Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 92288 February 9, 1993

BRITISH AIRWAYS, INC., petitioner,

vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL
SERVICES, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.

Monina P. Lee for private respondent.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of
Appeals1 affirming the decision of the trial court2 in ordering petitioner British Airways, Inc. to pay private respondent First
International Trading and General Services actual damages, moral damages, corrective or exemplary damages, attorney's
fees and the costs as well as the Resolution dated February 15, 19903 denying petitioner's Motion for Reconsideration in
the appealed decision.

It appears on record that on February 15, 1981, private respondent First International Trading and General Services Co., a
duly licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO
Engineering and Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said
principal.4

During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare
tickets for 93 contract workers with specific instruction to transport said workers to Jeddah on or before March 30, 1981.

As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private
respondent was immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private
respondent instructed its travel agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but the latter
failed to fly said workers, thereby compelling private respondent to borrow money in the amount of P304,416.00 in order to
purchase airline tickets from the other airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for
the 93 workers it had recruited who must leave immediately since the visas of said workers are valid only for 45 days and
the Bureau of Employment Services mandates that contract workers must be sent to the job site within a period of 30 days.

Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had received a
prepaid ticket advice from its Jeddah branch for the transportation of 27 contract workers. Immediatety, private respondent
instructed its travel agent to book the 27 contract workers with the petitioner but the latter was only able to book and
confirm 16 seats on its June 9, 1981 flight. However, on the date of the scheduled flight only 9 workers were able to board
said flight while the remaining 7 workers were rebooked to June 30, 1981 which bookings were again cancelled by the
petitioner without any prior notice to either private respondent or the workers. Thereafter, the 7 workers were rebooked to
the July 4,1981 flight of petitioner with 6 more workers booked for said flight. Unfortunately, the confirmed bookings of the
13 workers were again cancelled and rebooked to July 7, 1981.

On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the
receipt of the tax payments was submitted, the latter informed private respondent that it can only confirm the seats of the
12 workers on its July 7, 1981 flight. However, the confirmed seats of said workers were again cancelled without any prior
notice either to the private respondent or said workers. The 12 workers were finally able to leave for Jeddah after private
respondent had bought tickets from the other airlines.
As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the damages it
had incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings and payment of
the corresponding travel taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay the
amount of P350,000.00 representing damages and unrealized profit or income which was denied by the petitioner.

On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the remaining
recruited workers due to the delay in transporting the workers to Jeddah.5

On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of
Manila, Branch 1 in Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from Jeddah on
March 20, 1981 advising that the principal of private respondent had prepaid the airfares of 100 persons to transport
private respondent's contract workers from Manila to Jeddah on or before March 30, 1981. However, due to the
unavailability of space and limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice
consequently not even one of the alleged 93 contract workers were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private respondent to
Jeddah but the travel agent of the private respondent booked only 10 contract workers for petitioner's June 9, 1981 flight.
However, only 9 contract workers boarded the scheduled flight with 1 passenger not showing up as evidenced by the
Philippine Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C").6

Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight but said
travel agent cancelled the booking of 2 passengers while the other 3 passengers did not show up on said flight.

Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the
previous 5 contract workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight which
was accepted by petitioner subject to reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a
reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the bookings of private respondent's 12
contract workers. In the morning of July 7, 1981, the computer system of the petitioner was reinstalled and immediately
petitioner tried to reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines but both airlines
replied that no seat was available on that date and had to place the 12 workers on the wait list. Said information was duly
relayed to the private respondent and the 12 workers before the scheduled flight.

After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as
follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages;

4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and

5. To pay the costs.7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its Motion
for Reconsideration on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of which
reads:
 WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant.8

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it there being no perfected contract
of carriage existing between them as no ticket was ever issued to private respondent's contract workers and, therefore, the
obligation of the petitioner to transport said contract workers did not arise. Furthermore, private respondent's failure to
attach any ticket in the complaint further proved that it was never a party to the alleged transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of
one party in violation of the legal right or rights of the other.9 Petitioner's repeated failures to transport private respondent's
workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its
part. In resolving petitioner's theory that private respondent has no cause of action in the instant case, the appellate court
correctly held that:

In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2)
aspects of the same, namely: (a) the contract "to carry (at some future time)," which contract is consensual
and is necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines), and (b) the
contract "of carriage" or "of common carriage" itself which should be considered as a real contract for not
until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier.
(Paras, Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)

In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the
mere consent of the parties.

There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from
Manila to Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of
the PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's
contract workers advising the appellant that it must transport the contract workers on or before the end of
March, 1981 and the other batch in June, 1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus
no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of the
appellee, and the appellant had accepted such payment. The existence of this payment was never
objected to nor questioned by the appellant in the lower court. Thus, the cause or consideration which is
the fare paid for the passengers exists in this case.

The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is
the transport of the passengers from the place of departure to the place of destination as stated in the
telex.

Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage
imposing reciprocal obligations on both parties.

In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its
willingness for its contract workers to leave for their place of destination.

On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the
contract workers on their flight despite confirmation and bookings made by appellee's travelling agent.

xxx xxx xxx

Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified
the period of compliance therewith, and with emphasis that it could only be used if the passengers fly on
 BA. Under the circumstances, the appellant should have refused acceptance of the PTA from appellee's
principal or to at least inform appellee that it could not accommodate the contract workers.

xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the
appellee's contract workers who were recruited for ROLACO Engineering and the said contract workers
were the intended passengers in the aircraft of the appellant, the said contract "to carry" also involved the
appellee for as recruiter he had to see to it that the contract workers should be transported to ROLACO
Engineering in Jeddah thru the appellant's transportation. For that matter, the involvement of the appellee
in the said contract "to carry" was well demonstrated when
the appellant upon receiving the PTA immediately advised the appellee thereof. 10

Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to private
respondent since all expenses had already been subsequently reimbursed by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00 representing
actual damages refers to private respondent's second cause of action involving the expenses incurred by the latter which
were not reimbursed by ROLACO Engineering. However, in the Complaint 11 filed by private respondent, it was alleged that
private respondent suffered actual damages in the amount of P308,016.00 representing the money it borrowed from
friends and financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers. It is
clear therefore that the actual damages private respondent seeks to recover are the airline tickets and travel taxes it spent
for its workers which were already reimbursed by its principal and not for any other expenses it had incurred in the process
of recruiting said contract workers. Inasmuch as all expenses including the processing fees incurred by private respondent
had already been paid for by the latter's principal on a staggered basis as admitted in open court by its managing director,
Mrs. Bienvenida Brusellas. 12 We do not find anymore justification in the appellate court's decision in granting actual
damages to private respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract
workers when petitioner failed to transport said workers, the reimbursements made by its principal to private respondent
failed to support the latter's claim that it suffered actual damages as a result of petitioner's failure to transport said workers.
It is undisputed that private respondent had consistently admitted that its principal had reimbursed all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or
compensatory damages.

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable
degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but
must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a result of
petitioner's failure to transport the former's workers because of the latter's patent bad faith in the performance of its
obligation. As correctly pointed out by the appellate court:

As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract
workers of the appellee on or before March 30, 1981 despite receipt of the payment for their airfares, and
acceptance of the same by the appellant, with specific instructions from the appellee's principal to transport
the contract workers on or before March 30, 1981. No previous notice was ever registered by the appellant
that it could not comply with the same. And then followed the detestable act of appellant in unilaterally
cancelling, booking and rebooking unreasonably the flight of appellee's contract workers in June to July,
1981 without prior notice. And all of these actuations of the appellant indeed constitute malice and evident
bad faith which had caused damage and besmirched the reputation and business image of the appellee. 14

As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said
damages was ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were
mere afterthoughts when private respondent filed the present case.
WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be
deleted from said decision.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 125524 August 25, 1999

BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC.,respondents.

BELLOSILLO, J.:

On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on
board the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent
respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons valued at US$5,950.00
covered by Bill of Lading No. HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank
of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46
covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 also issued by PAKISTAN
BANK. The Bills of Lading contained the following pertinent provision: "One of the Bills of Lading must be surrendered duly
endorsed in exchange for the goods or delivery order.1 The shipment was bound for Hongkong with PAKISTAN BANK as
consignee and Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.

On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to
petitioner's depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in
advance the total value of the shipment of US$20,223.46. 1âw phi 1.nêt

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK,
and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such
that the latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since
SOLIDBANK already pre-paid petitioner the value of the shipment, it demanded payment from respondent WALLEM
through five (5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved to
SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.

On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of
P546,033.42 from respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC
without presentation of the bills of lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank
guarantee per request of petitioner himself because the shipment consisted of perishable goods. The telex dated 5 April
1989 conveying such request read —

AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES
WITHOUT PRESENTATION OF OB/L2 and bank guarantee since for prepaid shipt ofrt charges already fully paid
our end . . . .3

Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper
to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring
presentation of the bill of lading as that usually takes time. As proof thereof, respondents apprised the trial court that for the
duration of their two-year business relationship with petitioner concerning similar shipments to GPC deliveries were
effected without presentation of the bills of lading.4 Respondents advanced next that the refusal of PAKISTAN BANK to
pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity and Quality.
Respondents counterclaimed for attorney's fees and costs of suit.

On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following amounts: (1) P546,033.42
plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The
counterclaims were dismissed for lack of merit.5 The trial court opined that respondents breached the provision in the bill of
lading requiring that "one of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery
order," when they released the shipment to GPC without presentation of the bills of lading and the bank guarantee that
should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment should
not have been released to GPC at all since the instruction contained in the telex was to arrange delivery to the respective
consignees and not to any party. The trial court observed that the only role of GPC in the transaction as notify party was
precisely to be notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the consignee.

Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous
similar transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to
notify party GPC without need of the bills of lading or bank guarantee.6 Moreover, the bills of lading were viewed by
respondent court to have been properly superseded by the telex instruction and to implement the instruction, the delivery
of the shipment must be to GPC, the real importer/buyer of the goods as shown by the export invoices,7 and not to
PAKISTAN BANK since the latter could very well present the bills of lading in its possession; likewise, if it were the
PAKISTAN BANK to which the cargoes were to be strictly delivered it would no longer be proper to require a bank
guarantee. Respondent court noted that besides, GPC was listed as a consignee in the telex. It observed further that the
demand letter of petitioner to respondents never complained of misdelivery of goods. Lastly, respondent court found that
petitioner's claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated. Thus, on 13 March 1996
respondent court set aside the decision of the trial court and dismissed the complaint together with the counterclaims.8 On
5 July 1996 reconsideration was denied.9

Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or to a
party designated or named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from the
text of the telex, assuming there was such an instruction, the delivery of the shipment without the required bill of lading or
bank guarantee should be made only to the designated consignee, referring to PAKISTAN BANK.

We are not persuaded. The submission of petitioner that "the fact that the shipment was not delivered to the consignee as
stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof" is a
deviation from his cause of action before the trial court. It is clear from the allegation in his complaint that it does not deal
with misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank guarantee —

6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party,
Great Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required
bills of lading and bank guarantee for the release of the shipment issued by the consignee of the goods . . . .10

Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent
WALLEM demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture —

We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012
and 99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary
bank guarantee. We were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong,
did not release or endorse the original bills of lading. As a result thereof, neither the consignee, National Bank of
Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods . . . .11

At any rate, we shall dwell on petitioner's submission only as a prelude to our discussion on the imputed liability of
respondents concerning the shipped goods. Article 1736 of the Civil Code provides —

Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice
to the provisions of article 1738.12

We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of
lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as
buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint
before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to receive them14 was proper.

The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or
bank guarantee.
Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills
of lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without
need of presenting the bill of lading and bank guarantee per the respective shipper's request since "for prepaid shipt ofrt
charges already fully paid." Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading
Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims that this evidence is
self-serving.

