TRANSPO B
1. Ynchausti Steamship Co. vs. Dexter, 41 Phil. 289
G.R. No. L-15652 December 14, 1920
THE YNCHAUSTI STEAMSHIP COMPANY, petitioner,
vs.
I. B. DEXTER, as Auditor of the Philippine Islands, and C. E. UNSON,
as Acting Purchasing Agent of the Philippine Islands, respondents.
Cohn & Fisher for petitioner.
Attorney-General Paredes and Assistant Attorney-General A. Santos
for respondents.
STREET, J.:
This a petition for a writ of mandamus filed in this court of the Ynchausti
Steamship Company to compel the Purchasing Agent of the Philippine
Islands and the Insular Auditor to sign, countersign, and deliver to the
petitioner a warrant upon the Treasurer of the Philippine Islands for the
sum of P82.79 in satisfaction of a claim for that amount, which is alleged
to be due the petitioner as a common carrier for freight earned in
transporting for the Government two distinct consignments of mineral
oil from Manila to two other ports in the Philippine Islands. After the
defendants had duly answered, denying all the allegations of the
petition except such as relate to the character and places of residence
of the parties to the petition (which are admitted) the controversy was
submitted for determination by this court upon an agreed statement of
facts as follows:
On July 23, 1918, the Government of the Philippine Islands, acting by
and through the respondent Insular Purchasing Agent, employed the
services of the petitioner, Ynchausti Steamship Co., a common carrier,
for the transportation, on board the steamship Venus, from the port of
Manila to the port of Aparri, Cagayan, of a consignment of
merchandise, consisting of thirty (30) cases of "White Rose" mineral oil
of two five-gallon cans to the case; and on September 18, 1918, the
said Government likewise employed the services of petitioner for the
transportation on board the steamship Venus, from Manila to Aparri,
Cagayan, of ninety-six cases of "Cock" Brand mineral oil, ten gallons to
the case. The goods were delivered by the shipper to the carrier, which
accordingly received them, and to evidence the contract of
transportation, the parties duly executed and delivered what is
popularly called the Government bill of lading (General Form 9-A),
hereto attached, marked Exhibit A and made a part hereof, wherein and
whereby it was stipulated that the carrier, the petitioner Ynchausti &
Co., received the above-mentioned supplies in apparent good
condition, obligating itself to carry said supplies to the place agreed
upon, in accordance with the authorized and prescribed rates and
classifications, and subject to the law of common carriers in force on
the date of the shipment, and to the conditions prescribed by the Insular
Collector of Customs in Philippine Marine Regulations at page 16 under
the heading of "Bill of Lading Conditions," hereto attached, marked
Exhibit B and made a part hereof.
Upon the delivery of the said shipment of "Cock" brand oil and
consignee claimed that one case was delivered empty, and noted such
claim upon the bill of lading; and upon the delivery of the said shipment
of "White Rose," brand oil the consignee claimed that one case was
delivered empty, and noted said claim upon the bill of lading.
Thereafter, notwithstanding the protestations of the petitioner,
Ynchausti Steamship Co., that said shortages were due to causes
entirely unknown to it, and were not due to any fault or negligence on
its part, or on the part of its agents or servants, the Acting Insular
Purchasing Agent of the Philippine Islands notified the petitioners
herein that after due investigation the Insular Auditor found and decided
that the leakages of the two whole cases were due to its negligence
and that the deduction of the sum of P22.53, the invoice value of the
goods lost, and held by the Auditor to be the true value thereof had
been authorized by the said Insular Auditor.
Petitioner thereupon protested against the threatened deduction, and
demanded that it be paid the full amount due for the transportation of
the two said shipments of merchandise, to wit, the sum of P82.79, as
shown by its transportation voucher presented in this cause, hereto
attached. marked Exhibit C and made a part hereof.
Thereafter, notwithstanding the protest and demand of the petitioner as
aforesaid, the Insular Auditor, in conformity with his ruling, declined and
still declines to issue to the petitioner a warrant for the full sum of
1
TRANSPO B
P82.79, and has tendered to it a warrant for the sum of P60.26, which
the petitioner has refused to accept.lawphi1.net
The sum of P22.53 authorized to be deducted by the Insular Auditor,
as appears herein, has not at any time been liquidated by consent,
agreement, or by the judgment of any court of competent jurisdiction.
Upon a perusal of the foregoing agreed statement it will be seen that
the present litigation had its origin in a situation practically identical with
that considered by this court in Compaia General de Tabacos vs.
French and Unson (39 Phil., 34). It will be noted, however, that the case
mentioned was decided upon demurrer, while the one now before us is
to be heard and determined upon the petition, answer, and the admitted
facts.
We note that in this case, as in the case of Compaia General de
Tabacos vs. French and Unson (supra), the petition alleges that the
leakage of the lost gasoline was due to causes unknown to the
petitioner and was not due to any fault or negligence of petitioner, its
agents, or servants. The respondents, by demurring to the petition in
the earlier case, admitted that allegation. In the case now before us that
allegation is put in issue, and we find nothing in the admitted statement
of facts to support it. It results that if that allegation is material to the
relief here sought, the petition must fail.
We are of the opinion that the allegation in question is material and that
the belief sought in this case cannot be granted.
