TRANSPORTATION LAW Case Digests
G.R. No. 146018. June 25, 2003]
EDGAR COKALIONG SHIPPING LINES, INC.,,
Petitioner, vs. UCPB GENERAL INSURANCE
COMPANY, INC., respondent.
The liability of a common carrier for the loss of
goods may, by stipulation in the bill of lading, be
limited to the value declared by the shipper. On
the other hand, the liability of the insurer is
determined by the actual value covered by the
insurance policy and the insurance premiums
paid therefor, and not necessarily by the value
declared in the bill of lading.
The Case
Before the Court is a Petition for Review[1] under
Rule 45 of the Rules of Court, seeking to set aside
the August 31, 2000 Decision[2] and the
November 17, 2000 Resolution[3] of the Court of
Appeals[4] (CA) in CA-GR SP No. 62751. The
dispositive part of the Decision reads:
IN THE LIGHT OF THE FOREGOING, the appeal is
GRANTED. The Decision appealed from is
REVERSED. [Petitioner] is hereby condemned to
pay to [respondent] the total amount of
P148,500.00, with interest thereon, at the rate of
6% per annum, from date of this Decision of the
Court. [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[6] Decision,[7] which was later
reversed by the CA, states:
WHEREFORE, premises considered, the case is
hereby DISMISSED for lack of merit.
No cost.[8]
The Facts
The facts of the case are summarized by the
appellate court in this wise:
Sometime on December 11, 1991, Nestor Angelia
delivered to the Edgar Cokaliong Shipping Lines,
Inc. (now Cokaliong Shipping Lines), [petitioner]
for brevity, cargo consisting of one (1) carton of
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
 TRANSPORTATION LAW Case Digests
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
 TRANSPORTATION LAW Case Digests
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]
 TRANSPORTATION LAW Case Digests
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.[14]
Hence, fire is not considered a natural disaster or
calamity. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court,[15] we explained:
x x x. This must be so as it arises almost
invariably from some act of man or by human
means. It does not fall within the category of an
act of God unless caused by lighting or by other
natural disaster or calamity. It may even be
caused by the actual fault or privity of the carrier.
Article 1680 of the Civil Code, which considers
fire as an extraordinary fortuitous event refers to
leases or rural lands where a reduction of the rent
is allowed when more than one-half of the fruits
have been lost due to such event, considering
that the law adopts a protective policy towards
agriculture.
As the peril of fire is not comprehended within
the exceptions in Article 1734, supra, Article 1735
of the Civil Code provides that in all cases other
than those mentioned in Article 1734, the
common carrier shall be presumed to have been
at fault or to have acted negligently, unless it
proves that it has observed the extraordinary
diligence required by law.
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[17] of the Civil
Code, we hold petitioner responsible for the loss
of the goods covered by Bills of Lading Nos. 58
and 59.
Second Issue:
Extent of Liability
Respondent contends that 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[18] show that the Bills of Lading
covering the lost goods contain the stipulation
that in case of claim for loss or for damage to the
shipped merchandise or property, [t]he liability of
the common carrier x x x shall not exceed the
value of the goods as appearing in the bill of
 TRANSPORTATION LAW Case Digests
lading.[19] The attempt by respondent to make
light of this stipulation is unconvincing. As it had
the consignees copies of the Bills of Lading,[20] it
could have easily produced those copies, instead
of relying on mere allegations and suppositions.
However, it presented mere photocopies thereof
to disprove petitioners evidence showing the
existence of the above stipulation.
A stipulation that limits liability is valid[21] as
long as it is not against public policy. In Everett
Steamship Corporation v. Court of Appeals,[22]
the Court stated:
A stipulation in the bill of lading limiting the
common 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
 TRANSPORTATION LAW Case Digests
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 Lading No. 59, for which the latter subsequently
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,[23] the description of the nature and
the value of the goods shipped were declared and
reflected in the bill of lading, like in the present
case. The Court therein considered this
declaration as the basis of the 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
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.
TRANSPORTATION LAW Case Digests

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.chanrobles virtual law library

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.chanroblesvirtualawlibrary
chanrobles virtual law library