From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or
three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of
respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request the
shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls
by himself or his "people." In transactions covered by a letter of credit, bank guarantee is normally required by the shipping
lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee
because the goods are already fully paid. In his several years of business relationship with GPC and respondents, there
was not a single instance when the bill of lading was first presented before the release of the cargoes. He admitted the
existence of the telex of 3 July 1989 containing his request to deliver the shipment to the consignee without presentation of
the bill of lading15 but not the telex of 5 April 1989 because he could not remember having made such request.

Consider pertinent portions of petitioner's testimony —

Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the
immediate release of your fresh fruits, perishable goods, to Great Prospect without the presentation of the original
Bill of Lading?

A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested immediate release of the cargo
because there was immediate payment.

Q: And you are referring, therefore, to this copy Telex release that you mentioned where your Company's name
appears Ben-Mac?

Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG
(sic) 93023 and 93026 with Great Prospect Company.

Atty. Ventura:

Q: Is that the telegraphic transfer?

A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable.
I thought Wallem Shipping Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is
needed for the immediate release of the goods . . . .15

Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable goods to ask the shipping lines to
release immediately the shipment. Is that correct?

A: Yes, sir.

Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the
importer of goods without a Bill of Lading or Bank guarantee?

A: No, it cannot be without the Bank Guarantee.

Atty. Hernandez:

Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping lines to the
importer without the Bank guarantee and without the Bill of Lading?

A: As far as telegraphic transfer is concerned.

Q: Can you explain (to) this Honorable Court what telegraphic transfer is?
 A: Telegraphic transfer, it means advance payment that I am already fully paid . . . .

Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that any of your
shipment was released to Great Prospect by Wallem through telegraphic transfer?

A: I could not recall but there were so many instances sir.

Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through Wallem, you
requested Wallem to release immediately your perishable goods to the buyer?

A: Yes, that is the request of the shippers of the perishable goods . . . .16

Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even without the
presentation of OBL, how do you course it?

A: Usually, I call up the Shipping Lines, sir . . . .17

Q: You also testified you made this request through phone calls. Who of you talked whenever you made such
phone call?

A: Mostly I let my people to call, sir. (sic)

Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)

A: Not everytime, sir.

Q: You did not make this request in writing?

A: No, sir. I think I have no written request with Wallem . . . .18

Against petitioner's claim of "not remembering" having made a request for delivery of subject cargoes to GPC without
presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in
his testimony. He declared that it was his practice to ask the shipping lines to immediately release shipment of perishable
goods through telephone calls by himself or his "people." He no longer required presentation of a bill of lading nor of a
bank guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into account that
subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not
hard to believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without
presentation of the bills of lading and bank guarantee.

The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees." And so petitioner argues
that, assuming there was such an instruction, the consignee referred to was PAKISTAN BANK. We find the argument too
simplistic. Respondent court analyzed the telex in its entirety and correctly arrived at the conclusion that the consignee
referred to was not PAKISTAN BANK but GPC —

There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the
Pakistani Bank. The appealed decision affirms this fact. Conformably, to implement the said telex instruction, the
delivery of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the Pakistani
Bank since the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the
Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank
guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction.
After all, the cargoes consist of perishable fresh fruits and immediate delivery thereof to the buyer/importer is
essentially a factor to reckon with. Besides, GPC is listed as one among the several consignees in the telex
(Exhibit 5-B) and the instruction in the telex was to arrange delivery of A/M shipment (not any party) to respective
consignees without presentation of OB/L and bank guarantee . . . .20

Apart from the foregoing obstacles to the success of petitioner's cause, petitioner failed to substantiate his claim that he
returned to SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched to entertain the notion, as did
respondent court, that he merely accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from
respondents. We note that it was SOLIDBANK which initially demanded payment from respondents through five (5) letters.
SOLIDBANK must have realized the absence of privity of contract between itself and respondents. That is why petitioner
conveniently took the cudgels for the bank.

In view of petitioner's utter failure to establish the liability of respondents over the cargoes, no reversible error was
committed by respondent court in ruling against him.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March 1996 dismissing the
complaint of petitioner Benito Macam and the counterclaims of respondents China Ocean Shipping Co. and/or Wallem
Philippines Shipping, Inc., as well as its resolution of 5 July 1996 denying reconsideration, is AFFIRMED. 1âwphi1.nêt

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-18965 October 30, 1964

COMPAÑIA MARITIMA, petitioner,

vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.

Rafael Dinglasan for petitioner.

Ozaeta Gibbs & Ozaeta for respondent.

BAUTISTA ANGELO, J.:

Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the
Compañia 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 Compañia 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 patron of Barge No. 1025 reads in part:

Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF
PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

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 Compañia 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.

All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the
Insurance Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it
suffered as above stated with said insurance company, and after the same had been processed, the sum of P64,018.55
was paid, which was noted down in a document which aside from being a receipt of the amount paid, was a subrogation
agreement between Macleod and the insurance company wherein the former assigned to the latter its rights over the
insured and damaged cargo. Having failed to recover from the carrier the sum of P60,421.02, which is the only amount
supported by receipts, the insurance company instituted the present action on October 28, 1953. After trial, the court a
quo rendered judgment ordering the carrier to pay the insurance company the sum of P60,421.02, with legal interest
thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was affirmed by the Court
of Appeals on December 14, 1960. Hence, this petition for review.

The issues posed before us are: (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?; (3) Can respondent insurance company sue the carrier under
its insurance contract as assignee of Macleod in spite of the fact that the liability of the carrier as insurer is not recognized
in this jurisdiction?; (4) Has the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier
of the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of proof rule?; and (5) Can
the insurance company maintain this suit without proof of its personality to do so?

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: .

Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF
PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

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)

... 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 mutua-lly
demand that a bill of lading is not indispensable. As regards the form of the contract of carriage it can be said that
provided that there is a meeting of the minds and from such meeting arise rights and obligations, there should be
no limitations as to form." The bill of lading is 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 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 of force
majeure or storm which occurred on the night of October 29, 1952. But the evidence fails to bear this out.

Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate
precautions or measures taken by the carrier to prevent the loss as may be inferred from the following findings of the Court
of Appeals:

Aside from the fact that, as admitted by appellant's 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).

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.

3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the
cargo for the insurance amount it paid to the latter under the insurance contract. And this is so because since the cargo
that was damaged was insured with respondent company and the latter paid the amount represented by the loss, it is but
fair that it be given the right to recover from the party responsible for the loss. The instant case, therefore, is not one
between the insured and the insurer, but one between the shipper and the carrier, because the insurance company merely
stepped into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on account of
the damage of the cargo, no valid reason is seen why such action cannot be asserted or availed of by the insurance
company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the insurance policy not only
because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage which
binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting the following comments of
the Court of Appeals:

It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed
abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a
party nor privy to this insurance contract, and therefore cannot avail itself of any defect in the policy which may
constitute a valid reason for appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway,
whatever defect the policy contained, if any, is deemed to have been waived by the subsequent payment of
Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and appellee is
suing as the assignee of the shipper pursuant to exhibit MM. Since, as above demonstrated, appellant is liable to
Macleod and Company of the Philippines for the los or damage to the 1,162 bales of hemp after these were
received in good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows that
appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped into the shoes of and substi-
tuted the latter in demanding from appellant the payment for the loss and damage aforecited.

4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to
order the production of the books of accounts of the Odell Plantation containing the charges it made for the loss of the
damaged hemp for verification of its accountants, but later it desisted therefrom on the claim that it finds their production
no longer necessary. This desistance notwithstanding, the shipper however pre-sented other documents to prove the
damage it suffered in connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the
sum of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the desistance of the carrier
from producing the books of accounts of Odell Plantation implies an admission of the correctness of the statements of
accounts contained therein, petitioner now contends that the Court of Appeals erred in basing the affirmance of the award
on such erroneous interpretation.

There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation
presented in court is tantamount to an admission that the statements contained therein are correct and their verification not
necessary because its main defense here, as well as below, was that it is not liable for the loss because there was no
contract of carriage between it and the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the
carrier's theory, the correctness of the account representing the loss was not so material as would necessitate the
presentation of the books in question. At any rate, even if the books of accounts were not produced, the correctness of the
accounts cannot now be disputed for the same is supported by the original documents on which the entries in said books
were based which were presented by the shipper as part of its evidence. And according to the Court of Appeals, these
documents alone sufficiently establish the award of P60,412.02 made in favor of respondent.

5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find
the same of no importance, for the attorney himself of the carrier admitted in open court that it is a foreign corporation
doing business in the Philippines with a personality to file the present action.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 95582 October 7, 1991

DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners,

vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA
CUDIAMAT, NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of
the late Pedrito Cudiamat represented by Inocencia Cudiamat, respondents.

Francisco S. Reyes Law Office for petitioners.

Antonio C. de Guzman for private respondents.

REGALADO, J.:

On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death of Pedrito Cudiamat
as a result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among
others, it was alleged that on said date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to
petitioner corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and
safety to persons and property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito
immediately to the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first
brought his other passengers and cargo to their respective destinations before banging said victim to the Lepanto Hospital
where he expired.

On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence
required in the operation of the transportation company and the supervision of the employees, even as they add that they
are not absolute insurers of the safety of the public at large. Further, it was alleged that it was the victim's own
carelessness and negligence which gave rise to the subject incident, hence they prayed for the dismissal of the complaint
plus an award of damages in their favor by way of a counterclaim.

On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion:

IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which
negligence was the proximate cause of his death. Nonetheless, defendants in equity, are hereby ordered to pay
the heirs of Pedrito Cudiamat the sum of P10,000.00 which approximates the amount defendants initially offered
said heirs for the amicable settlement of the case. No costs.

SO ORDERED. 2

in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3

decision of the lower court, and ordered petitioners to pay private respondents:

1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat;

2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;

3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages;

4. The costs of this suit. 4

 hence this petition with the central issue herein being whether
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5

respondent court erred in reversing the decision of the trial court and in finding petitioners negligent and liable for the
damages claimed.

It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by
this Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court
are contrary to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. 6

In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim is guilty of negligence. Perforce, we have had to
conduct an evaluation of the evidence in this case for the prope calibration of their conflicting factual findings and legal conclusions.

The lower court, in declaring that the victim was negligent, made the following findings:

This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding an umbrella. And, without having given the driver or the conductor any indication that he wishes to board the bus. But defendants can
also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to believe that one
would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This,
also considering that initially, defendant common carrier had made overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's heirs. 7

However, respondent court, in arriving at a different opinion, declares that:

From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the victim Pedrito Cudiamat boarded
the same as it was precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate
his intention to board the bus as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking and made a sign to
board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the
latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.

Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so when we take into account that the platform of the bus was at the
time slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them according to the circumstances of each case (Article 1733, New Civil Code). 8

After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid findings are supported by the testimony of
petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination as follows:

Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?

A The way going to the mines but it is not being pass(ed) by the bus.

Q And the incident happened before bunkhouse 56, is that not correct?

A It happened between 54 and 53 bunkhouses. 9

The bus conductor, Martin Anglog, also declared:

 Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident that occurred?

A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.

Q What happened when you delivered this passenger at this particular place in Lepanto?

A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an umbrella about a split second and I
signalled again the driver, so the driver stopped and we went down and we saw Pedrito Cudiamat asking for help because he was lying down.

Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from the bus how far was he?

A It is about two to three meters.

Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?

A At the back, sir. 10 (Emphasis supplied.)

The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the
Court of Appeals that the bus was at full stop when the victim boarded the same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it
suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the bus when it
stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence.

The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter had supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in motion there is no necessity for a
person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of
increasing the peril to a passenger while he was attempting to board the same. The premature acceleration of the bus in this case was a breach of such duty. 11

It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. 12

Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in
slow motion" at the point where the victim had boarded and was on its platform. 13

An ordinarily prudent person would have made the attempt board the
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14

moving conveyance under the same or similar circumstances. The fact that passengers board and alight from slowly
moving vehicle is a matter of common experience both the driver and conductor in this case could not have been unaware
of such an ordinary practice.

