivered to the plaintiff the aforesaid one case of hat bands, although demand
was made upon them for its delivery, and the said steamship departed from the port of Manila without landing said plaintiff's merchandise.
Plaintiff claimed for P1,624.78, the invoice value of the goods, from the defendant as damages for failure to deliver the said merchandise.
However, the defendant tendered to the plaintiff only the sum of S100 US currency w/c tender plaintiff rejected. A judgment in favor of the
plaintiff and against the defendant for the sum of P200, Philippine currency was rendered, with costs against the plaintiff. Two important clauses
in the bill of lading are important. First, Clause 25 states that all liability for loss or damage to goods shall be determined by their invoice cost
plus freight. Second, Clause 27 states that the shipper hereby represents and declares that the value of each package described on the face of this
bill of lading does not exceed the sum of $100, unless the shipper shall expressly declare and there shall be written on the face thereof a different
value; and upon such basis of valuation of said packages, the rate of freight thereon is adjusted. The petitioner contended that those were in
contravention of the principles of Article 1601 of the CC, that those were probably not within the contemplation of the parties and that there
was no consideration for said clauses because the amount of the freight was not based on the value of the merchandise but on the cubic foot
space occupied by it. Furthermore, it contended that the Civil Code does not permit any limitation of liability on the carrier's part unless the loss
or damage occurred through force majeure or an act of God for such limitation would be contrary to public policy.
ISSUE: WON said clauses are valid

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION: The clauses of the bill of lading here in question fall within the third kind of stipulation above described, and are therefore valid
and enforceable.
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.
In the absence of fraud committed by its representative in signing the bill of lading, it is conclusive against the petitioners.
Furthermore, it is undisputed that the latter did not declare the merchandise in question to be a higher value than $100 per package, but paid the
freight therefor upon the express understanding and agreement between the parties that its value did not exceed $100 per package. While it is
true that the unit of measure adopted in fixing the rate of freight was the cubic foot of space occupied by the merchandise, it is clear that such
rate was charged upon the stipulation that the value of east package, for which the carrier stood responsible, did not exceed $100. In other
words, if the shipper had declared that each package was of the value of P1,624.78 instead of P200, he would have had to pay a much higher rate
than that which he did pay on the basis of a valuation of P200 per package. We are, therefore, of the opinion that there was sufficient
consideration for the clauses or stipulations of the bill of lading in question. It has been settled that if a common carrier gives to a shipper the
choice of two rates, the lower of them conditioned upon his agreeing to a stipulated valuation of his property in case of loss, even by the
carrier's negligence, if the shipper makes such a choice, understandingly and freely, and names his valuation, he cannot thereafter recover more
than the value which he thus places upon his property. Estoppel is made the basis of this ruling, - that, having accepted the benefit of the lower
rate, in common honesty the shipper may not repudiate the conditions on which it was obtained, - but the rule and the effect of it are clearly
established. The limited valuation for which a recovery may be had does not permit the carrier to defeat recovery because of losses arising from
its own negligence, but serves to fix the amount of recovery upon an agreed valuation made in consideration of the lower rate stipulated to be
paid for the service.
For all of the foregoing reasons the judgment of the lower court should be affirmed, without any finding as to costs in this instance.
So ordered.