The factual antecedents, for the most part, are

not in dispute.chanroblesvirtualawlibrary
chanrobles virtual law library

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
 TRANSPORTATION LAW Case Digests
located on Borromeo and Plaridel Streets, Cebu
City.chanroblesvirtualawlibrary chanrobles virtual
law library
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. 1Based 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.chanroblesvirtualawlibrary chanrobles
virtual law library
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
chanrobles virtual law library
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 chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles
virtual law library
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
 TRANSPORTATION LAW Case Digests
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
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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
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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
 TRANSPORTATION LAW Case Digests
sustained.chanroblesvirtualawlibrary chanrobles
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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
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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.
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
 TRANSPORTATION LAW Case Digests
and given.chanroblesvirtualawlibrary chanrobles
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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 16 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.chanroblesvirtualawlibrary chanrobles
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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
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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.chanroblesvirtualawlibrary chanrobles virtual
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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
 TRANSPORTATION LAW Case Digests
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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
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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
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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.chanroblesvirtualawlibrary chanrobles
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SO ORDERED.
Case Digest:
Sea-Land Service, Inc. v. Intermediate Appellate
Court153 SCRA 552
Facts:
Sea-Land, a foreign shipping and
forwarding company licensed to do business in
the Philippines,received from Sea-borne
Trading Company in California, a shipment
consigned to Sen Hiap Hing, thebusiness
name used by Cue. The shipper not having
declared the value of the shipment , no value
wasindicated in the bill of lading. The shipment
was discharged in Manila, and while awaiting
transshipmentto Cebu, the cargo was stolen and
never recovered.The trial court sentenced
Sea-Land to pay Cue P186,048 representing
the Philippine currencyvalue of the lost
cargo, P55, 814 for unrealized profit and
P25,000 for attorney’s fees. CA affirmed
thetrial court’s decision.
Issue:
Whether or not Sea-Land is liable to pay
Cue.
Held:
There is no question of the right 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 mayhave been drawn up only by
the consignor and the carrier without the
intervention of the consignee.Since the liability
 TRANSPORTATION LAW Case Digests
of a common carrier for loss of or damage to
goods transported by it under acontract of
carriage os governed by the laws of the country
of destination and the goods in question
wereshipped from the United States to the
Philippines, the liability of Sea-Land has Cue is
governed primarilyby the Civil Code, and as
ordained by the said Code, supplementary, in all
matters not cluttered thereby,by the Code of
Commerce and special laws. One of these
supplementary special laws is the Carriage
of goods by Sea Act (COGSA), made
applicable to all contracts for the carriage
by sea to and from thePhilippines Ports in
Foreign Trade by Comm. Act. 65.Even if Section
4(5) of COGSA did not list the validity and
binding effect of the liability limitationclause
in the bill of lading here are fully substantial
on the basis alone of Article 1749 and 1750
of theCivil Code. The justices of such
stipulation is implicit in its giving the owner
or shipper the option of avoiding accrual of
liability limitation by the simple expedient of
declaring the value of the shipment in thebill of
lading.The stipulation in the bill of lading
limiting the liability of Sea-Land for loss or
damages to theshipment covered by said
rule to US$500 per package unless the
shipper declares the value of theshipment
and pays additional charges is valid and binding
on Cue.
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.,
respondents.
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
Decision1 and the May 2, 2000 Resolution2 of the
Court of Appeals3 (CA) in CA-GR CV No. 53571.
The decretal portion of the Decision reads as
follows:
"WHEREFORE, in the light of the foregoing
disquisition, the decision appealed from is hereby
REVERSED and SET ASIDE. Defendants-appellees
are ORDERED to jointly and severally pay
plaintiffs-appellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-
Seven Pesos and 32/100 (P451,027.32) as actual
damages, representing the value of the damaged
cargo, plus interest at the legal rate from the
time of filing of the complaint on July 25, 1991,
until fully paid;
'2) Attorney's fees amounting to 20% of the
claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's
Motion for Reconsideration.
The CA reversed the Decision of the Regional
Trial Court (RTC) of Makati City (Branch 134),
which had disposed as follows:
 TRANSPORTATION LAW Case Digests
"WHEREFORE, in view of the foregoing, judgment
is hereby rendered, dismissing the complaint, as
well as defendant's counterclaim."5
The Facts
The factual antecedents of the case are
summarized by the Court of Appeals in this wise:
"On June 13, 1990, CMC Trading A.G. shipped on
board the M/V '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, M/V 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.1âwphi1.nêt
"Despite receipt of a formal demand, defendants-
appellees refused to submit to the consignee's
claim. Consequently, plaintiff-appellant paid the
consignee five hundred six thousand eighty six &
50/100 pesos (P506,086.50), and was subrogated
to the latter's rights and causes of action against
defendants-appellees. Subsequently, plaintiff-
appellant instituted this complaint for recovery of
the amount paid by them, to the consignee as
insured.
"Impugning the propriety of the suit against
them, defendants-appellees imputed that the
damage and/or loss was due to pre-shipment
damage, to the inherent nature, vice or defect of
the goods, or to perils, danger and accidents of
the sea, or to insufficiency of packing thereof, or
to the act or omission of the shipper of the goods
or their representatives. In addition thereto,
defendants-appellees argued that their liability, if
there be any, should not exceed the limitations of
liability provided for in the bill of lading and other
pertinent laws. Finally, defendants-appellees
averred that, in any event, they exercised due
diligence and foresight required by law to prevent
any damage/loss to said shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because
respondent had failed to prove its claims with the
quantum of proof required by law.7
It likewise debunked petitioners' counterclaim,
because respondent's suit was not manifestly
frivolous or primarily intended to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that
petitioners were liable for the loss or the damage
of the goods shipped, because they had failed to
overcome the presumption of negligence
imposed on common carriers.
The CA further held as inadequately proven
petitioners' claim that the loss or the
deterioration of the goods was due to pre-
shipment damage.9 It likewise opined that the
notation "metal envelopes rust stained and
slightly dented" placed on the Bill of Lading had
not been the proximate cause of the damage to
the four (4) coils.10
As to the extent of petitioners' liability, the CA
held that the package limitation under COGSA
was not applicable, because the words "L/C No.
90/02447" indicated that a higher valuation of the
cargo had been declared by the shipper. The CA,
however, affirmed the award of attorney's fees.
Hence, this Petition.11
Issues