The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled
all the rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier
passengers owes to its patrons extends to persons boarding cars as well as to those alighting therefrom. 15

A common carrier is
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the safety of the passengers transported by the according to all the circumstances of each case. 16

bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence very
cautious persons, with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By contract of carriage, the carrier
assumes the express obligation to transport the passenger to his destination safely and observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier.
This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 18

Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies understanding and can even be stigmatized as callous indifference. The evidence shows that after the accident the bus could have
forthwith turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator, despite the
serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was tersely and correctly confuted by respondent
court:

... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the verge of
dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and helpless husband. 19

In fact, it
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. 20

was only after the refrigerator was unloaded that one of the passengers thought of sending somebody to the house of the
victim, as shown by the testimony of Virginia Abalos again, to wit:

Q Why, what happened to your refrigerator at that particular time?

A I asked them to bring it down because that is the nearest place to our house and when I went down and asked
somebody to bring down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat.

COURT:

Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.

Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?

A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire
earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such earnings or income and
minus living and other incidental expenses. 22

We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48 years old, in good
health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on computation based on the net
earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23

WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby AFFIRMED in all other respects.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-20761 July 27, 1966

LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents.

G. E. Yabut, R. Monterey and M.C. Lagman for petitioner.

Ahmed Garcia for respondents.

BARRERA, J.:

La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No. 23267-R, holding it liable for quasi-
delict and ordering it to pay to respondents Mariano Beltran, et al., P6,000.00 for the death of his minor daughter Raquel
Beltran, plus P400.00 as actual damages.

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

On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with their minor daughters,
namely, Milagros, 13 years old, Raquel, about 4½ years old, and Fe, over 2 years old, boarded the Pambusco Bus
No. 352, bearing plate TPU No. 757 (1953 Pampanga), owned and operated by the defendant, at San Fernando,
Pampanga, bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four pieces of
baggages containing their personal belonging. The conductor of the bus, who happened to be a half-brother of
plaintiff Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full fares of the plaintiff and their eldest
child, Milagros. No fare was charged on Raquel and Fe, since both were below the height at which fare is charged
in accordance with the appellant's rules and regulations.

After about an hour's trip, the bus reached Anao whereat it stopped to allow the passengers bound therefor,
among whom were the plaintiffs and their children to get off. With respect to the group of the plaintiffs, Mariano
Beltran, then carrying some of their baggages, was the first to get down the bus, followed by his wife and his
children. Mariano led his companions to a shaded spot on the left pedestrians side of the road about four or five
meters away from the vehicle. Afterwards, he returned to the bus in controversy to get his other bayong, which he
had left behind, but in so doing, his daughter Raquel followed him, unnoticed by her father. While said Mariano
Beltran was on the running board of the bus waiting for the conductor to hand him his bayong which he left under
one of its seats near the door, the bus, whose motor was not shut off while unloading, suddenly started moving
forward, evidently to resume its trip, notwithstanding the fact that the conductor has not given the driver the
customary signal to start, since said conductor was still attending to the baggage left behind by Mariano Beltran.
Incidentally, when the bus was again placed into a complete stop, it had travelled about ten meters from the point
where the plaintiffs had gotten off.

Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board without
getting his bayong from the conductor. He landed on the side of the road almost in front of the shaded place where
he left his wife and children. At that precise time, he saw people beginning to gather around the body of a child
lying prostrate on the ground, her skull crushed, and without life. The child was none other than his daughter
Raquel, who was run over by the bus in which she rode earlier together with her parents.

For the death of their said child, the plaintiffs commenced the present suit against the defendant seeking to recover
from the latter an aggregate amount of P16,000 to cover moral damages and actual damages sustained as a result
thereof and attorney's fees. After trial on the merits, the court below rendered the judgment in question.

On the basis of these facts, the trial court found defendant liable for breach of contract of carriage and sentenced it to pay
P3,000.00 for the death of the child and P400.00 as compensatory damages representing burial expenses and costs.

On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract in the case, for the
reason that when the child met her death, she was no longer a passenger of the bus involved in the incident and,
therefore, the contract of carriage had already terminated. Although the Court of Appeals sustained this theory, it
nevertheless found the defendant-appellant guilty of quasi-delict and held the latter liable for damages, for the negligence
of its driver, in accordance with Article 2180 of the Civil Code. And, the Court of Appeals did not only find the petitioner
liable, but increased the damages awarded the plaintiffs-appellees to P6,000.00, instead of P3,000.00 granted by the trial
court.

In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable for quasi-delict,
considering that respondents complaint was one for breach of contract, and (2) in raising the award of damages from
P3,000.00 to P6,000.00 although respondents did not appeal from the decision of the lower court.

Under the facts as found by the Court of Appeals, we have to sustain the judgement holding petitioner liable for damages
for the death of the child, Raquel Beltran. It may be pointed out that although it is true that respondent Mariano Beltran, his
wife, and their children (including the deceased child) had alighted from the bus at a place designated for disembarking or
unloading of passengers, it was also established that the father had to return to the vehicle (which was still at a stop) to get
one of his bags or bayong that was left under one of the seats of the bus. There can be no controversy that as far as the
father is concerned, when he returned to the bus for his bayongwhich was not unloaded, the relation of passenger and
carrier between him and the petitioner remained subsisting. For, the relation of carrier and passenger does not necessarily
cease where the latter, after alighting from the car, aids the carrier's servant or employee in removing his baggage from
the car.1 The issue to be determined here is whether as to the child, who was already led by the father to a place about 5
meters away from the bus, the liability of the carrier for her safety under the contract of carriage also persisted.

It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger
alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the
passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a
reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Thus, a person who,
after alighting from a train, walks along the station platform is considered still a passenger.2 So also, where a passenger
has alighted at his destination and is proceeding by the usual way to leave the company's premises, but before actually
doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent
of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus
continues to be a passenger entitled as such to the protection of the railroad and company and its agents.3

In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted
from the bus. Raquel, the child that she was, must have followed the father. However, although the father was still on the
running board of the bus awaiting for the conductor to hand him the bag or bayong, the bus started to run, so that even he
(the father) had to jump down from the moving vehicle. It was at this instance that the child, who must be near the bus,
was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had exercised the "utmost
diligence" of a "very cautions person" required by Article 1755 of the Civil Code to be observed by a common carrier in the
discharge of its obligation to transport safely its passengers. In the first place, the driver, although stopping the bus,
nevertheless did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the
signal to go and while the latter was still unloading part of the baggages of the passengers Mariano Beltran and family.
The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as
passengers of the carrier, entitled to the protection under their contract of carriage.

But even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for
the negligence of its driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the
complaint, which reads —

That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs' daughter, was caused by
the negligence and want of exercise of the utmost diligence of a very cautious person on the part of the defendants
and their agent, necessary to transport plaintiffs and their daughter safely as far as human care and foresight can
provide in the operation of their vehicle.

is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while incompatible with the other
claim under the contract of carriage, is permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a
plaintiff to allege causes of action in the alternative, be they compatible with each other or not, to the end that the real
matter in controversy may be resolved and determined.4

The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated when it was alleged in the
complaint that "the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want of exercise of the
utmost diligence of a very cautious person on the part of the defendants and their agent." This allegation was also proved
when it was established during the trial that the driver, even before receiving the proper signal from the conductor, and
while there were still persons on the running board of the bus and near it, started to run off the vehicle. The presentation of
proof of the negligence of its employee gave rise to the presumption that the defendant employer did not exercise the
diligence of a good father of the family in the selection and supervision of its employees. And this presumption, as the
Court of Appeals found, petitioner had failed to overcome. Consequently, petitioner must be adjudged peculiarily liable for
the death of the child Raquel Beltran.

The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals, however, cannot be
sustained. Generally, the appellate court can only pass upon and consider questions or issues raised and argued in
appellant's brief. Plaintiffs did not appeal from that portion of the judgment of the trial court awarding them on P3,000.00
damages for the death of their daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs have
pointed out in their brief the inadequacy of the award, or that the inclusion of the figure P3,000.00 was merely a clerical
error, in order that the matter may be treated as an exception to the general rule.5Herein petitioner's contention, therefore,
that the Court of Appeals committed error in raising the amount of the award for damages is, evidently, meritorious. 1äwphï1.ñët

Wherefore, the decision of the Court of Appeals is hereby modified by sentencing, the petitioner to pay to the respondents
Mariano Beltran, et al., the sum of P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00 as
actual damages. No costs in this instance. So ordered.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 84458 November 6, 1989

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and GORGONIA
VIANA, and PIONEER STEVEDORING CORPORATION, respondents.

Herenio E. Martinez for petitioner.

M.R. Villaluz Law Office for private respondent.

REGALADO, J.:

In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the decision 1 of respondent Court of
Appeals, dated July 29, 1988, the decretal portion of which reads:

WHEREFORE, the judgment appealed from as modified by the order of October 27, 1982, is hereby
affirmed with the modification that appellant Aboitiz Shipping is hereby ordered to pay plaintiff-appellees
the amount of P30,000.00 for the death of Anacleto Viana; actual damages of P9,800.00; P150,000.00 for
unearned income; P7,200.00 as support for deceased's parents; P20,000.00 as moral damages;
P10,000.00 as attorney's fees; and to pay the costs.

The undisputed facts of the case, as found by the court a quo and adopted by respondent court, are as follows: .

The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia, owned by
defendant, at the port at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket (No.
117392) in the sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North Harbor,
Manila, and the passengers therein disembarked, a gangplank having been provided connecting the side
of the vessel to the pier. Instead of using said gangplank Anacleto Viana disembarked on the third deck
which was on the level with the pier. After said vessel had landed, the Pioneer Stevedoring Corporation
took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of
Agreement dated July 26, 1975 (Exh. '2') between the third party defendant Pioneer Stevedoring
Corporation and defendant Aboitiz Shipping Corporation.

The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa was
placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it
started operation by unloading the cargoes from said vessel. While the crane was being operated, Anacleto
Viana who had already disembarked from said vessel obviously remembering that some of his cargoes
were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the
said vessel to the place where his cargoes were loaded that the crane hit him, pinning him between the
side of the vessel and the crane. He was thereafter brought to the hospital where he later expired three (3)
days thereafter, on May 15, 1975, the cause of his death according to the Death Certificate (Exh. "C")
being "hypostatic pneumonia secondary to traumatic fracture of the pubic bone lacerating the urinary
bladder" (See also Exh. "B"). For his hospitalization, medical, burial and other miscellaneous expenses,
Anacleto's wife, herein plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana
who was only forty (40) years old when he met said fateful accident (Exh. 'E') was in good health. His
average annual income as a farmer or a farm supervisor was 400 cavans of palay annually. His parents,
herein plaintiffs Antonio and Gorgonia Viana, prior to his death had been recipient of twenty (20) cavans of
palay as support or P120.00 monthly. Because of Anacleto's death, plaintiffs suffered mental anguish and
extreme worry or moral damages. For the filing of the instant case, they had to hire a lawyer for an agreed
fee of ten thousand (P10,000.00) pesos. 2
Private respondents Vianas filed a complaint 3 for damages against petitioner corporation (Aboitiz, for brevity) for breach of
contract of carriage.

In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely under
the control of respondent Pioneer Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring contractor of
Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. It is also averred that since the crane operator
was not an employee of Aboitiz, the latter cannot be held liable under the fellow-servant rule.

Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer imputing liability thereto for
Anacleto Viana's death as having been allegedly caused by the negligence of the crane operator who was an employee of
Pioneer under its exclusive control and supervision.

Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no cause of action against Pioneer
considering that Aboitiz is being sued by the Vianas for breach of contract of carriage to which Pioneer is not a party; that
Pioneer had observed the diligence of a good father of a family both in the selection and supervision of its employees as
well as in the prevention of damage or injury to anyone including the victim Anacleto Viana; that Anacleto Viana's gross
negligence was the direct and proximate cause of his death; and that the filing of the third-party complaint was premature
by reason of the pendency of the criminal case for homicide through reckless imprudence filed against the crane operator,
Alejo Figueroa.

In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the Vianas for damages incurred,
and Pioneer was ordered to reimburse Aboitiz for whatever amount the latter paid the Vianas. The dispositive portion of
said decision provides:

WHEREFORE, judgment is hereby rendered in favor of the plantiffs:

(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum of P12,000.00 for the death
of Anacleto Viana P9,800.00 as actual damages; P533,200.00 value of the 10,664 cavans of palay
computed at P50.00 per cavan; P10,000.00 as attorney's fees; F 5,000.00, value of the 100 cavans of
palay as support for five (5) years for deceased (sic) parents, herein plaintiffs Antonio and Gorgonia Viana
computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a
month for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and
costs; and

(2) ordering the third party defendant Pioneer Stevedoring Corporation to reimburse defendant and third
party plaintiff Aboitiz Shipping Corporation the said amounts that it is ordered to pay to herein plaintiffs.

Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly raised the trial court's failure to
declare that Anacleto Viana acted with gross negligence despite the overwhelming evidence presented in support thereof.
In addition, Aboitiz alleged, in opposition to Pioneer's motion, that under the memorandum of agreement the liability of
Pioneer as contractor is automatic for any damages or losses whatsoever occasioned by and arising from the operation of
its arrastre and stevedoring service.

In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of the Vianas and Aboitiz to
preponderantly establish a case of negligence against the crane operator which the court a quo ruled is never presumed,
aside from the fact that the memorandum of agreement supposedly refers only to Pioneer's liability in case of loss or
damage to goods handled by it but not in the case of personal injuries, and, finally that Aboitiz cannot properly invoke the
fellow-servant rule simply because its liability stems from a breach of contract of carriage. The dispositive portion of said
order reads:

WHEREFORE, judgment is hereby modified insofar as third party defendant Pioneer Stevedoring
Corporation is concerned rendered in favor of the plaintiffs-,:

(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the sum of P12,000.00 for the
death of Anacleto Viana; P9,000.00 (sic) as actual damages; P533,200.00 value of the 10,664 cavans of
palay computed at P50.00 per cavan; P10,000.00 as attorney's fees; P5,000.00 value of the 100 cavans of
palay as support for five (5) years for deceased's parents, herein plaintiffs Antonio and Gorgonia
Viana,computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00
a month for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and
costs; and
 (2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic) any liability for the death of
Anacleto Viana the passenger of M/V Antonia owned by defendant third party plaintiff Aboitiz Shipping
Corporation it appearing that the negligence of its crane operator has not been established therein.

Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to respondent Court of Appeals which
affirmed the findings of of the trial court except as to the amount of damages awarded to the Vianas.

Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred:

(A) In holding that the doctrine laid down by this honorable Court in La Mallorca vs. Court of Appeals, et al.
(17 SCRA 739, July 27, 1966) is applicable to the case in the face of the undisputable fact that the factual
situation under the La Mallorca case is radically different from the facts obtaining in this case;

(B) In holding petitioner liable for damages in the face of the finding of the court a quo and confirmed by the
Honorable respondent court of Appeals that the deceased, Anacleto Viana was guilty of contributory
negligence, which, We respectfully submit contributory negligence was the proximate cause of his death;
specifically the honorable respondent Court of Appeals failed to apply Art. 1762 of the New Civil Code;

(C) In the alternative assuming the holding of the Honorable respondent Court of Appears that petitioner
may be legally condemned to pay damages to the private respondents we respectfully submit that it
committed a reversible error when it dismissed petitioner's third party complaint against private respondent
Pioneer Stevedoring Corporation instead of compelling the latter to reimburse the petitioner for whatever
damages it may be compelled to pay to the private respondents Vianas. 9

At threshold, it is to be observed that both the trial court and respondent Court of Appeals found the victim Anacleto Viana
guilty of contributory negligence, but holding that it was the negligence of Aboitiz in prematurely turning over the vessel to
the arrastre operator for the unloading of cargoes which was the direct, immediate and proximate cause of the victim's
death.

I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana disembarked from the
vessel and that he was given more than ample opportunity to unload his cargoes prior to the operation of the crane, his
presence on the vessel was no longer reasonable e and he consequently ceased to be a passenger. Corollarily, it insists
that the doctrine in La Mallorca vs. Court of Appeals, et al. 10 is not applicable to the case at bar.

The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of
destination and has left the vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily terminate
until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable
opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the
conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his
departure.12 The carrier-passenger relationship is not terminated merely by the fact that the person transported has been
carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage.13

It was in accordance with this rationale that the doctrine in the aforesaid case of La Mallorca was enunciated, to wit:

It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment
the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination,
but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the
carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined
from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform
is considered still a passenger. So also, where a passenger has alighted at his destination and is
proceeding by the usual way to leave the company's premises, but before actually doing so is halted by the
report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of
engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed
and thus continues to be a passenger entitled as such to the protection of the railroad company and its
agents.

In the present case, the father returned to the bus to get one of his baggages which was not unloaded
when they alighted from the bus. Racquel, the child that she was, must have followed the father. However,
although the father was still on the running board of the bus waiting for the conductor to hand him the bag
 or bayong, the bus started to run, so that even he (the father) had to jump down from the moving vehicle. It
was at this instance that the child, who must be near the bus, was run over and killed. In the
circumstances, it cannot be claimed that the carrier's agent had exercised the 'utmost diligence' of a 'very
cautious person' required by Article 1755 of the Civil Code to be observed by a common carrier in the
discharge of its obligation to transport safely its passengers. ... The presence of said passengers near the
bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier,
entitled to the protection under their contract of carriage. 14

It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the passenger's
reasonable presence within the carrier's premises. That reasonableness of time should be made to depend on the
attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the
place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such
other factors. It is thus of no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the
passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had elapsed
before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will
justify the presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause.

It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are
allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With
respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of accommodating a
bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need
at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger
can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically
claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the
ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to
the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the
incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do,
from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its passengers safely to their destination
but also to afford them a reasonable time to claim their baggage.

It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the vessel.
Petitioner failed to prove this. What is clear to us is that at the time the victim was taking his cargoes, the vessel had
already docked an hour earlier. In consonance with common shipping procedure as to the minimum time of one (1) hour
allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the vessel when he went to
retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioner's premises was
not without cause. The victim had to claim his baggage which was possible only one (1) hour after the vessel arrived since
it was admittedly standard procedure in the case of petitioner's vessels that the unloading operations shall start only after
that time. Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said
carrier at the time of his tragic death.

II. Under the law, common carriers are, from the nature of their business and for reasons of public policy, bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case. 15 More particularly, a common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances. 16 Thus, where a passenger dies or is injured, the common carrier is presumed to have been at fault or to
have acted negligently. 17 This gives rise to an action for breach of contract of carriage where all that is required of plaintiff
is to prove the existence of the contract of carriage and its non-performance by the carrier, that is, the failure of the carrier
to carry the passenger safely to his destination, 18which, in the instant case, necessarily includes its failure to safeguard its
passenger with extraordinary diligence while such relation subsists.

The presumption is, therefore, established by law that in case of a passenger's death or injury the operator of the vessel
was at fault or negligent, having failed to exercise extraordinary diligence, and it is incumbent upon it to rebut the same.
This is in consonance with the avowed policy of the State to afford full protection to the passengers of common carriers
which can be carried out only by imposing a stringent statutory obligation upon the latter. Concomitantly, this Court has
likewise adopted a rigid posture in the application of the law by exacting the highest degree of care and diligence from
common carriers, bearing utmost in mind the welfare of the passengers who often become hapless victims of indifferent
and profit-oriented carriers. We cannot in reason deny that petitioner failed to rebut the presumption against it. Under the
facts obtaining in the present case, it cannot be gainsaid that petitioner had inadequately complied with the required
degree of diligence to prevent the accident from happening.
As found by the Court of Appeals, the evidence does not show that there was a cordon of drums around the perimeter of
the crane, as claimed by petitioner. It also adverted to the fact that the alleged presence of visible warning signs in the
vicinity was disputable and not indubitably established. Thus, we are not inclined to accept petitioner's explanation that the
victim and other passengers were sufficiently warned that merely venturing into the area in question was fraught with
serious peril. Definitely, even assuming the existence of the supposed cordon of drums loosely placed around the
unloading area and the guard's admonitions against entry therein, these were at most insufficient precautions which pale
into insignificance if considered vis-a-vis the gravity of the danger to which the deceased was exposed. There is no
showing that petitioner was extraordinarily diligent in requiring or seeing to it that said precautionary measures were strictly
and actually enforced to subserve their purpose of preventing entry into the forbidden area. By no stretch of liberal
evaluation can such perfunctory acts approximate the "utmost diligence of very cautious persons" to be exercised "as far
as human care and foresight can provide" which is required by law of common carriers with respect to their passengers.

While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise extraordinary diligence
was the proximate and direct cause of, because it could definitely have prevented, the former's death. Moreover, in
paragraph 5.6 of its petition, at bar, 19 petitioner has expressly conceded the factual finding of respondent Court of Appeals
that petitioner did not present sufficient evidence in support of its submission that the deceased Anacleto Viana was guilty
of gross negligence. Petitioner cannot now be heard to claim otherwise.

No excepting circumstance being present, we are likewise bound by respondent court's declaration that there was no
negligence on the part of Pioneer Stevedoring Corporation, a confirmation of the trial court's finding to that effect, hence
our conformity to Pioneer's being absolved of any liability.

As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross negligence of the victim, hence its
present contention that the death of the passenger was due to the negligence of the crane operator cannot be sustained
both on grounds, of estoppel and for lack of evidence on its present theory. Even in its answer filed in the court below it
readily alleged that Pioneer had taken the necessary safeguards insofar as its unloading operations were concerned, a
fact which appears to have been accepted by the plaintiff therein by not impleading Pioneer as a defendant, and likewise
inceptively by Aboitiz by filing its third-party complaint only after ten (10) months from the institution of the suit against it.
Parenthetically, Pioneer is not within the ambit of the rule on extraordinary diligence required of, and the corresponding
presumption of negligence foisted on, common carriers like Aboitiz. This, of course, does not detract from what we have
said that no negligence can be imputed to Pioneer but, that on the contrary, the failure of Aboitiz to exercise extraordinary
diligence for the safety of its passenger is the rationale for our finding on its liability.

WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in toto.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-36481-2 October 23, 1982

AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,

vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.

Zoilo de la Cruz, Jr. & Associate for plaintiff-appellee Amparo Servando.

Benedicto, Sumbingco & Associate for appellee Clara Uy Bico.

Ross, Salcedo, del Rosario, Bito & Misa for defendant-appellant.

ESCOLIN, J.:

This appeal, originally brought to the Court of Appeals, seeks to set aside the decision of the Court of First Instance of
Negros Occidental in Civil Cases Nos. 7354 and 7428, declaring appellant Philippine Steam Navigation liable for damages
for the loss of the appellees' cargoes as a result of a fire which gutted the Bureau of Customs' warehouse in Pulupandan,
Negros Occidental.

The Court of Appeals certified the case to Us because only pure questions of law are raised therein.

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. 1

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.

On the bases of the foregoing facts, the lower court rendered a decision, the decretal portion of which reads as follows:

WHEREFORE, judgment is rendered as follows:

 1. In case No. 7354, the defendant is hereby ordered to pay the plaintiff Amparo C. Servando the
aggregate sum of P1,070.50 with legal interest thereon from the date of the filing of the complaint until fully
paid, and to pay the costs.

2. In case No. 7428, the defendant is hereby ordered to pay to plaintiff Clara Uy Bico the aggregate sum of
P16,625.00 with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay
the costs.