In section 646 of the Administrative Code it is provided that when
Government property is transmitted from one place to another by
carrier, it shall be upon proper bill of lading, or receipt, from such carrier,
and it shall be the duty of the consignee, or his representative, to make
full notation of any evidence of loss, shortage, or damage, upon the bill
of lading, or receipt, before accomplishing it. It is admitted by the
petitioner in the agreed statement of facts that the consignee, at the
time the oil was delivered, noted the loss in the present case upon the
two respective bills of lading. The notation of these losses by the
consignee, in obedience to the precept of section 646 of the
Administrative Code, is competent evidence to show that the shortage
in fact existed. As the petitioner admits that the oil was received by it
for carriage and inasmuch as the fact of loss is proved in the manner
just stated, it results that there is a presumption that the petitioner was
to blame for the loss; and it was incumbent upon the petitioner in order
to entitle it to relief in the case to rebut that presumption by proving, as
is alleged in the petition, that the loss was not due to any fault or
negligence of the petitioner.
The mere proof of delivery of goods in good order to a carrier, and of
their arrival at the place of destination in bad order, makes out a prima
facie case against the carrier, so that if no explanation is given as to
how the injury occurred, the carrier must be held responsible. (4 R. C.
L., p. 917.) It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstance inconsistent with its
liability. (Articles
361-363, Code of Commerce.) Indeed, if the Government of the
Philippine Islands had instituted an action in a court of law against the
petitioner to recover the value of the oil lost while these consignments
were in the court of transportation, it would, upon the facts appearing
before us, have been entitled to judgment.
From this it is apparent that the mandamus prayed for cannot be
granted. It is a rule of universal application that a petition for
extraordinary relief of the character here sought must show merit. That
is, the petitioner's right to relief must be clear. Such cannot be said to
be the case where, as here, a presumption of responsibility on the part
of the petitioner stands unrefuted upon the record.
We are of the opinion that, in the absence of proof showing that the
carrier was not at fault in respect to the matter under discussion, the
Insular Auditor was entitled to withhold, from the amount admittedly due
to the petitioner for the freight charges, a sum sufficient to cover the
value of the oil lost in transit.
The petition will be dismissed, with costs against the petitioner. So
ordered.
2. Mirasol v. Dollar, 53 Phil. 125
G.R. No. 161833. July 8, 2005
2
TRANSPO B
PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioners,
vs.
UNKNOWN OWNER OF THE VESSEL M/V "NATIONAL HONOR,"
NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL CONTAINER SERVICES, INC., Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules
of Civil Procedure assailing the Decision1 dated January 19, 2004 of
the Court of Appeals (CA) in CA-G.R. CV No. 57357 which affirmed the
Decision dated February 17, 1997 of the Regional Trial Court (RTC) of
Manila, Branch 37, in Civil Case No. 95-73338.
The Antecedent
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a
shipment of four units of parts and accessories in the port of Pusan,
Korea, on board the vessel M/V "National Honor," represented in the
Philippines by its agent, National Shipping Corporation of the
Philippines (NSCP). The shipment was for delivery to Manila,
Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued
Bill of Lading No. SH94103062 in the name of the shipper consigned to
the order of Metropolitan Bank and Trust Company with arrival notice
in Manila to ultimate consignee Blue Mono International Company,
Incorporated (BMICI), Binondo, Manila.
NSCP, for its part, issued Bill of Lading No. NSGPBSML5125653 in the
name of the freight forwarder, as shipper, consigned to the order of
Stamm International Inc., Makati, Philippines. It is provided therein that:
12. This Bill of Lading shall be prima facie evidence of the receipt of the
Carrier in apparent good order and condition except as, otherwise,
noted of the total number of Containers or other packages or units
enumerated overleaf. Proof to the contrary shall be admissible when
this Bill of Lading has been transferred to a third party acting in good
faith. No representation is made by the Carrier as to the weight,
contents, measure, quantity, quality, description, condition, marks,
numbers, or value of the Goods and the Carrier shall be under no
responsibility whatsoever in respect of such description or particulars.
13. The shipper, whether principal or agent, represents and warrants
that the goods are properly described, marked, secured, and packed
and may be handled in ordinary course without damage to the goods,
ship, or property or persons and guarantees the correctness of the
particulars, weight or each piece or package and description of the
goods and agrees to ascertain and to disclose in writing on shipment,
any condition, nature, quality, ingredient or characteristic that may
cause damage, injury or detriment to the goods, other property, the ship
or to persons, and for the failure to do so the shipper agrees to be liable
for and fully indemnify the carrier and hold it harmless in respect of any
injury or death of any person and loss or damage to cargo or property.
The carrier shall be responsible as to the correctness of any such mark,
descriptions or representations.4
The shipment was contained in two wooden crates, namely, Crate No.
1 and Crate No. 2, complete and in good order condition, covered by
Commercial Invoice No. YJ-73564 DTD5 and a Packing List.6 There
were no markings on the outer portion of the crates except the name of
the consignee.7 Crate No. 1 measured 24 cubic meters and weighed
3,620 kgs. It contained the following articles: one (1) unit Lathe Machine
complete with parts and accessories; one (1) unit Surface Grinder
complete with parts and accessories; and one (1) unit Milling Machine
complete with parts and accessories. On the flooring of the wooden
crates were three wooden battens placed side by side to support the
weight of the cargo. Crate No. 2, on the other hand, measured 10 cubic
meters and weighed 2,060 kgs. The Lathe Machine was stuffed in the
crate. The shipment had a total invoice value of US$90,000.00 C&F
Manila.8 It was insured for P2,547,270.00 with the Philippine Charter
Insurance Corporation (PCIC) thru its general agent, Family Insurance
and Investment Corporation,9 under Marine Risk Note No. 68043 dated
October 24, 1994.10
The M/V "National Honor" arrived at the Manila International Container
Terminal (MICT) on November 14, 1995. The International Container
Terminal Services, Incorporated (ICTSI) was furnished with a copy of
the crate cargo list and bill of lading, and it knew the contents of the
crate.11 The following day, the vessel started discharging its cargoes
3
TRANSPO B
using its winch crane. The crane was operated by Olegario Balsa, a
winchman from the ICTSI,12 the exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the
crew and the surveyor of the ICTSI, conducted an inspection of the
cargo.13 They inspected the hatches, checked the cargo and found it
in apparent good condition.14 Claudio Cansino, the stevedore of the
ICTSI, placed two sling cables on each end of Crate No. 1.15 No sling
cable was fastened on the mid-portion of the crate. In Dauzs
experience, this was a normal procedure.16 As the crate was being
hoisted from the vessels hatch, the mid-portion of the wooden flooring
suddenly snapped in the air, about five feet high from the vessels twin
deck, sending all its contents crashing down hard,17 resulting in
extensive damage to the shipment.