In their Memorandum, petitioners raise the
following issues for the Court's consideration:
I. "Whether or not plaintiff by
presenting only one witness who
has never seen the subject
shipment and whose testimony
is purely hearsay is sufficient to
pave the way for the applicability
of Article 1735 of the Civil Code;
II. "Whether or not the
consignee/plaintiff filed the
required notice of loss within the
time required by law;
III. "Whether or not a notation in the
bill of lading at the time of loading
is sufficient to show pre-shipment
 TRANSPORTATION LAW Case Digests
damage and to exempt herein
defendants from liability;
IV. "Whether or not the "PACKAGE
LIMITATION" of liability under
Section 4 (5) of COGSA is
applicable to the case at bar."12
In sum, the issues boil down to three:
1. Whether petitioners have overcome the
presumption of negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is
applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault
imposed on common carriers should not be
applied on the basis of the lone testimony offered
by private respondent. The contention is
untenable.
Well-settled is the rule that common carriers,
from the nature of their business and for reasons
of public policy, are bound to observe
extraordinary diligence and vigilance with respect
to the safety of the goods and the passengers
they transport.13 Thus, common carriers are
required to render service with the greatest skill
and foresight and "to use all reason[a]ble means
to ascertain the nature and characteristics of the
goods tendered for shipment, and to exercise due
care in the handling and stowage, including such
methods as their nature requires."14 The
extraordinary responsibility lasts from the time
the goods are unconditionally placed in the
possession of and received for transportation by
the carrier until they are delivered, actually or
constructively, to the consignee or to the person
who has a right to receive them.15
This strict requirement is justified by the fact
that, without a hand or a voice in the preparation
of such contract, the riding public enters into a
contract of transportation with common carriers.16
Even if it wants to, it cannot submit its own
stipulations for their approval.17 Hence, it merely
adheres to the agreement prepared by them.
Owing to this high degree of diligence required of
them, common carriers, as a general rule, are
presumed to have been at fault or negligent if the
goods they transported deteriorated or got lost or
destroyed.18 That is, unless they prove that they
exercised extraordinary diligence in transporting
the goods.19 In order to avoid responsibility for
any loss or damage, therefore, they have the
burden of proving that they observed such
diligence.20
However, the presumption of fault or negligence
will not arise21 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 Report27 prepared and signed by
representatives of both parties showed the steel
bands broken, the metal envelopes rust-stained
 TRANSPORTATION LAW Case Digests
and heavily buckled, and the contents thereof
exposed and rusty.
Third, Bad Order Tally Sheet No. 15497928 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 Analysis30 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 letter31 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.
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.
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
 TRANSPORTATION LAW Case Digests
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 Act44
(COGSA), respondent should have filed its Notice
of Loss within three days from delivery. They
assert that the cargo was discharged on July 31,
1990, but that respondent filed its Notice of Claim
only on September 18, 1990.45
We are not persuaded. First, the above-cited
provision of COGSA provides that the notice of
claim need not be given if the state of the goods,
at the time of their receipt, has been the subject
of a joint inspection or survey. As stated earlier,
prior to unloading the cargo, an Inspection
Report46 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 Complaint51 was filed by
respondent on July 25, 1991, within the one-year
prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for
respondent's claims, petitioners contend that
their liability should be limited to US$500 per
package as provided in the Bill of Lading and by
Section 4(5)52 of COGSA.53
On the other hand, respondent argues that
Section 4(5) of COGSA is inapplicable, because
the value of the subject shipment was declared
by petitioners beforehand, as evidenced by the
reference to and the insertion of the Letter of
Credit or "L/C No. 90/02447" in the said Bill of
Lading.54
 TRANSPORTATION LAW Case Digests
A bill of lading serves two functions. First, it is a
receipt for the goods shipped.53 Second, it is a
contract by which three parties -- namely, the
shipper, the carrier, and the consignee --
undertake specific responsibilities and assume
stipulated obligations.56 In a nutshell, the
acceptance of the bill of lading by the shipper
and the consignee, with full knowledge of its
contents, gives rise to the presumption that it
constituted a perfected and binding contract.57
Further, a stipulation in the bill of lading limiting
to a certain sum the common carrier's liability for
loss or destruction of a cargo -- unless the shipper
or owner declares a greater value58 -- is
sanctioned by law.59 There are, however, two
conditions to be satisfied: (1) the contract is
reasonable and just under the circumstances, and
(2) it has been fairly and freely agreed upon by
the parties.60 The rationale for this rule is to bind
the shippers by their agreement to the value
(maximum valuation) of their goods.61
It is to be noted, however, that the Civil Code
does not limit the liability of the common carrier
to a fixed amount per package.62 In all matters
not regulated by the Civil Code, the right and the
obligations of common carriers shall be governed
by the Code of Commerce and special laws.63
Thus, the COGSA, which is suppletory to the
provisions of the Civil Code, supplements the
latter by establishing a statutory provision
limiting the carrier's liability in the absence of a
shipper's declaration of a higher value in the bill
of lading.64 The provisions on limited liability are
as much a part of the bill of lading as though
physically in it and as though placed there by
agreement of the parties.65
In the case before us, there was no stipulation in
the Bill of Lading66 limiting the carrier's liability.
Neither did the shipper declare a higher valuation
of the goods to be shipped. This fact
notwithstanding, the insertion of the words "L/C
No. 90/02447 cannot be the basis for petitioners'
liability.
First, a notation in the Bill of Lading which
indicated the amount of the Letter of Credit
obtained by the shipper for the importation of
steel sheets did not effect a declaration of the
value of the goods as required by the bill. 67 That
notation was made only for the convenience of
the shipper and the bank processing the Letter of
Credit.68
Second, in Keng Hua Paper Products v. Court of
Appeals,69 we held that a bill of lading was
separate from the Other Letter of Credit
arrangements. We ruled thus:
"(T)he contract of carriage, as stipulated in the
bill of lading in the present case, must be treated
independently of the contract of sale between the
seller and the buyer, and the contract of issuance
of a letter of credit between the amount of goods
described in the commercial invoice in the
contract of sale and the amount allowed in the
letter of credit will not affect the validity and
enforceability of the contract of carriage as
embodied in the bill of lading. As the bank cannot
be expected to look beyond the documents
presented to it by the seller pursuant to the letter
of credit, neither can the carrier be expected to
go beyond the representations of the shipper in
the bill of lading and to verify their accuracy vis-
à-vis the commercial invoice and the letter of
credit. Thus, the discrepancy between the
amount of goods indicated in the invoice and the
amount in the bill of lading cannot negate
petitioner's obligation to private respondent
arising from the contract of transportation."70
In the light of the foregoing, petitioners' liability
should be computed based on US$500 per
package and not on the per metric ton price
declared in the Letter of Credit.71 In Eastern
Shipping Lines, Inc. v. Intermediate Appellate
Court,72 we explained the meaning of packages:
"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.1âwphi1.nêt
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
 TRANSPORTATION LAW Case Digests