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 ready made 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 1 1 7 4 of the Civil Code:

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

Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from
liability for non-performance. 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.

The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs. Ossorio 6, where this Court held the
defendant liable for damages arising from a fire caused by the negligence of the defendant's employees while loading cases of
gasoline and petroleon products. But unlike in the said case, there is not a shred of proof in the present case that the cause of
the fire that broke out in the Custom's warehouse was in any way attributable to the negligence of the appellant or its employees.
Under the circumstances, the appellant is plainly not responsible.

WHEREFORE, the judgment appealed from is hereby set aside. No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-28673 October 23, 1984

SAMAR MINING COMPANY, INC., plaintiff-appellee,

vs.
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendants-appellants.

CUEVAS, J.: ñé+.£ª wph!1

This is an appeal taken directly to Us on certiorari from the decision of the defunct Court of First Instance of Manila, finding
defendants carrier and agent, liable for the value of goods never delivered to plaintiff consignee. The issue raised is a pure
question of law, which is, the liability of the defendants, now appellants, under the bill of lading covering the subject
shipment.

The case arose from an importation made by plaintiff, now appellee, SAMAR MINING COMPANY, INC., of one (1) crate
Optima welded wedge wire sieves through the M/S SCHWABENSTEIN a vessel owned by defendant-appellant
NORDEUTSCHER LLOYD, (represented in the Philippines by its agent, C.F. SHARP & CO., INC.), which shipment is
covered by Bill of Lading No. 18 duly issued to consignee SAMAR MINING COMPANY, INC. Upon arrival of the aforesaid
vessel at the port of Manila, the aforementioned importation was unloaded and delivered in good order and condition to the
bonded warehouse of AMCYL. 1 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, consignee herein appellee, filed a
formal claim for P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at that time, against the former,
but neither paid. Hence, the filing of the instant suit to enforce payment. Defendants-appellants brought in AMCYL as third
party defendant.

The trial court rendered judgment in favor of plaintiff, ordering defendants to pay the amount of P1,691.93 plus attorney's
fees and costs. However, the Court stated that defendants may recoup whatever they may pay plaintiff by enforcing the
judgment against third party defendant AMCYL which had earlier been declared in default. Only the defendants appealed
from said decision.

The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its various clauses and stipulations which should
be examined in the light of pertinent legal provisions and settled jurisprudence. This undertaking is not only proper but
necessary as well because of the nature of the bill of lading which operates both as a receipt for the goods; and more
importantly, as a contract to transport and deliver the same as stipulated therein. 2 Being a contract, it is the law between
the parties thereto 3 who are bound by its terms and conditions 4 provided that these are not contrary to law, morals, good
customs, public order and public policy. 5

Bill of Lading No. 18 sets forth in page 2 thereof 6 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 The stipulation is
plainly indicated on the face of the bill which contains the following phrase printed below the space provided for the port of
discharge from ship", thus: têñ.£îhqwâ£

if goods are to be transshipped at port of discharge, show destination under the column for "description of
contents" 7

As instructed above, the following words appeared typewritten under the column for "description of contents": têñ.£îhqw â£
 PORT OF DISCHARGE OF GOODS: DAVAO
FREIGHT PREPAID 8

It is clear, then, that in discharging the goods from the ship at the port of Manila, and delivering the same into the custody
of AMCYL, the bonded warehouse, appellants were acting in full accord with the contractual stipulations contained in Bill of
Lading No. 18. The delivery of the goods to AMCYL was part of appellants' duty to transship the goods from Manila to their
port of destination-Davao. The word "transship" means: têñ.£îhqwâ£

to transfer for further transportation from one ship or conveyance to another 9

The extent of appellant carrier's responsibility and/or liability in the transshipment of the goods in question are spelled out
and delineated under Section 1, paragraph 3 of Bill of Lading No. 18, to wit: têñ.£îhqw â£

The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before
the goods enter ship's tackle to be loaded or after the goods leave ship's tackle to be discharged,
transshipped or forwarded ... (Emphasis supplied)

and in Section 11 of the same Bill, which provides: têñ.£îhqw â£

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
(Emphasis supplied) 10

Defendants-appellants now shirk liability for the loss of the subject goods by claiming that they have discharged the same in full and good condition unto the custody of
AMCYL at the port of discharge from ship — Manila, and therefore, pursuant to the aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo had
ceased. 11

We find merit in appellants' stand. The validity of stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the same are not in
its actual custody has been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968). Said case matches the present
controversy not only as to the material facts but more importantly, as to the stipulations contained in the bill of lading concerned. As if to underline their awesome likeness,
the goods in question in both cases were destined for Davao, but were discharged from ship in Manila, in accordance with their respective bills of lading.

The stipulations in the bill of lading in the PHOENIX case which are substantially the same as the subject stipulations
before Us, provides: têñ.£îhqwâ£

The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the
goods are not in its actual custody. (Par. 2, last subpar.)

xxx xxx xxx

The carrier or master, in making arrangements with any person for or in connection with all transshipping or
forwarding of the goods or the use of any means of transportation or forwarding of goods not used or
operated by the carrier, shall be considered solely the agent of the shipper and consignee and without any
other responsibility whatsoever or for the cost thereof ... (Par. 16). 12

Finding the above stipulations not contrary to law, morals, good customs, public order or public policy, We sustained their validity 13 Applying said stipulations as the law
between the parties in the aforecited case, the Court concluded that: têñ.£îhqw â£

... The short form Bill of Lading ( ) states in no uncertain terms that the port of discharge of the cargo is
Manila, but that the same was to be transshipped beyond the port of discharge to Davao City. Pursuant to
the terms of the long form Bill of Lading ( ), appellee's responsibility as a common carrier ceased the
moment the goods were unloaded in Manila and in the matter of transshipment, appellee acted merely as
an agent of the shipper and consignee. ... (Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the authority of the above pronouncements, and in conformity with the
pertinent provisions of the New Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof
are valid stipulations between the parties insofar as they exempt the carrier from liability for loss or damage to the goods
while the same are not in the latter's actual custody.

The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to
the Philippines is governed primarily by the New Civil Code. 15 In all matters not regulated by said Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by special laws. 16 A careful perusal of the provisions of the New Civil Code on common carriers (Section 4, Title
VIII, Book IV) directs our attention to Article 1736 thereof, which reads:
têñ.£îhqw â£

Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to
receive them, without prejudice to the provisions of article 1738.

Article 1738 referred to in the foregoing provision runs thus: têñ.£îhqw â£

Article 1738. The extraordinary liability of the common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has
been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or
otherwise dispose of them.

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. 17 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. 18 The court a quo found that there was actual delivery to the consignee through its duly authorized agent, the carrier.

It becomes necessary at this point to dissect the complex relationship that had developed between appellant and appellee
in the course of the transactions that gave birth to the present suit. Two undertakings appeared embodied and/or provided
for in the Bill of Lading 19 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. 20 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, 21This can be gleaned from the following
provisions of the New Civil Code on the obligations of the agent: têñ.£îhqw â£

Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages
which, through his non-performance, the principal may suffer.

xxx xxx xxx

Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those
of the principal, he should prefer his own.

Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but
he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

 (2) When he was given such power but without designating the person and the person appointed was
notoriously incompetent or insolvent.

xxx xxx xxx

Article 1909. The agent is responsible not only for fraud, but also for negligence which shall be judged with
more or less rigor by the courts, according to whether the agency was or was not for a compensation.

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.

The actions of appellant carrier and of its representative in the Philippines being in full faith with the lawful stipulations of
Bill of Lading No. 18 and in conformity with the provisions of the New Civil Code on common carriers, agency and
contracts, they incur no liability for the loss of the goods in question.

WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's complaint is hereby DISMISSED.

No costs.

SO ORDERED. 1äw phï1.ñët

 THIRD DIVISION

[G.R. No. 146018. June 25, 2003]

EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL

INSURANCE COMPANY, INC., respondent.

DECISION
PANGANIBAN, J.:

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

The Case

Before the Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set
[1]

aside the August 31, 2000 Decision and the November 17, 2000 Resolution of the Court of
[2] [3]

Appeals (CA) in CA-GR SP No. 62751. The dispositive part of the Decision reads:
[4]

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

The assailed Resolution denied petitioners Motion for Reconsideration.

On the other hand, the disposition of the Regional Trial Courts Decision, which was later
[6] [7]

reversed by the CA, states:

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

No cost. [8]

The Facts

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

Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc.
(now Cokaliong Shipping Lines), [petitioner] for brevity, cargo consisting of one (1) carton of
Christmas dcor and two (2) sacks of plastic toys, to be transported on board the M/V Tandag on
its Voyage No. T-189 scheduled to depart from Cebu City, on December 12, 1991, for Tandag, Surigao
del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia
was both the shipper and consignee of the cargo valued, on the face thereof, in the amount
of P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons of
plastic toys and Christmas decor, one (1) roll of floor mat and one (1) bundle of various or assorted
goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the said vessel, and
said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on the face thereof, was
valued in the amount of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper
and consignee of the cargo.

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

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

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

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

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

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

2. Attorneys fees in the amount of P10,000.00; and

3. Cost of suit.
[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just
and equitable under the premises.

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

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

After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to take the depositions
of Chester Cokaliong, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and
of Noel Tanyu, an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be
given before the Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel
Tanyu did testify, by way of deposition, before the Court and declared inter alia, that: [petitioner] is a family
corporation like the Chester Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and Chester
Marketing, Inc., for years, and incurred an account with Chester Marketing, Inc. for his purchases from said
corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the cargo described therein with Zosimo
Mercado and Nestor Angelia as shippers/consignees, respectively; the engine room of the M/V Tandag caught fire
after it passed the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its cargo; an investigation was
conducted by the Board of Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated February 13,
1992 absolving [petitioner] of any responsibility on account of the fire, which Report of the Board was approved by
the District Commander of the Philippine Coast Guard; a few days after the sinking of the vessel, a representative of
the Legaspi Marketing filed claims for the values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the
shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to ascertain, from the
shippers/consignees and the representative of the Legaspi Marketing that the cargo covered by Bill of Lading No.
59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that covered by Bill of Lading No.
58 was purchased by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the claim of Legaspi
Marketing for the value of the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount
under Equitable Banking Corporation Check No. 20230486 dated August 12, 1992, in the amount of P14,000.00 for
which the representative of the Legaspi Marketing signed Voucher No. 4379, dated August 12, 1992, for the said
amount of P14,000.00 in full payment of claims under Bill of Lading No. 59; that [petitioner] approved the claim of
Nestor Angelia in the amount of P6,500.00 but that since the latter owed Chester Marketing, Inc., for some purchases,
[petitioner] merely set off the amount due to Nestor Angelia under Bill of Lading No. 58 against his account with
Chester Marketing, Inc.; [petitioner]lost/[misplaced] the original of the check after it was received by Legaspi
Marketing, hence, the production of the microfilm copy by Noel Tanyu of the Equitable Banking Corporation;
[petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia that the cargo under both Bills of
Lading were insured with [respondent], or that Feliciana Legaspi filed claims for the value of the cargo with
[respondent] and that the latter approved the claims of Feliciana Legaspi and paid the total amount of P148,500.00 to
her; [petitioner] came to know, for the first time, of the payments by [respondent] of the claims of Feliciana Legaspi
when it was served with the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x
x executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor of [respondent];
hence, [petitioner] was absolved of any liability for the loss of the cargo covered by Bills of Lading Nos. 58 and 59;
and even if it was, its liability should not exceed the value of the cargo as stated in the Bills of Lading.