BMICIs customs broker, JRM Incorporated, took delivery of the cargo
in such damaged condition.18 Upon receipt of the damaged shipment,
BMICI found that the same could no longer be used for the intended
purpose. The Mariners Adjustment Corporation hired by PCIC
conducted a survey and declared that the packing of the shipment was
considered insufficient. It ruled out the possibility of taxes due to
insufficiency of packing. It opined that three to four pieces of cable or
wire rope slings, held in all equal setting, never by-passing the center
of the crate, should have been used, considering that the crate
contained heavy machinery.19
BMICI subsequently filed separate claims against the NSCP,20 the
ICTSI,21 and its insurer, the PCIC,22 for US$61,500.00. When the
other companies denied liability, PCIC paid the claim and was issued a
Subrogation Receipt23 for P1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila,
Branch 35, a Complaint for Damages24 against the "Unknown owner
of the vessel M/V National Honor," NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault and negligence of the
defendants. It prayed, among others
WHEREFORE, it is respectfully prayed of this Honorable Court that
judgment be rendered ordering defendants to pay plaintiff, jointly or in
the alternative, the following:
1. Actual damages in the amount of P1,740,634.50 plus legal interest
at the time of the filing of this complaint until fully paid;
2. Attorneys fees in the amount of P100,000.00;
3. Cost of suit.25
ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim
against its co-defendant NSCP, claiming that the loss/damage of the
shipment was caused exclusively by the defective material of the
wooden battens of the shipment, insufficient packing or acts of the
shipper.
At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified
that the wooden battens placed on the wooden flooring of the crate was
of good material but was not strong enough to support the weight of the
machines inside the crate. He averred that most stevedores did not
know how to read and write; hence, he placed the sling cables only on
those portions of the crate where the arrow signs were placed, as in the
case of fragile cargo. He said that unless otherwise indicated by arrow
signs, the ICTSI used only two cable slings on each side of the crate
and would not place a sling cable in the mid-section.26 He declared
that the crate fell from the cranes because the wooden batten in the
mid-portion was broken as it was being lifted.27 He concluded that the
loss/damage was caused by the failure of the shipper or its packer to
place wooden battens of strong materials under the flooring of the crate,
and to place a sign in its mid-term section where the sling cables would
be placed.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co.,
Inc. that the damage to the cargo could be attributed to insufficient
packing and unbalanced weight distribution of the cargo inside the crate
as evidenced by the types and shapes of items found.28
The trial court rendered judgment for PCIC and ordered the complaint
dismissed, thus:
4
TRANSPO B
WHEREFORE, the complaint of the plaintiff, and the respective
counterclaims of the two defendants are dismissed, with costs against
the plaintiff.
SO ORDERED.29
According to the trial court, the loss of the shipment contained in Crate
No. 1 was due to the internal defect and weakness of the materials used
in the fabrication of the crates. The middle wooden batten had a hole
(bukong-bukong). The trial court rejected the certification30 of the
shipper, stating that the shipment was properly packed and secured, as
mere hearsay and devoid of any evidentiary weight, the affiant not
having testified.
Not satisfied, PCIC appealed31 to the CA which rendered judgment on
January 19, 2004 affirming in toto the appealed decision, with this fallo
WHEREFORE, the decision of the Regional Trial Court of Manila,
Branch 35, dated February 17, 1997, is AFFIRMED.
SO ORDERED.32
The appellate court held, inter alia, that it was bound by the finding of
facts of the RTC, especially so where the evidence in support thereof
is more than substantial. It ratiocinated that the loss of the shipment
was due to an excepted cause "[t]he character of the goods or defects
in the packing or in the containers" and the failure of the shipper to
indicate signs to notify the stevedores that extra care should be
employed in handling the shipment.33 It blamed the shipper for its
failure to use materials of stronger quality to support the heavy
machines and to indicate an arrow in the middle portion of the cargo
where additional slings should be attached.34 The CA concluded that
common carriers are not absolute insurers against all risks in the
transport of the goods.35
Hence, this petition by the PCIC, where it alleges that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW
IN NOT HOLDING THAT RESPONDENT COMMON CARRIER IS
LIABLE FOR THE DAMAGE SUSTAINED BY THE SHIPMENT IN THE
POSSESSION OF THE ARRASTRE OPERATOR.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW
IN NOT APPLYING THE STATUTORY PRESUMPTION OF FAULT
AND NEGLIGENCE IN THE CASE AT BAR.
III.
THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE
FACTS IN FINDING THAT THE DAMAGE SUSTAINED BY THE
[SHIPMENT] WAS DUE TO ITS DEFECTIVE PACKING AND NOT TO
THE FAULT AND NEGLIGENCE OF THE RESPONDENTS.36
The petitioner asserts that the mere proof of receipt of the shipment by
the common carrier (to the carrier) in good order, and their arrival at the
place of destination in bad order makes out a prima facie case against
it; in such case, it is liable for the loss or damage to the cargo absent
satisfactory explanation given by the carrier as to the exercise of
extraordinary diligence. The petitioner avers that the shipment was
sufficiently packed in wooden boxes, as shown by the fact that it was
accepted on board the vessel and arrived in Manila safely. It
emphasizes that the respondents did not contest the contents of the bill
of lading, and that the respondents knew that the manner and condition
of the packing of the cargo was normal and barren of defects. It
maintains that it behooved the respondent ICTSI to place three to four
cables or wire slings in equal settings, including the center portion of
the crate to prevent damage to the cargo:
[A] simple look at the manifesto of the cargo and the bill of lading
would have alerted respondents of the nature of the cargo consisting of
thick and heavy machinery. Extra-care should have been made and
extended in the discharge of the subject shipment. Had the respondent
only bothered to check the list of its contents, they would have been
nervous enough to place additional slings and cables to support those
5
TRANSPO B
massive machines, which were composed almost entirely of thick steel,
clearly intended for heavy industries. As indicated in the list, the boxes
contained one lat[h]e machine, one milling machine and one grinding
machine-all coming with complete parts and accessories. Yet, not one
among the respondents were cautious enough. Here lies the utter
failure of the respondents to observed extraordinary diligence in the
handling of the cargo in their custody and possession, which the Court
of Appeals should have readily observed in its appreciation of the
pertinent facts.37
The petitioner posits that the loss/damage was caused by the
mishandling of the shipment by therein respondent ICTSI, the arrastre
operator, and not by its negligence.
The petitioner insists that the respondents did not observe
extraordinary diligence in the care of the goods. It argues that in the
performance of its obligations, the respondent ICTSI should observe
the same degree of diligence as that required of a common carrier
under the New Civil Code of the Philippines. Citing Eastern Shipping
Lines, Inc. v. Court of Appeals,38 it posits that respondents are liable
in solidum to it, inasmuch as both are charged with the obligation to
deliver the goods in good condition to its consignee, BMICI.
Respondent NSCP counters that if ever respondent ICTSI is adjudged
liable, it is not solidarily liable with it. It further avers that the "carrier
cannot discharge directly to the consignee because cargo discharging
is the monopoly of the arrastre." Liability, therefore, falls solely upon the
shoulder of respondent ICTSI, inasmuch as the discharging of cargoes
from the vessel was its exclusive responsibility. Besides, the petitioner
is raising questions of facts, improper in a petition for review on
certiorari.39
Respondent ICTSI avers that the issues raised are factual, hence,
improper under Rule 45 of the Rules of Court. It claims that it is merely
a depository and not a common carrier; hence, it is not obliged to
exercise extraordinary diligence. It reiterates that the loss/damage was
caused by the failure of the shipper or his packer to place a sign on the
sides and middle portion of the crate that extra care should be
employed in handling the shipment, and that the middle wooden batten
on the flooring of the crate had a hole. The respondent asserts that the
testimony of Anthony Abarquez, who conducted his investigation at the
site of the incident, should prevail over that of Rolando Balatbat. As an
alternative, it argues that if ever adjudged liable, its liability is limited
only to P3,500.00 as expressed in the liability clause of Gate Pass CFS-
BR-GP No. 319773.
The petition has no merit.
The well-entrenched rule in our jurisdiction is that only questions of law
may be entertained by this Court in a petition for review on certiorari.
This rule, however, is not ironclad and admits certain exceptions, such
as when (1) the conclusion is grounded on speculations, surmises or
conjectures; (2) the inference is manifestly mistaken, absurd or
impossible; (3) there is grave abuse of discretion; (4) the judgment is
based on a misapprehension of facts; (5) the findings of fact are
conflicting; (6) there is no citation of specific evidence on which the
factual findings are based; (7) the findings of absence of facts are
contradicted by the presence of evidence on record; (8) the findings of
the Court of Appeals are contrary to those of the trial court; (9) the Court
of Appeals manifestly overlooked certain relevant and undisputed facts
that, if properly considered, would justify a different conclusion; (10) the
findings of the Court of Appeals are beyond the issues of the case; and
(11) such findings are contrary to the admissions of both parties.40
We have reviewed the records and find no justification to warrant the
application of any exception to the general rule.
We agree with the contention of the petitioner that common carriers,
from the nature of their business and for reasons of public policy, are
mandated 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.41 The Court has
defined extraordinary diligence in the vigilance over the goods as
follows:
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires common
carriers to render service with the greatest skill and foresight and "to
6
TRANSPO B
use all reasonable means to ascertain the nature and characteristic of
goods tendered for shipment, and to exercise due care in the handling
and stowage, including such methods as their nature requires."42
The common carriers duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier
for transportation until delivered to, or until the lapse of a reasonable
time for their acceptance, by the person entitled to receive them.43
When the goods shipped are either lost or arrive in damaged condition,
a presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence to
hold it liable.44 To overcome the presumption of negligence in the case
of loss, destruction or deterioration of the goods, the common carrier
must prove that it exercised extraordinary diligence.45
However, under Article 1734 of the New Civil Code, the presumption of
negligence does not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or
calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the
containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil
Code which exempts the common carrier for the loss or damage to the
cargo is a closed list.46 To exculpate itself from liability for the
loss/damage to the cargo under any of the causes, the common carrier
is burdened to prove any of the aforecited causes claimed by it by a
preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.47
"Defect" is the want or absence of something necessary for
completeness or perfection; a lack or absence of something essential
to completeness; a deficiency in something essential to the proper use
for the purpose for which a thing is to be used.48 On the other hand,
inferior means of poor quality, mediocre, or second rate.49 A thing may
be of inferior quality but not necessarily defective. In other words,
"defectiveness" is not synonymous with "inferiority."