18. PHOENIX ASSURANCE COMPANY vs. MACONDRAY & CO., INC.,


FACTS: On October 24, 1961, the SS Fernbank received from Saco Lowell Shops, Greenville, South Carolina, a shipment consigned to the
order of the Commercial Bank and Trust Company, a Manila bank, with arrival notice to Floro Spinning Mills 280 Escolta, Manila. The
shipment was insured for $5,450 with Phoenix Assurance Company of New York against all risks including loss or damage. In the bill of lading
the shipment is described as one box and one carton containing textile machinery spare parts including ball bearings weighing 930 pounds. It
also contained a notation which states that on July 3, 1961 the consignee, Floro Spinning Mills, opened a letter of credit through the Commercial
Bank and Trust Company for the amount of $4,183.74 which was to expire on October 31, 1961 and that the shipper paid to the vessel's agent
at the port of loading the sum of $46.20 as freightage based on the gross weight of the shipment. Also, printed in the smallest type on its back is the
stipulation limiting the carrier's liability for loss or damage to $500 per package unless the shipper in writing declares the nature of the goods and
a higher valuation and pays additional freightage on the basis of such higher valuation and provides that hereunder (Clause No. 17). The bill of
lading provides that "in accepting this Bill of Lading, the shipper, owner and consignee of the goods, and the holder of the Bill of Lading agree
to be bound by all its stipulations, exceptions and conditions, whether written, stamped or printed, as fully as if they were all signed by such
shipper, owner, consignee or holder." The SS Fernbank arrived at the port of Manila on November 23, 1961. The shipment was discharged into
the custody of the Manila Port Service. The second carton was in bad order and was almost empty. It contained only a small package containing
a steel wire clip which was worthless. The Floro Spinning Mills operated by P. Floro & Sons, Inc., filed claims with Macondray & Co., Inc., the
agent of the vessel, and with Ker & Company, Ltd., the agent of the insurance company, for the value of the missing cargo in the total sum of
$1,512.78 (including freight, insurance premium and other charges) which was equivalent to P4,554.98 at the prevailing rate of exchange of
3.011. The defendant replied that the maximum limitation of the vessel's liability was $500 per package. Phoenix Assurance Company paid the
claim of Floro Spinning Mills in the sum of P4,554.98. As subrogee, it filed claims against defendant. The latter, however, pleaded the same
defense.
The lower court rendered judgment, ordering Macondray & Co., Inc. to pay Phoenix Assurance Company the sum of P1,505.50, as
the peso equivalent of five hundred dollars at the conversion rate of P3.011 to the dollar, "with costs against the plaintiff, deductible" from the
amount of the judgment. Phoenix Assurance Company appealed contending that as the assignee of the consignee, it is entitled from the carrier
the amount of the actual value of the cargo and not just 500$ but admitted that it was bound by the said clause in the B/L. It also contended
that the value of the goods was shown in the notation regarding the letter of credit for $4, 183.74 which was allegedly made by the shipper and
argued that extra freight was not paid because the carrier did not demand the payment of an increased freight. The lower court found that the
notation in the bill of lading as to the amount of the letter of credit was not the declaration of the value of the shipment which was required by
Clause 17 and which would render the carrier liable for loss or damage to the cargo in an amount exceeding $500. The lower court said that
notation was made for the convenience of the shippers and the bank in processing the letter of credit.
ISSUE: WON the carrier should be held liable for the actual amount of the cargo

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION: The lower court did not err in holding that Macondray & Co., Inc. is liable to Phoenix Assurance Company only in the amount of
$500 under Clause 17 of the bill of lading.
Three kinds of stipulation 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. Thus, a stipulation that the value of the goods shipped does not exceed $500 per freight
ton, or, in proportion for any part of ton, unless the value be expressly stated herein and ad valorem freight paid thereon was regarded as valid.
However, in view of the result arrived at in this appeal, appellant Phoenix Assurance Company, as the defeated party, is liable for the
costs of the suit which are allowed to the winning party as a matter of course.
The lower court decided this case on July 12, 1965. It applied the conversion rate which was current at the time of its decision. In
justice to the plaintiff, it should be paid the $500 at the conversion rate prevailing at the time of payment which the trial court should determine
if the parties cannot agree on the same.
WHEREFORE, the trial court's judgment is affirmed in the sense that the defendant's liability of $500 to the plaintiff should be paid
at the rate of exchange prevailing at the time the judgment is satisfied instead of at the conversion rate prevailing in 1965. Costs against the
plaintiff-appellant. SO ORDERED.