[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x[9] (Citations omitted)
 Ruling of the Court of Appeals

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

Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No.
59. The CA, however, held that the payment did not extinguish petitioners obligation to
respondent, because there was no evidence that Feliciana Legaspi (the insured) was the
owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating the
claim under Bill of Lading No. 58 -- covering cargo valued therein at P6,500 -- as a setoff against
Nestor Angelias account with Chester Enterprises, Inc.
Finally, it ruled that respondent is not bound by the valuation of the cargo under the Bills of
Lading, x x x nor is the value of the cargo under said Bills of Lading conclusive on the
[respondent]. This is so because, in the first place, the goods were insured with the [respondent]
for the total amount of P150,000.00, which amount may be considered as the face value of the
goods. [11]

Hence this Petition. [12]

Issues

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

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

II

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

III

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

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

This Courts Ruling

 The Petition is partly meritorious.

First Issue:
Liability for Loss

Petitioner argues that the cause of the loss of the goods, subject of this case, was force
majeure. It adds that its exercise of due diligence was adequately proven by the findings of the
Philippine Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that
the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil
service tank. Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing
the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a
mere two-inch gap from the engine room walling, thus precluding constant inspection and care
by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have
been caused by force majeure. Broadly speaking, force majeure generally applies to a natural
accident, such as that caused by a lightning, an earthquake, a tempest or a public
enemy. Hence, fire is not considered a natural disaster or calamity. In Eastern Shipping Lines,
[14]

Inc. v. Intermediate Appellate Court, we explained:

[15]

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

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

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

Where loss of cargo results from the failure of the officers of a vessel to inspect their ship
frequently so as to discover the existence of cracked parts, that loss cannot be attributed to force
majeure, but to the negligence of those officials. [16]

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

petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.
 Second Issue:
Extent of Liability

Respondent contends that petitioners liability should be based on the actual insured value of
the goods, subject of this case. On the other hand, petitioner claims that its liability should be
limited to the value declared by the shipper/consignee in the Bill of Lading.
The records show that the Bills of Lading covering the lost goods contain the stipulation that
[18]

in case of claim for loss or for damage to the shipped merchandise or property, [t]he liability of
the common carrier x x x shall not exceed the value of the goods as appearing in the bill of
lading. The attempt by respondent to make light of this stipulation is unconvincing. As it had the
[19]

consignees copies of the Bills of Lading, it could have easily produced those copies, instead of
[20]

relying on mere allegations and suppositions. However, it presented mere photocopies thereof
to disprove petitioners evidence showing the existence of the above stipulation.
A stipulation that limits liability is valid as long as it is not against public policy. In Everett
[21]

Steamship Corporation v. Court of Appeals, the Court stated: [22]

A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo
to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly
Articles 1749 and 1750 of the Civil Code which provides:

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

Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and
has been freely and fairly agreed upon.

Such limited-liability clause has also been consistently upheld by this Court in a number of cases. Thus,
in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the
validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully
sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just and
reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a
greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private respondent does not pretend to
do. But over and above that consideration, the just and reasonable character of such stipulation is implicit
in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and
surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading.

Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common
carriers liability for loss must be reasonable and just under the circumstances, and has been freely and
fairly agreed upon.

The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be
liable for any loss of possible profits or any consequential loss.

The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an
amount exceeding One Hundred Thousand Yen in Japanese Currency (100,000.00) or its equivalent in
any other currency per package or customary freight unit (whichever is least) unless the value of the
goods higher than this amount is declared in writing by the shipper before receipt of the goods by the
carrier and inserted in the Bill of Lading and extra freight is paid as required.

The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear
that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper,
Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than
the limited liability of the carrier.Considering that the shipper did not declare a higher valuation, it had
itself to blame for not complying with the stipulations. (Italics supplied)

In the present case, the stipulation limiting petitioners liability is not contrary to public policy. In
fact, its just and reasonable character is evident. The shippers/consignees may recover the full
value of the goods by the simple expedient of declaring the true value of the shipment in the Bill
of Lading. Other than the payment of a higher freight, there was nothing to stop them from placing
the actual value of the goods therein. In fact, they committed fraud against the common carrier
by deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its
proper and just transport fare.
Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the
common carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of
the amount that the latter may be liable for in case of loss of the goods. The common carrier can
then take appropriate measures -- getting insurance, if needed, to cover or protect itself. This
precaution on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that
undervalues the real worth of the goods it seeks to transport does not only violate a valid
contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier
liable for more than the amount it declared in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in
their respective Bills of Lading. Hence, petitioner was exposed to a risk that was deliberately
hidden from it, and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged actual value of the goods)
the insurance company was paid the correct higher premium by Feliciana Legaspi; while
petitioner was paid a fee lower than what it was entitled to for transporting the goods that had
been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the
insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just
and equitable solution.
In Aboitiz Shipping Corporation v. Court of Appeals, the description of the nature and the
[23]

value of the goods shipped were declared and reflected in the bill of lading, like in the present
case. The Court therein considered this declaration as the basis of the carriers liability and
ordered payment based on such amount. Following this ruling, petitioner should not be held liable
for more than what was declared by the shippers/consignees as the value of the goods in the
bills of lading.
 We find no cogent reason to disturb the CAs finding that Feliciana Legaspi was the owner of
the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were merely
consigned to Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or her
subrogee (respondent) was entitled to the goods or, in case of loss, to compensation
therefor. There is no evidence showing that petitioner paid her for the loss of those goods. It does
not even claim to have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill
of Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the records
convincingly shows that the former was the owner of the goods. Respondent was, however, able
to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to
payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be
deemed to have been extinguished, because payment was made to a person who was not
entitled thereto.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued
at P6,500, the parties have not convinced us to disturb the findings of the CA that compensation
could not validly take place. Thus, we uphold the appellate courts ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision
is MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of P14,000
and P6,500, which represent the value of the goods stated in Bills of Lading Nos. 59 and 58,
respectively. No costs.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 75118 August 31, 1987

SEA-LAND SERVICE, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing business under the name and style of "SEN HIAP
HING," respondents.

NARVASA, J.:

The main issue here is whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of
lading limiting to a fixed amount the liability of the carrier for loss or damage to the cargo where its value is not declared in
the bill.

The factual antecedents, for the most part, are not in dispute.

On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity), a foreign shipping and forwarding company
licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment
consigned to Sen Hiap Hing the business name used by Paulino Cue in the wholesale and retail trade which he operated
out of an establishment located on Borromeo and Plaridel Streets, Cebu City.

The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The bill described
the shipment only as "8 CTNS on 2 SKIDS-FILES. 1 Based on volume measurements Sea-land charged the shipper the total amount of
US$209.28 2 for freight age and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port Of
Cebu.

The shipment arrived in Manila on February 12, 1981, and there discharged in Container No. 310996 into the custody of
the arrastre contractor and the customs and port authorities. 3 Sometime between February 13 and 16, 1981, after the
shipment had been transferred, along with other cargoes to Container No. 40158 near Warehouse 3 at Pier 3 in South
Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered. 4

On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment
allegedly amounting to P179,643.48. 5 Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of
P30,600.00. asserting that said amount represented its maximum liability for the loss of the shipment under the package
limitation clause in the covering bill of lading.6 Cue rejected the offer and thereafter brought suit for damages against Sea-
Land in the then Court of First Instance of Cebu, Branch X.7 Said Court, after trial, rendered judgment in favor of Cue,
sentencing Sea-Land to pay him P186,048.00 representing the Philippine currency value of the lost cargo, P55,814.00 for
unrealized profit with one (1%) percent monthly interest from the filing of the complaint until fully paid, P25,000.00 for
attorney's fees and P2,000.00 as litigation expenses.8

Sea-Land appealed to the Intermediate Appellate Court.9 That Court however affirmed the decision of the Trial Court xxx in
all its parts ... . 10 Sea-Land thereupon filed the present petition for review which, as already stated, poses the question of whether, upon the facts above set forth, it
can be held liable for the loss of the shipment in any amount beyond the limit of US$600.00 per package stipulated in the bill of lading.

To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or
shipper for loss of, or damage to, goods being transported under said bill ,although that document may have been — as in
practice it oftentimes is — drawn up only by the consignor and the carrier without the intervention of
the consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the Court delved at some length into the reasons behind this when, upon a claim made by
the consignee of a motion picture film shipped by air that he was never a party to the contract of transportation and was a complete stranger thereto, it said:

But appellant now contends that he is not suing on a breach of contract but on a tort as provided for in Art.
1902 of the Civil Code. We are a little perplexed as to this new theory of the appellant. First, he insists that
the articles of the Code of Commerce should be applied: that he invokes the provisions of aid Code
governing the obligations of a common carrier to make prompt delivery of goods given to it under a contract
 of transportation. 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 Phil. Air Port stems and is derived from the contract of carriage under which contract, the PAL
undertook to carry the can of film safely and to deliver it to him promptly. Take away or ignore that contract
and the obligation to carry and to deliver and right to prompt delivery disappear. 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. In the present case, the findings of the trial court
which as already stated, are accepted by the parties and which we must accept are to the effect that the
LVN Pictures Inc. and Jose Mendoza on one side, and the defendant company on the other, entered into a
contract of transportation (p. 29, Rec. on Appeal). One interpretation of said finding is that the LVN Pictures
Inc. through previous agreement with Mendoza acted as the latter's agent. When he negotiated with the
LVN Pictures Inc. to rent the film "Himala ng Birhen" and show it during the Naga town fiesta, he most
probably authorized and enjoined the Picture Company to ship the film for him on the PAL on September
17th. Another interpretation is that even if the LVN Pictures Inc. as consignor of its own initiative, and
acting independently of Mendoza for the time being, made Mendoza as consignee, a stranger to the
contract if that is possible, nevertheless when he, Mendoza appeared at the Phil Air Port armed with the
copy of the Air Way Bill (Exh. 1) demanding the delivery of the shipment to him, he thereby made himself a
party to the contract of transportation. The very citation made by appellant in his memorandum supports
this view. Speaking of the possibility of a conflict between the order of the shipper on the one hand and the
order of the consignee on the other, as when the shipper orders the shipping company to return or retain
the goods shipped while the consignee demands their delivery, Malagarriga in his book Codigo de
Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina Court of Appeals on commercial
matters, cited by Tolentino in Vol. II of his book entitled "Commentaries and Jurisprudence on the
Commercial Laws of the Philippines" p. 209, says that the right of the shipper to countermand the shipment
terminates when the consignee or legitimate holder of the bill of lading appears with such big of lading
before the carrier and makes himself a party to the contract. Prior to that time he is a stranger to the
contract.

Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old Civil
Code (now Art, 1311, second paragraph) which reads thus:

Should the contract contain any stipulation in favor of a third person, he may demand its
fulfillment provided he has given notice of his acceptance to the person bound before the
stipulation has been revoked.

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 Phil 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 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.

Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is
governed by the laws of the country of destination 12 and the goods in question were shipped from the United States to the Philippines, the liability of
petitioner Sea-Land to the respondent consignee is governed primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not determined
thereby, by the Code of Commerce and special laws. 13 One of these suppletory special laws is the Carriage of Goods by Sea Act, U.S. Public Act No. 521 which was
made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by Commonwealth Act No. 65, approved on October 22, 1936.
Sec. 4(5) of said Act in part reads:

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding $500 per package lawful money of the
United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of
that sum in other currency, unless the nature and value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be
prima facie evidence, but shall not be conclusive on the carrier.

By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum
amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be
less than the figure above named. In no event shall the carrier be liable for more than the amount of
damage actually sustained.
 xxx xxx xxx

Clause 22, first paragraph, of the long form bill of lading customarily issued by Sea-Land to its shipping clients 14 is a virtual
copy of the first paragraph of the foregoing provision. It says:

22. VALUATION. In the event of any loss, damage or delay to or in connection with goods exceeding in
actual value $500 per package, lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, the value of the goods shall be deemed to be $500 per package or
per customary freight unit, as the case may be, and the carrier's liability, if any, shall be determined on the
basis of a value of $500 per package or customary freight unit, unless the nature and a higher value shall
be declared by the shipper in writing before shipment and inserted in this Bill of Lading.