In the present case, the trial court declared that based on the record,
the loss of the shipment was caused by the negligence of the petitioner
as the shipper:
The same may be said with respect to defendant ICTSI. The breakage
and collapse of Crate No. 1 and the total destruction of its contents were
not imputable to any fault or negligence on the part of said defendant
in handling the unloading of the cargoes from the carrying vessel, but
was due solely to the inherent defect and weakness of the materials
used in the fabrication of said crate.
The crate should have three solid and strong wooden batten placed
side by side underneath or on the flooring of the crate to support the
weight of its contents. However, in the case of the crate in dispute,
although there were three wooden battens placed side by side on its
flooring, the middle wooden batten, which carried substantial volume of
the weight of the crates contents, had a knot hole or "bukong-bukong,"
which considerably affected, reduced and weakened its strength.
Because of the enormous weight of the machineries inside this crate,
the middle wooden batten gave way and collapsed. As the combined
strength of the other two wooden battens were not sufficient to hold and
carry the load, they too simultaneously with the middle wooden battens
gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).
Crate No. 1 was provided by the shipper of the machineries in Seoul,
Korea. There is nothing in the record which would indicate that
defendant ICTSI had any role in the choice of the materials used in
fabricating this crate. Said defendant, therefore, cannot be held as
blame worthy for the loss of the machineries contained in Crate No.
1.50
The CA affirmed the ruling of the RTC, thus:
7
TRANSPO B
The case at bar falls under one of the exceptions mentioned in Article
1734 of the Civil Code, particularly number (4) thereof, i.e., the
character of the goods or defects in the packing or in the containers.
The trial court found that the breakage of the crate was not due to the
fault or negligence of ICTSI, but to the inherent defect and weakness
of the materials used in the fabrication of the said crate.
Upon examination of the records, We find no compelling reason to
depart from the factual findings of the trial court.
It appears that the wooden batten used as support for the flooring was
not made of good materials, which caused the middle portion thereof to
give way when it was lifted. The shipper also failed to indicate signs to
notify the stevedores that extra care should be employed in handling
the shipment.
Claudio Cansino, a stevedore of ICTSI, testified before the court their
duties and responsibilities:
"Q: With regard to crates, what do you do with the crates?
A: Everyday with the crates, there is an arrow drawn where the sling is
placed, Maam.
Q: When the crates have arrows drawn and where you placed the
slings, what do you do with these crates?
A: A sling is placed on it, Maam.
Q: After you placed the slings, what do you do with the crates?
A: After I have placed a sling properly, I ask the crane (sic) to haul it,
Maam.
Q: Now, what, if any, were written or were marked on the crate?
A: The thing that was marked on the cargo is an arrow just like of a
chain, Maam.
Q: And where did you see or what parts of the crate did you see those
arrows?
A: At the corner of the crate, Maam.
Q: How many arrows did you see?
A: Four (4) on both sides, Maam.
Q: What did you do with the arrows?
A: When I saw the arrows, thats where I placed the slings, Maam.
Q: Now, did you find any other marks on the crate?
A: Nothing more, Maam.
Q: Now, Mr. Witness, if there are no arrows, would you place slings on
the parts where there are no arrows?
A: You can not place slings if there are no arrows, Maam."
Appellants allegation that since the cargo arrived safely from the port
of [P]usan, Korea without defect, the fault should be attributed to the
arrastre operator who mishandled the cargo, is without merit. The cargo
fell while it was being carried only at about five (5) feet high above the
ground. It would not have so easily collapsed had the cargo been
properly packed. The shipper should have used materials of stronger
quality to support the heavy machines. Not only did the shipper fail to
properly pack the cargo, it also failed to indicate an arrow in the middle
portion of the cargo where additional slings should be attached. At any
rate, the issue of negligence is factual in nature and in this regard, it is
settled that factual findings of the lower courts are entitled to great
8
TRANSPO B
weight and respect on appeal, and, in fact, accorded finality when
supported by substantial evidence.51
We agree with the trial and appellate courts.
The petitioner failed to adduce any evidence to counter that of
respondent ICTSI. The petitioner failed to rebut the testimony of Dauz,
that the crates were sealed and that the contents thereof could not be
seen from the outside.52 While it is true that the crate contained
machineries and spare parts, it cannot thereby be concluded that the
respondents knew or should have known that the middle wooden batten
had a hole, or that it was not strong enough to bear the weight of the
shipment.
There is no showing in the Bill of Lading that the shipment was in good
order or condition when the carrier received the cargo, or that the three
wooden battens under the flooring of the cargo were not defective or
insufficient or inadequate. On the other hand, under Bill of Lading No.
NSGPBSML512565 issued by the respondent NSCP and accepted by
the petitioner, the latter represented and warranted that the goods were
properly packed, and disclosed in writing the "condition, nature, quality
or characteristic that may cause damage, injury or detriment to the
goods." Absent any signs on the shipment requiring the placement of a
sling cable in the mid-portion of the crate, the respondent ICTSI was
not obliged to do so.
The statement in the Bill of Lading, that the shipment was in apparent
good condition, is sufficient to sustain a finding of absence of defects in
the merchandise. Case law has it that such statement will create a
prima facie presumption only as to the external condition and not to that
not open to inspection.53
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack
of merit.
SO ORDERED.
3. Tan Chiong v. Ynchausti, 22 Phil. 153
G.R. No. L-6092 March 8, 1912
TAN CHIONG SIAN, plaintiff-appellee,
vs.
INCHAUSTI AND CO., defendant-appellant.
Haussermann, Cohn and Fisher for appellant.
O'Brien and DeWitt for appellee.
TORRES, J.:
This is an appeal through bill of exceptions, by counsel for the firm of
Inchausti & Co., from a judgment rendered by the Honorable A.S.
Crossfield, judge.