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.
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 them 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.
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.
Macam vs. CA
The goods are released to GPC. It has been the
Facts:
practice of petitioner to request the shipping lines
Petitioner Macam exported watermelons
to immediately release perishable cargoes such
and mangoes to Hong Kong, Great Prospect
as watermelons and fresh mangoes through
Companyis the consignee. The bill of lading
telephone calls by himself or his "people." In
stated that one of the bill must be presented by
transactions covered by a letter of credit, bank
the Pakistan Bank asconsignee and GPC as the
guarantee is normally required by the shipping
notify party. Upon arrival in Hong Kong, the
lines prior to releasing the goods. But for buyers
shipment was delivered by thecarrier directly to
using telegraphic transfers, petitioner dispenses
GPC and not to Pakistan Bank and without
with the bank guarantee because the goods are
surrendering the bill of lading.
already fully paid. In his several years of business
relationship with GPC and respondents, there was
Issue:
not a single instance when the bill of lading was
Whether or not there was a valid delivery.
first presented before the release of the cargoes.
Held:
The extraordinary responsibility of
common carriers last until actual or constructive
delivery of thecargo to the consignee or his
agent. Pakistan was indicted as consignee and
GPC was the notify party.However, in the export
invoice, GPC was clearly named as buyer or
importer. Petitioner referred to GPCas such in his
demand letter to respondent and his complaint
before the court. This premise brings
intoconclusion that the deliveries of the cargo to
GPC as buyer or importer is in conformity with
Art. 1736 of the Civil Code. Therefore, there was
a valid delivery.

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