And in its second paragraph, the bill states:

If a value higher than $500 shag have been declared in writing by the shipper upon delivery to the carrier
and inserted in this bill of lading and extra freight paid, if required and in such case if the actual value of the
goods per package or per customary freight unit shall exceed such declared value, the value shall
nevertheless be deemed to be declared value and the carrier's liability, if any, shall not exceed the declared
value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value.

Since, as already pointed out, Article 1766 of the Civil Code expressly subjects the rights and obligations of common
carriers to the provisions of the Code of Commerce and of special laws in matters not regulated by said (Civil) Code, the
Court fails to fathom the reason or justification for the Appellate Court's pronouncement in its appealed Decision that the
Carriage of Goods by Sea Act " ... has no application whatsoever in this case. 15 Not only is there nothing in the Civil Code which absolutely
prohibits agreements between shipper and carrier limiting the latter's liability for loss of or damage to cargo shipped under contracts of carriage; it is also quite clear that
said Code in fact has agreements of such character in contemplation in providing, in its Articles 1749 and 1750, that:

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

ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and
has been fairly and freely agreed upon.

Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is repugnant to or inconsistent with
any of the just-cited provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather
general terms of Article 1749 (without doing any violence to the plain intent thereof) and of Article 1750, to give effect to
just agreements limiting carriers' liability for loss or damage which are freely and fairly entered into.

It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did not exist, the validity and binding
effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the
cited Civil Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750
itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold
otherwise would amount to questioning the justice and fairness of that law itself, and this the private respondent does not
pretend to do. But over and above that consideration, the lust and reasonable character of such stipulation is implicit in it
giving the shipper or owner the option of avoiding acrrual of liability limitation by the simple and surely far from onerous
expedient of declaring the nature and value of the shipment in the bill of lading. And since the shipper here has not been
heard to complaint of having been "rushed," imposed upon or deceived in any significant way into agreeing to ship the
cargo under a bill of lading carrying such a stipulation — in fact, it does not appear that said party has been heard from at
all insofar as this dispute is concerned — there is simply no ground for assuming that its agreement thereto was not as the
law would require, freely and fairly sought and given.

The private respondent had no direct part or intervention in the execution of the contract of carriage between the shipper
and the carrier as set forth in the bill of lading in question. As pointed out in Mendoza vs. PAL, supra, the right of a party in
the same situation as respondent here, to recover for loss of a shipment consigned to him under a bill of lading drawn up
only by and between the shipper and the carrier, springs from either a relation of agency that may exist between him and
the shipper or consignor, or his status as a stranger in whose favor some stipulation is made in said contract, and who
becomes a party thereto when he demands fulfillment of that stipulation, in this case the delivery of the goods or cargo
shipped. In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged circumstance
that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable.
Parenthetically, it may be observed that in one comparatively recent case 16where this Court found that a similar package limitation clause
was "(printed in the smallest type on the back of the bill of lading, it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such
provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed therein by agreement of the parties.

There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in
a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a
higher value and inserts it into said contract or bill. This pro position, moreover, rests upon an almost uniform weight of
authority. 17

The issue of alleged deviation is also settled by Clause 13 of the bill of lading which expressly authorizes trans-shipment of the goods at any point in the voyage in these
terms:

13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the exercise of its or his
discretion and although transshipment or forwarding of the goods may not have been contemplated or
provided for herein, may at port of discharge or any other place whatsoever transship or forward the goods
or any part thereof by any means at the risk and expense of the goods and at any time, whether before or
after loading on the ship named herein and by any route, whether within or outside the scope of the voyage
or beyond the port of discharge or destination of the goods and without notice to the shipper or consignee.
The carrier or master may delay such transshipping or forwarding for any reason, including but not limited
to awaiting a vessel or other means of transportation whether by the carrier or others.

Said provision obviates the necessity to offer any other justification for offloading the shipment in question in Manila for
transshipment to Cebu City, the port of destination stipulated in the bill of lading. Nonetheless, the Court takes note of Sea-
Land's explanation that it only directly serves the Port of Manila from abroad in the usual course of voyage of its carriers,
hence its maintenance of arrangements with a local forwarder. Aboitiz and Company, for delivery of its imported cargo to
the agreed final point of destination within the Philippines, such arrangements not being prohibited, but in fact recognized,
by law. 18

Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea Act is applicable up to the final port of destination and that the fact that
transshipment was made on an interisland vessel did not remove the contract of carriage of goods from the operation of said Act.

Private respondent also contends that the aforecited Clauses 22 and 13 of the bill of lading relied upon by petitioner Sea
Land form no part of the short-form bill of lading attached to his complaint before the Trial Court and appear only in the
long form of that document which, he claims. SeaLand offered (as its Exhibit 2) as an unused blank form with no entries or
signatures therein. He, however, admitted in the Trial Court that several times in the past shipments had been delivered to
him through Sea-Land, 20 from which the assumption may fairly follow that by the time of the consignment now in question,
he was already reasonably apprised of the usual terms covering contracts of carriage with said petitioner.

At any rate, as observed earlier, it has already been held that the provisions of the Carriage of Goods by Sea Act on
package limitation [sec 4(5) of the Act hereinabove referred to] are as much a part of a bill of lading as though actually
placed therein by agreement of the parties. 21

Private respondent, by making claim for loss on the basis of the bill of lading, to all intents and purposes accepted said bill.
Having done so, he —

... becomes bound by all stipulations contained therein whether on the front or the back thereof.
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 finding upon him as if it
had been actually signed by him or by any other person in his behalf. ... 22.

There is one final consideration. The private respondent admits 23 that as early as on April 22, 1981, Sea-Land had offered
to settle his claim for US$4,000.00, the limit of said carrier's liability for loss of the shipment under the bill of lading. This
Court having reached the conclusion that said sum is all that is justly due said respondent, it does not appear just or
equitable that Sea-Land, which offered that amount in good faith as early as six years ago, should, by being made to pay
at the current conversion rate of the dollar to the peso, bear for its own account all of the increase in said rate since the
time of the offer of settlement. The decision of the Regional Trial Court awarding the private respondent P186,048.00 as
the peso value of the lost shipment is clearly based on a conversion rate of P8.00 to US$1.00, said respondent having
claimed a dollar value of $23,256.00 for said shipment.24 All circumstances considered, it is just and fair that Sea-Land's
dollar obligation be convertible at the same rate.
WHEREFORE, the Decision of the Intermediate Appellate Court complained of is reversed and set aside. The stipulation
in the questioned bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to
US$500.00 per package is held valid and binding on private respondent. There being no question of the fact that said
shipment consisted of eight (8) cartons or packages, for the loss of which Sea-Land is therefore liable in the aggregate
amount of US$4,000.00, it is the judgment of the Court that said petitioner discharge that obligation by paying private
respondent the sum of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to
$1.00. Costs against private respondent.

SO ORDERED.
 THIRD DIVISION

[G.R. No. 143133. June 5, 2002]

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES

TRANSPORT SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO.,
INC., respondent.

DECISION
PANGANIBAN, J.:

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

Statement of the Case

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

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

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

2) Attorneys fees amounting to 20% of the claim; and

3) Costs of suit.[4]

The assailed Resolution denied petitioners Motion for Reconsideration.

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

WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well
as defendants counterclaim.[5]

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

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

Despite receipt of a formal demand, defendants-appellees refused to submit to the consignees

claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six &
50/100 pesos (P506,086.50), and was subrogated to the latters rights and causes of action against
defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the
amount paid by them, to the consignee as insured.

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

Ruling of the Trial Court

The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum
of proof required by law.[7]
It likewise debunked petitioners counterclaim, because respondents suit was not manifestly frivolous
or primarily intended to harass them.[8]

Ruling of the Court of Appeals

In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the
goods shipped, because they had failed to overcome the presumption of negligence imposed on common
carriers.
The CA further held as inadequately proven petitioners claim that the loss or the deterioration of the
goods was due to pre-shipment damage.[9] It likewise opined that the notation metal envelopes rust stained
and slightly dented placed on the Bill of Lading had not been the proximate cause of the damage to the
four (4) coils.[10]
As to the extent of petitioners liability, the CA held that the package limitation under COGSA was not
applicable, because the words L/C No. 90/02447 indicated that a higher valuation of the cargo had been
declared by the shipper. The CA, however, affirmed the award of attorneys fees.
Hence, this Petition.[11]
 Issues

In their Memorandum, petitioners raise the following issues for the Courts consideration:
I

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

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

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

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

In sum, the issues boil down to three:

1. Whether petitioners have overcome the presumption of negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable

This Courts Ruling

The Petition is partly meritorious.

First Issue:
Proof of Negligence

Petitioners contend that the presumption of fault imposed on common carriers should not be applied
on the basis of the lone testimony offered by private respondent. The contention is untenable.
Well-settled is the rule that common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods
and the passengers they transport.[13] Thus, common carriers are required to render service with the greatest
skill and foresight and to use all reason[a]ble means to ascertain the nature and characteristics of the goods
tendered for shipment, and to exercise due care in the handling and stowage, including such methods as
their nature requires.[14] The extraordinary responsibility lasts from the time the goods are unconditionally
placed in the possession of and received for transportation by the carrier until they are delivered, actually
or constructively, to the consignee or to the person who has a right to receive them.[15]
This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such
contract, the riding public enters into a contract of transportation with common carriers.[16] Even if it wants
to, it cannot submit its own stipulations for their approval.[17] Hence, it merely adheres to the agreement
prepared by them.
Owing to this high degree of diligence required of them, common carriers, as a general rule, are
presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or
destroyed.[18] That is, unless they prove that they exercised extraordinary diligence in transporting the
goods.[19] In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving
that they observed such diligence.[20]
However, the presumption of fault or negligence will not arise [21] if the loss is due to any of the
following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act
of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner
of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act
of competent public authority.[22] This is a closed list. If the cause of destruction, loss or deterioration is
other than the enumerated circumstances, then the carrier is liable therefor.[23]
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and
of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against
the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of
the goods happened, the transporter shall be held responsible.[24]
That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar
by a review of the records and more so by the evidence adduced by respondent. [25]
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and
condition in Hamburg, Germany.[26]
Second, prior to the unloading of the cargo, an Inspection Report [27] prepared and signed by
representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily
buckled, and the contents thereof exposed and rusty.
Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine Davies Transport Services, Inc., stated
that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in
case there is an apparent or a presumed loss or damage.[29]
Fourth, the Certificate of Analysis[30] stated that, based on the sample submitted and tested, the steel
sheets found in bad order were wet with fresh water.
Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel Coating Corporation and dated
October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and
condition.
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers
Agency. Pertinent portions of his testimony are reproduce hereunder:
Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you
are connected?
A. BM Santos Checkers Agency, sir.
Q. How is BM Santos Checkers Agency related or connected with defendant Jardine Davies Transport Services?
 A. It is the company who contracts the checkers, sir.
Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities?
A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes.

xxxxxxxxx
Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker?
A. Yes, sir.
Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on board
the MV/AN ANGEL SKY?
A. Yes, sir, I was there.