On January 11, 1909, the Chinaman, Tan Chiong Sian or Tan Chinto,
filed a written complaint, which was amended on the 28th of the same
month and again amended on October 27 of the same year, against the
said firm, wherein he alleged, among other things, as a cause of action:
That, on or about November 25, 1908, the plaintiff delivered to the
defendant 205 bundles or cases of general merchandise belonging to
him, which Inchausti & Co., upon receiving, bound themselves to
deliver in the pueblo of Catarman, Province of Samar, to the Chinaman,
Ong Bieng Sip, and in consideration of the obligations contracted by
the defendant party, the plaintiff obligated himself to pay to the latter
the sum of P250 Philippine currency, which payment should be made
upon the delivery of the said merchandise in the said pueblo Catarman;
but that the defendant company neither carried nor delivered the
aforementioned merchandise to the said Ong Bieng Sip, in Catarman,
but unjustly and negligently failed to do so, with the result that the said
merchandise was almost totally lost; that, had the defendant party
complied well and faithfully with its obligation, according to the
agreement made, the merchandise concerned would have a value of
P20,000 in the said pueblo of Catarman on the date when it should
have been delivered there, wherefore the defendant party owed the
plaintiff the said sum of P20,000, which it had not paid him, or any part
thereof, notwithstanding the many demands of the plaintiff; therefore
the latter prayed for judgment against the defendant for the said sum,
together with legal interest thereon from November 25, 1908, and the
costs of the suit.
9
TRANSPO B
Counsel for the defendant company, in his answer, set forth, that he
admitted the allegations of paragraphs 1 and 2 of the complaint,
amended for the second time, and denied those paragraphs 3, 4, 5, 6
and 7 of the same. As his first special defense, he alleged that on or
about November 28, 1908, his client, the said firm, received in Manila
from Ong Bieng Sip 205 bundles, bales, or cases of merchandise to be
placed on board the steamer Sorsogon, belonging to the defendant, for
shipment to the port of Gubat, Province of Sorsogon, to be in the said
port transshipped into another of the defendant's vessels for
transportation to the port of Catarman, Samar, and delivered to the
aforesaid Chinaman, Ong Bieng Sip; that the defendant company, upon
receiving the said merchandise from the latter, Ong Bieng Sip, and on
its entering into a contract of maritime transportation with him did not
know and was not notified that the plaintiff, Tan Chiong Sian, had any
interest whatever in the said merchandise and had made with the
plaintiff no contract relative to the transportation of such goods, for, on
receiving the latter from the said Ong Bieng Sip, for transportation,
there were made out and delivered to him three bills of lading, Nos. 38,
39 and 76, which contained a list of the goods received and, printed on
the back thereof were the terms of the maritime transportation contract
entered into by and between the plaintiff and the defendant company,
copies of which bills of lading and contract, marked as Exhibits A, B,
and C, are of record, attached to and made an integral part of the said
answer; that Ong Bieng Sip accepted the said bills of lading and the
contract extended on the backs thereof; that the merchandise
mentioned was put on board the steamer Sorsogon and carried to the
port of Gubat, Province of Sorsogon, where this vessel arrived on
November 28, 1908, on which date the lorcha Pilar, into which the said
merchandise was to be transshipped for carriage to Catarman, was not
at Gubat, and therefore the goods had to be unloaded and stored in the
defendant company's warehouses at Gubat; that, on the 4th of
December of the same year, the lorcha Pilar arrived at Gubat and, after
the termination of certain necessary work, the goods received from
Chinaman, Ong Bieng Sip, were taken aboard the same, together with
other merchandise belonging to the defendant party, for the purpose of
transportation to the port of Catarman; that, before the said lorcha could
leave for its destination, a strong wind arose which in the course of the
day increased in force until, early in the morning of the following day,
the lorcha was dragged and driven, by the force of the storm, upon the
shore, despite the means employed by the crew to avoid the accident,
and notwithstanding the five anchors that held the craft, which was thus
wrecked and completely destroyed and the merchandise with which it
was laden, including the 205 bundles or packages taken aboard for the
said Chinaman, was scattered on the shore; that, on the occasion, the
lorcha Pilar was in good condition, provided with all the proper and
necessary equipment and accessories and carried a crew of sufficient
number in command of a skillful patron or master, wherefore the wreck
of the said craft was solely due to the irresistible force of the elements
and of the storm which drove it upon the shore; that the defendant
company, with the greatest possible diligence, gathered up the said
shipwrecked goods that had been shipped by the Chinaman, Ong
Bieng Sip, but, owing to the damage they had suffered, it was
impossible to preserve them, so, after having offered to deliver them to
him, the defendant proceeded, in the presence of a notary, to sell them
at public auction and realized from the sale thereof P1,693.67, the
reasonable value of the same in the condition in which they were after
they had been gathered up and salved from the wreck of the lorcha
Pilar; that the expenses occasioned by such salvage and sale of the
said goods amounted to P151.35, which were paid by the defendant
party; that the latter offered to the Chinese shipper, the plaintiff, the
amount realized from the sale of the said merchandise, less P151.35,
the amount of the expenses, and the sum of P250, the amount of the
freight stipulated, and is still willing to pay such products of the said sale
to the aforementioned Ong Bieng Sip or to any other person who should
establish his subrogation to the rights of the Chinaman, Ong Bieng Sip,
with respect to the said amount; that, as his client's second special
defense, the defendant company alleged that one of the conditions of
the shipping contract executed between it and the Chinaman, Ong
Bieng Sip, relative to the transportation of the said merchandise, was
that the said firm should not be held liable for more than P25 for any
bundle or package, unless the value of its contents should be stated in
the bill of lading, and that the shipper, Chinaman, Ong Bieng Sip, did
not state in the bill of lading the value of any of the bundles or packages
in which the goods shipped by him were packed. Counsel for the
defendant company, therefore, prayed the court to absolve his client
from the complaint, with costs against the plaintiff.