19. NORTHERN MOTORS, INC., vs. PRINCE LINE, ROOSEVELT STEAMSHIP AGENCY INC., COLUMBIAN ROPE
COMPANY OF THE PHILIPPINES, INC., and/or DELGADO BROTHERS, INC.,
FACTS: Plaintiff is the owner, by transfer from Liddel & Co., Inc., of a consignment of merchandise, consisting of 33 cases of auto spare parts
and accessories, covered by Bill of Lading No. 19, discharged in Manila into the custody of defendant Delgado Brothers, Inc., (arrastre operator)
and later cleared and taken delivery of by Luzon Brokerage Co., Inc., as agents of the consignee, upon presentation of the corresponding release
papers from the Bureau of Customs. However, instead of 33, cases, only 32 were delivered to plaintiff's broker. Plaintiff, thereupon, demanded
payment of the reasonable value (P3,117.53) of the missing case from defendant Delgado Brothers, Inc., but later offered to refund only
P500.00, claiming that under paragraph 15 of its Management Contract, its liability is limited only to P500.00 unless the value of the
merchandise is otherwise specified or manifested. Petitioner contended that the management contract in question is not binding upon it for the
reason that it was not a party thereto. Also, it reasoned out that said stipulation 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. Such being the issue, the lower court rendered a
judgment stating that as the defendant Delgado Brothers, Inc. admitted having received the 33 cases in good order condition from the shipper
and that it delivered only 32 cases to the consignee, the other defendants are now exempt from any liability. It ruled that the plaintiff is bound by
the provisions of the management contract and has complied, as a matter of fact, with such provisions as were necessary for it to take delivery
of the cargo. Plaintiff should not take advantage of the management contract when it suits him to do so, and reject its provisions when it thinks
otherwise. The pertinent provision of the Management Contract involved in this case provides:
Paragraph 15. It is further understood and strictly agreed that the CONTRACTOR (appellee) shall at its own expenses handle all
merchandise upon or over said piers, wharves 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; and the CONTRACTOR (appellee) shall be solely responsible as
an independent contractor for, and promptly pay to the steamship company, consignee, consignor, or other interested party or parties the
invoice value of each package but which in no case shall be more than five hundred pesos (P500.00) for each package, unless the value is
otherwise specified or manifested, and the corresponding arrastre charges had been paid, including all damages that may be suffered on
account of loss, destruction, or damage of any merchandise while in the custody or under the control of the CONTRACTOR (appellee)
upon any pier, wharf or other designated place under the supervision of the BUREAU, . . .

ISSUE: (1) whether the provisions of Paragraph 15 of the Management Contract between appellee Delgado Bothers, Inc. and the Bureau of
Customs are valid, and (2) in the affirmative, whether plaintiff-appellant is bound by said provisions.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

DECISION: (1) it is valid. The petitioner overlooks the fact that the limitation of defendant'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 arbitrary, 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 reason 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. It has been held that in the
absence of a prohibitory statute, the validity of a limitation of the amount of liability is generally upheld, where with a view to obtaining a
compensation commensurate to the risk assumed, the warehouseman stipulates that unless the valuation of the property committed to his care is
disclosed, his responsibility for loss or damage shall not exceed a certain amount or that in case of loss or damages the valuation fixed in the
receipt shall be controlling. The legal relationship created between the consignee or owner of the imported goods who withdraws them from the
customs house and the arrastre operator whose services are utilized for the purpose, is sufficiently akin to that existing between the consignee or
owner of shipped goods and the common carrier or that between a depositor and the warehouseman, to warrant, in our opinion, the application
of the same or similar principle. Paragraph 15 of the Management Contract in question contains provisions which are in the nature of
stipulations pour autrui, that is, for the benefit or in favor of a third party who is the petitioner in the case at bar is valid and binding using the 2nd
par of Art. 1311 of the NCC (If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its revocation). Having arrived at the conclusion that said contract contain provisions which clearly
and deliberately confer a favor upon a third person (using the language of the article aforecited), the next inquiry is whether the beneficiary,
herein appellant, has accepted said favor and communicated his acceptance to the obligor, herein appellee. In this regard, and to answer the 2nd
issue, the court affirmed the lower courts ruling that the plaintiff is bound by the provisions of the management contract and has complied, as a
matter of fact, with such provisions as were necessary for it to take delivery of the cargo.