xxxxxxxxx
Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the
appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY?
ATTY. MACAMAY:
Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is
the document itself, Your Honor that shows the condition of the steel sheets.
COURT:
Let the witness answer.
A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides.[32]
All these conclusively prove the fact of shipment in good order and condition and the consequent
damage to the four coils while in the possession of petitioner,[33] who notably failed to explain why.[34]
Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which
the law requires a common carrier to know and to follow, to avoid damage to or destruction of the goods
entrusted to it for safe carriage and delivery.[35]
True, the words metal envelopes rust stained and slightly dented were noted on the Bill of Lading;
however, there is no showing that petitioners exercised due diligence to forestall or lessen the
loss.[36] Having been in the service for several years, the master of the vessel should have known at the
outset that metal envelopes in the said state would eventually deteriorate when not properly stored while
in transit.[37] Equipped with the proper knowledge of the nature of steel sheets in coils and of the proper
way of transporting them, the master of the vessel and his crew should have undertaken precautionary
measures to avoid possible deterioration of the cargo. But none of these measures was taken.[38] Having
failed to discharge the burden of proving that they have exercised the extraordinary diligence required by
law, petitioners cannot escape liability for the damage to the four coils.[39]
In their attempt to escape liability, petitioners further contend that they are exempted from liability
under Article 1734(4) of the Civil Code. They cite the notation metal envelopes rust stained and slightly
dented printed on the Bill of Lading as evidence that the character of the goods or defect in the packing or
the containers was the proximate cause of the damage. We are not convinced.
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was
due to the condition noted on the Bill of Lading.[40] The aforecited exception refers to cases when goods are
lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or
evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in
packages in which they are shipped, or the natural propensities of animals. [41] None of these is present in
the instant case.
 Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon
ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the
goods notwithstanding such condition.[42] Thus, petitioners have not successfully proven the application of
any of the aforecited exceptions in the present case.[43]

Second Issue:
Notice of Loss

Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea
Act (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They
[44]

assert that the cargo was discharged on July 31, 1990, but that respondent filed its Notice of Claim only
on September 18, 1990.[45]
We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim
need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report [46] as to the
condition of the goods was prepared and signed by representatives of both parties. [47]
Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar
recovery if it is nonetheless filed within one year.[48] This one-year prescriptive period also applies to the
shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. [49]
In Loadstar Shipping Co., Inc. v. Court of Appeals,[50] we ruled that a claim is not barred by prescription
as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G.
Davide Jr.:

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

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

Third Issue:
Package Limitation

Assuming arguendo they are liable for respondents claims, petitioners contend that their liability
should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5) [52] of
COGSA.[53]
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value
of the subject shipment was declared by petitioners beforehand, as evidenced by the reference to and the
insertion of the Letter of Credit or L/C No. 90/02447 in the said Bill of Lading.[54]
A bill of lading serves two functions. First, it is a receipt for the goods shipped.[55] Second, it is a
contract by which three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific
responsibilities and assume stipulated obligations.[56] In a nutshell, the acceptance of the bill of lading by
the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it
constituted a perfected and binding contract.[57]
Further, a stipulation in the bill of lading limiting to a certain sum the common carriers liability for
loss or destruction of a cargo -- unless the shipper or owner declares a greater value[58] -- is sanctioned by
law.[59] There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the
circumstances, and (2) it has been fairly and freely agreed upon by the parties.[60] The rationale for, this rule
is to bind the shippers by their agreement to the value (maximum valuation) of their goods. [61]
It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a
fixed amount per package.[62] In all matters not regulated by the Civil Code, the right and the obligations of
common carriers shall be governed by the Code of Commerce and special laws. [63] Thus, the COGSA,
which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory
provision limiting the carriers liability in the absence of a shippers declaration of a higher value in the bill
of lading.[64] The provisions on limited liability are as much a part of the bill of lading as though physically
in it and as though placed there by agreement of the parties.[65]
In the case before us, there was no stipulation in the Bill of Lading [66] limiting the carriers
liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words L/C No. 90/02447 cannot be the basis for petitioners liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by
the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as
required by the bill.[67] That notation was made only for the convenience of the shipper and the bank
processing the Letter of Credit.[68]
Second, in Keng Hua Paper Products v. Court of Appeals,[69] we held that a bill of lading was separate
from the Other Letter of Credit arrangements. We ruled thus:

(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated
independently of the contract of sale between the seller and the buyer, and the contract of issuance of a
letter of credit between the amount of goods described in the commercial invoice in the contract of sale
and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract
of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the
documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected
to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis--
vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods
indicated in the invoice and the amount in the bill of lading cannot negate petitioners obligation to
private respondent arising from the contract of transportation. [70]

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

When what would ordinarily be considered packages are shipped in a container supplied by the carrier
and the number of such units is disclosed in the shipping documents, each of those units and not the
container constitutes the package referred to in the liability limitation provision of Carriage of Goods by
Sea Act.
 Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly
disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the
four damaged coils should be considered as the shipping unit subject to the US$500 limitation.
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners
liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of
the Complaint on July 25, 1991 until the finality of this Decision, and 12 percent thereafter until fully
paid. No pronouncement as to costs.
SO ORDERED.
 SECOND DIVISION

[G.R. No. 122494. October 8, 1998]

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF APPEALS and

HERNANDEZ TRADING CO. INC., respondents.

DECISION
MARTINEZ, J.:

Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the
decision[1] of the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the
decision of the Regional Trial Court of Kalookan City, Branch 126, in Civil Case No. C-15532, finding
petitioner liable to private respondent Hernandez Trading Co., Inc. for the value of the lost cargo.
Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO
C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading),
a foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to
Manila on board ADELFAEVERETTE, a vessel owned by petitioners principal, Everett Orient Lines. The
said crates were covered by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was
missing. This was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to
private respondent, which thereafter made a formal claim upon petitioner for the value of the lost cargo
amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the
amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered to pay
only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the
covering bill of lading which limits the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil
Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and
agreed instead to file their respective memoranda.
On July 16, 1993, the trial court rendered judgment[2] in favor of private respondent, ordering petitioner
to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost
cargo and the material and packaging cost; (c) 10% of the total amount as an award for and as contingent
attorneys fees; and (d) to pay the cost of the suit. The trial court ruled:
Considering defendants categorical admission of loss and its failure to overcome the presumption
of negligence and fault, the Court conclusively finds defendant liable to the plaintiff. The next
point of inquiry the Court wants to resolve is the extent of the liability of the defendant. As stated
earlier, plaintiff contends that defendant should be held liable for the whole value for the loss of
the goods in the amount of Y1,552,500.00 because the terms appearing at the back of the bill of
lading was so written in fine prints and that the same was not signed by plaintiff or shipper thus,
they are not bound by the clause stated in paragraph 18 of the bill of lading. On the other hand,
 defendant merely admitted that it lost the shipment but shall be liable only up to the amount of
Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code -
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
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 Art. 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 at bar, the Court is of the view that the requirements of said article have not been
met. The fact that those conditions are printed at the back of the bill of lading in letters so small
that they are hard to read would not warrant the presumption that the plaintiff or its supplier was
aware of these conditions such that he had fairly and freely agreed to these conditions. It can not
be said that the plaintiff had actually entered into a contract with the defendant, embodying the
conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts
findings with the additional observation that private respondent can not be bound by the terms and
conditions of the bill of lading because it was not privy to the contract of carriage. It said:
As to the amount of liability, no evidence appears on record to show that the appellee (Hernandez
Trading Co.) consented to the terms of the Bill of Lading. The shipper named in the Bill of
Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.) contracted
with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the
bill of lading when it delivered the cargo to the appellant, still it does not necessarily follow that
appellee Hernandez Trading Company as consignee is bound thereby considering that the latter
was never privy to the shipping contract.
xxxxxxxxx
Never having entered into a contract with the appellant, appellee should therefore not be bound
by any of the terms and conditions in the bill of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of
which is not the breach of contract as appellee was never a privy to the any contract with the
appellant, but is based on Article 1735 of the New Civil Code, there being no evidence to prove
satisfactorily that the appellant has overcome the presumption of negligence provided for in the
law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the
consignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding
upon it; (2) in holding that the carriers limited package liability as stipulated in the bill of lading does not
apply in the instant case; and (3) in allowing private respondent to fully recover the full alleged value of
its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
 A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a
cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of
cases.[3] Thus, in Sea Land Service, Inc. vs Intermediate Appellate Court[4], we ruled:

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the
validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully
sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just and
reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a
greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private respondent does not pretend to
do. But over and above that consideration, the just and reasonable character of such stipulation is implicit
in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and
surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading..

Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common
carriers liability for loss must be reasonable and just under the circumstances, and has been freely and
fairly agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the
carrier be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods
in an amount exceeding One Hundred Thousand Yen in Japanese Currency (Y100,000.00) or its
equivalent in any other currency per package or customary freight unit (whichever is least) unless
the value of the goods higher than this amount is declared in writing by the shipper before receipt
of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as
required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it
clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the
shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was
higher than the limited liability of the carrier. Considering that the shipper did not declare a higher
valuation, it had itself to blame for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely agreed to the
limited liability clause in the bill of lading because the said conditions were printed in small letters does
not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals[5] that the jurisprudence on the matter reveals the consistent
holding of the court that contracts of adhesion are not invalid per se and that it has on numerous occasions
upheld the binding effect thereof. Also, in Philippine American General Insurance Co., Inc. vs. Sweet
Lines , Inc.[6] this Court , speaking through the learned Justice Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion wherein one
party imposes a ready-made form of contract on the other x x x 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. In the present case, not even an allegation of ignorance of a party excuses
non-compliance with the contractual stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of carriage devolves not on the carrier but on the
owner, shipper, or consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals[7] that stipulations in contracts of adhesion are
valid and binding.
While it may be true that petitioner had not signed the plane ticket x x, 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 latters 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 ready-made 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. x x x , a
contract limiting liability upon an agreed valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that
the said contracts must be carefully scrutinized in order to shield the unwary (or weaker party) from
deceptive schemes contained in ready-made covenants,[8] such as the bill of lading in question. The
stringent requirement which the courts are enjoined to observe is in recognition of Article 24 of the Civil
Code which mandates that (i)n all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender
age or other handicap, the courts must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It
can not be said to be ignorant of the business transactions it entered into involving the shipment of its
goods to its customers. The shipper could not have known, or should know the stipulations in the bill of
lading and there it should have declared a higher valuation of the goods shipped. Moreover, Maruman
Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the cargo
in petitioners vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory
to the bill of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the
consignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee
can still be bound by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to
recover from the carrier or shipper for loss of, or damage to goods being transported under said
bill, although that document may have been- as in practice it oftentimes is-drawn up only
by the consignor and the carrier without the intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent here, to recover for loss of a
shipment consigned to him under a bill of lading drawn up only by and between the shipper
 and the carrier, springs from either a relation of agency that may exist between him and the
shipper or consignor, or his status as stranger in whose favor some stipulation is made in
said contract, and who becomes a party thereto when he demands fulfillment of that
stipulation, in this case the delivery of the goods or cargo shipped. In neither capacity can
he assert personally, in bar to any provision of the bill of lading, the alleged circumstance
that fair and free agreement to such provision was vitiated by its being in such fine print as
to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case
(Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15) where this Court found
that a similar package limitation clause was printed in the smallest type on the back of the
bill of lading, it nonetheless ruled that the consignee was bound thereby on the strength of
authority holding that such provisions on liability limitation are as much a part of a bill of
lading as though physically in it and as though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-
agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher value and inserts it into
said contract or bill. This proposition, moreover, rests upon an almost uniform weight of
authority. (Underscoring supplied)
When private respondent formally claimed reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very same bill of lading, it (private respondent)
accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court
to enforce it.[9] Thus, private respondent cannot now reject or disregard the carriers limited liability
stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in
the bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo
in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the
shipment x x x, the contents of each crate, the dimensions, weight and value of the contents,"[10] as shown
in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and value
of "the shipment which consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN
merely as 3 CASES SPARE PARTS.[11]
The bill of lading in question confirms petitioners contention. To defeat the carriers limited liability,
the aforecited Clause 18 of the bill of lading requires that the shipper should have declared in writing a
higher valuation of its goods before receipt thereof by the carrier and insert the said declaration in the
bill of lading, with the extra freight paid. These requirements in the bill of lading were never complied
with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The
commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show that petitioner
has knowledge of the value of the cargo as contended by private respondent. No other evidence was
proffered by private respondent to support is contention. Thus, we are convinced that petitioner should be
liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand
(Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No.
42803 is hereby REVERSED and SET ASIDE.
SO ORDERED.