After the hearing of the case and the introduction of testimony by the
parties, judgment was rendered, on March 18, 1910, in favor of the
plaintiff, Tan Chiong Sian or Tan Chinto, against the defendant
10
TRANSPO B
Inchausti and Co., for the sum of P14,642.63, with interest at the rate
of 6 per cent per annum from January 11, 1909, and for the costs of the
trial. The defendant party appealed from this judgment.
This suit was brought for the purpose of collecting a certain sum which
it is alleged the defendant firm owes the plaintiff for losses and
damages suffered by the latter as a result of the former's
noncompliance with the terms of an agreement or contract to transport
certain merchandise by sea from this city to the pueblo of Catarman,
Island of Samar, for the sum of P250.
The principal question to be determined is whether the defendant is
liable for the loss of the merchandise and for failure to deliver the same
at the place of destination, or whether he is relieved from responsibility
on the ground of force majeure.
Article 1601 of the Civil Code prescribes:
Carriers of goods by land or by water shall be subject with regard to the
keeping and preservation of the things entrusted to them, to the same
obligations as determined for innkeepers by articles 1783 and 1784.
The provisions of this article shall be understood without prejudice to
what is prescribed by the Code of Commerce with regard to
transportation by sea and land.
Article 1602 reads:
Carriers are also liable for the loss of and damage to the things which
they receive, unless they prove that the loss or damage arose from a
fortuitous event or force majeure.
The articles aforecited are as follows:
ART. 1783. The depositum of goods made by travelers in inns or
hostelries shall also be considered a necessary one. The keepers of
inns and hostelries are liable for them as such bailees, provided that
notice thereof may have been given to them or to their employees, and
that the travelers on their part take the precautions which said
innkeepers or their substitutes may have advised them concerning the
care and vigilance of said goods.
ART. 1784. The liability referred to in the preceding article shall include
damages to the goods of the travelers caused the servants or
employees of the keepers for inns or hostelries as well as by strangers,
but not those arising from robbery or which may be caused by any other
case of force majeure.
Article 361 of the Code of Commerce provides:
Merchandise shall be transported at the risk and venture of the shipper,
unless the contrary was expressly stipulated.
Therefore, all damages and impairment suffered by the goods in
transportation, by reason of accident, force majeure, or by virtue of the
nature or defect of the articles, shall be for the account and risk of the
shipper.
The proof of these accidents in incumbent on the carrier.
ART. 362. The carrier, however, shall be liable for the losses and
damages arising from the causes mentioned in the foregoing article if it
is proved that they occurred on account of his negligence or because
he did not take the precautions usually adopted by careful persons,
unless the shipper committed fraud in the bill of lading, stating that the
goods were of a class or quality different from what they really were.
If, notwithstanding the precaution referred to in this article, the goods
transported run the risk of being lost on account of the nature or by
reason of an unavoidable accident, without there being time for the
owners of the same to dispose thereof, the carrier shall proceed to their
sale, placing them for this purpose at the disposal of the judicial
authority or of the officials determined by special provisions.
ART. 363. With the exception of the cases prescribed in the second
paragraph of article 361, the carrier shall be obliged to deliver the goods
transported in the same condition in which, according to the bill of
lading, they were at the time of their receipt, without any detriment or
impairment, and should he not do so, he shall be obliged to pay the
11
TRANSPO B
value of the goods not delivered at the point where they should have
been and at the time the delivery should have taken place.
If part of the goods transported should be delivered the consignee may
refuse to receive them, when he proves that he can not make use
thereof without the others.
On November 25, 1908, Inchausti & Co. received in Manila from the
Chinaman, Ong Bieng Sip, 205 bundles, bales or cases of goods to be
conveyed by the steamer Sorsogon to the port of Gubat, Province of
Sorsogon, where they were to be transshipped to another vessel
belonging to the defendant company and by the latter transported to
the pueblo of Catarman, Island of Samar, there to be delivered to the
Chinese shipper with whom the defendant party made the shipping
contract. To this end three bills of lading were executed, Nos. 38, 39,
and 76, copies of which, marked as Exhibits A, B, and C, are found on
pages 13, 14, and 15 of the record.
The steamer Sorsogon, which carried the goods, arrived at the port of
Gubat on the 28th of that month and as the lorcha Pilar, to which the
merchandise was to be transshipped for its transportation to Catarman,
was not yet there, the cargo was unloaded and stored in the defendant
company's warehouses at that port.
Several days later, the lorcha just mentioned arrived at Gubat and, after
the cargo it carried had been unloaded, the merchandise belonging to
the Chinaman, Ong Bieng Sip, together with other goods owned by the
defendant Inchausti & Co., was taken aboard to be transported to
Catarman; but on December 5, 1908, before the Pilar could leave for
its destination, towed by the launch Texas, there arose and, as a result
of the strong wind and heavy sea, the lorcha was driven upon the shore
and wrecked, and its cargo, including the Chinese shipper's 205
packages of goods, scattered on the beach. Laborers or workmen of
the defendant company, by its order, then proceeded to gather up the
plaintiff's merchandise and, as it was impossible to preserve it after it
was salved from the wreck of the lorcha, it was sold at public auction
before a notary for the sum of P1,693.67.