20. EASTERN AND AUSTRALIAN STEAMSHIP CO., LTD. AND F. E. ZUELLIG, INC., vs. GREAT AMERICAN
INSURANCE CO. and COURT OF FIRST INSTANCE OF MANILA, BRANCH XIII,
FACTS: On December 10, 1971, the Jackson and Spring (Sydney) Pty. Ltd. shipped from Sydney, Australia, 1 case of impellers for warman
pump on board the SS "Chitral," a vessel owned and operated in the Philippines by Eastern & Australian Steamship Co., Ltd., thru its agent F.E.
Zuellig, Inc. under Bill of Lading No. 31, for delivery to Manila, Philippines in favor of consignee Benguet Consolidated, Inc. The shipment was
insured with Great American Insurance, Co. for P 35,921.81 against all risks. On December 22, 1971 it arrived in Manila but failed to discharge
the shipment or any part thereof. A demand was made for its delivery and having been unsuccessful, a claim was presented against them for the
value of the shipment. Failing to make good the claim, private respondent Great American Insurance Co. was compelled to pay the consignee P
35,921,81. As subrogee, said private respondent filed a complaint dated Nov. 20, 1972 against herein petitioners for recovery of the said amount
with legal interest and attorney's fees. However, the petitioners alleged that their liability for the loss of the shipment is only limited to L100
Sterling or its peso equivalent of P1,544.40 as per stipulation in the Bill of Lading and that even before the filing of the complaint, petitioners
have signified their willingness to pay the claim up to their limit of liability as stipulated in the Bill of Lading. The lower court found that under
Section 4 (5) of the Carriage of Goods by Sea Act, the carrier and the shipper may, in the absence of a declaration in the Bill of Lading of the
value of the goods shipped, fix a maximum liability of the shipper for the cargo lost or damages, but such maximum shall not be less than
$500.00 per package. Consequently, the agreement for a maximum liability of only L100 Sterling contained in Clause 17 of the Bill of Lading was
declared void for being contrary to law.
ISSUE: whether petitioner's liability is limited to L100 Sterling or its peso equivalent of P1,544.40 as stipulated in Clause 17 of the Bill of
Lading or whether petitioner's liability should be $500 or its peso equivalent in the sum of P3,217.50 pursuant to Sec. 4 (5) of the Carriage of
Goods by Sea Act.
DECISION: Petitioner's liability is limited to L100 Sterling or its peso equivalent of P1,544.40 as stipulated in Clause 17 of the Bill of Lading.
The contention of the petitioner that:
the first paragraphs of Section 4(5) of the Carriage of Goods by Sea Act prescribes a maximum liability of the vessel/carrier in the amount
of $500.00 per package; that said maximum liability, however, is not applicable in a shipment wherein the nature and a higher valuation of
the goods are indicated in the Bill of Lading; that the second paragraph refers to an agreement of the shipper and the carrier which
provides for another maximum necessarily higher than $500.00 and that said proviso should not be read in connection with stipulations in
Bills of Lading limiting the vessel's liability to less than $500.00 per package, otherwise, the very intent of the law setting the sum of $500.00
as the maximum liability of the carrier, per package, in the absence of a higher valuation of the goods as indicated in the Bill of Lading
would be nullified, for it would thereby become not the maximum, but the minimum liability of the carrier.

C.Y.D. Notes ()
University of Santo Tomas Faculty of Civil Law

is well taken. Its stand that the condition imposed in Clause 17 of the Bill of Lading should not be read in the light of second paragraph of
Section 4 (5) of the Carriage of Goods by Sea Act, is well taken. There is no inconsistency between Section 4 (5) of the Carriage of Goods by
Sea Act and Clause 17 of the Bill of Lading. The first part of the provision of Section 4 (5) of the Carriage of Goods by Sea Act limits the melee,
amount that may be recovered by the shipper in the absence of an agreement as to the nature and value of goods shipped. Said provision does
not prescribe the minimum and hence, it could be any amount which is below $500.00. Clause 17 of the questioned Bill of Lading also provides
the melee, for which the carrier is liable. It prescribes that the carrier may only be held liable for an amount not more than L100 Sterling which
is below the melee, limit required in the Carriage of Goods by Sea Act. It should be noted that both the Carriage of Goods by Sea Act and
Clause 17 of the Bill of Lading allow the payment beyond the respective melee, limit imposed therein, provided that the value of the goods have
been declared in the Bill of Lading. The second paragraph of Section 4 (5) of the Carriage of Goods by Sea Act prescribing the melee, amount
shall not be less than $500.00 refers to a situation where there is an agreement other than set forth in the Bill of Lading providing for a melee,
higher than $500.00 per package. In the case at bar, it is apparent that there had been no agreement between the parties, and hence, Clause 17 of
the Bill of Lading shall prevail. Furthermore, Article 1749 of the New Civil Code expressly allows the limitation of the carrier's liability. Pursuant
to such provision, where the shipper is silent as to the value of his goods, the carrier's liability for loss or damage thereto is limited to the
amount specified in the contract of carriage and where the shipper states the value of his goods, the carrier's liability for loss or damage thereto
is limited to that amount. Under a stipulation such as this, it is the duty of the shipper to disclose, rather than the carrier's to demand the true
value of the goods and silence on the part of the shipper will be sufficient to limit recovery in case of loss to the amount stated in the contract of
carriage.

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