The contract entered into between the Chinese shipper, Ong Bieng Sip,
and the firm of Inchausti & Co., provided that transportation should be
furnished from Manila to Catarman, although the merchandise taken
aboard the steamer Sorsogon was to be transshipped at Gubat to
another vessel which was to convey it from that port to Catarman; it
was not stipulated in the said contract that the Sorsogon should convey
the goods to their final destination, nor that the vessel into which they
were to be transshipped, should be a steamer. The shipper, Ong Bieng
Sip, therefore assented to these arrangements and made no protest
when his 205 packages of merchandise were unloaded from the ship
and, on account of the absence of the lorcha Pilar, stored in the
warehouses at Gubat nor did he offer any objection to the lading of his
merchandise on to this lorcha as soon as it arrived and was prepared
to receive cargo; moreover, he knew that to reach the port of Catarman
with promptness and dispatch, the lorcha had to be towed by some
vessel like the launch Texas, which the defendant company had been
steadily using for similar operations in those waters.
Hence the shipper, Ong Bieng Sip, made no protest or objection to the
methods adopted by the agents of the defendant for the transportation
of his gods to the port of their destination, and the record does not show
that in Gubat the defendant possessed any other means for the
conveyance and transportation of merchandise, at least for Catarman,
than the lorcha Pilar, towed by said launch and exposed during its
passage to all sorts of accidents and perils from the nature and
seafaring qualities of a lorcha, from the circumstances then present and
the winds prevailing on the Pacific Ocean during the months of
November and December.
It is to be noted that a lorcha is not easily managed or steered when the
traveling, for, out at sea, it can only be moved by wind and sails; and
along the coast near the shore and in the estuaries where it customarily
travels, it can only move by poling. For this reason, in order to arrive at
the pueblo of Catarman with promptness and dispatch, the lorcha was
usually towed by the launch Texas.
The record does not show that, from the afternoon of the 4th of
December, 1908, until the morning of the following day, the 5th, the
patron or master of the lorcha which was anchored in the cove of Gubat,
received any notice from the captain of the steamer Ton Yek, also
anchored near by, of the near approach of a storm. The said captain,
Juan Domingo Alberdi, makes no reference in his sworn testimony of
12
TRANSPO B
having given any such notice to the patron of the lorcha, nor did the
latter, Mariano Gadvilao, testify that he received such notice from the
captain of the Ton Yek or from the person in charge of the Government
observatory. Gadvilao, the patron, testified that only between 10 and
11 o'clock of Saturday morning, the 5th of December, was he informed
by Inchausti & Co.'s agent in Gubat that a baguio was approaching; that
thereupon, on account of the condition of the sea, he dropped the four
anchors that the lorcha had on board and immediately went ashore to
get another anchor and a new cable in order more securely to hold the
boat in view of the predicted storm. This testimony was corroborated by
the said representative, Melchor Muoz. So the lorcha, when the storm
broke upon it, was held fast by five anchors and was, as testified by the
defendant without contradiction or evidence to the contrary, well found
and provided with all proper and necessary equipment and had a
sufficient crew for its management and preservation.
The patron of the lorcha testified specifically that at Gubat or in its
immediate vicinity there is no port whatever adequate for the shelter
and refuge of vessels in cases of danger, and that, even though there
were, on being advised between 10 and 11 o'clock of the morning of
the 5th, of the approach of a storm from the eastern Pacific, it would
have been impossible to spread any sails or weigh anchor on the lorcha
without being dragged or driven against the reefs by the force of the
wind. As the craft was not provided with steam or other motive power,
it would not have been possible for it to change its anchorage, nor move
from the place where it lay, even several hours before the notice was
received by its patron. A lorcha can not be compared with a steamer
which does not need the help or assistance of any other vessel in its
movements.
Due importance must be given to the testimony of the weather
observer, Antonio Rocha, that the notice received from the Manila
Observatory on the afternoon of December 4, with regard to a storm
travelling from the east of the Pelew Islands toward the northwest, was
not made known to the people of Gubat and that he merely left a
memorandum notice on the desk of the station, intending to give
explanations thereof to any person who should request them of him. So
the notice of the storm sent by the Manila Observatory was only known
to the said observer, and he did not apprise the public of the approach
of the storm until he received another notice from Manila at 20 minutes
past 8 o'clock on Saturday morning, December 5. Then he made a
public announcement and advised the authorities of the storm that was
coming.
The patron of the lorcha Pilar is charged with gross negligence for not
having endeavored to remove his craft to a safe place in the Sabang
River, about half a mile from where it was anchored.
In order to find out whether there was or was not such negligence on
the part of the patron, it becomes necessary to determine, first, whether
the lorcha, on the morning of December 5, could be moved by its own
power and without being towed by any steamboat, since it had no
steam engine of its own; second, whether the lorcha, on account of its
draft and the shallowness of the mouth of the said river, could have
entered the latter before the storm broke.
The patron, Mariano Gadvilao, stated under oath that the weather
during the night of December 4 was not threatening and he did not
believe there would be a storm; that he knew the Sabang River; and
that the lorcha Pilar, when loaded, could not enter as there was not
sufficient water in its channel; that, according to an official chart of the
port of Gubat, the bar of the Sabang River was covered by only a foot
and a half of water at ordinary low tide and the lorcha Pilar, when
loaded, drew 6 feet and a half; that aside from the fact that the condition
of the sea would not have permitted the lorcha to take shelter in the
said river, even could it have relied upon the assistance of a towboat,
at half past 8 o'clock in the morning the tide was still low; there was but
little water in the river and still less over the bar.
It was proven by the said official chart of the port of Gubat, that the
depth of water over the bar or entrance of the Sabang River is only one
foot and a half at ordinary low tide; that the rise and fall of the tide is
about 4__ feet, the highest tide being at 2 o'clock in the afternoon of
every day; and at that hour, on the 5th of December, the hurricane had
already made its appearance and the wind was blowing with all its fury
and raising great waves.
The lorcha Pilar, loaded as it had been from the afternoon of December
4, even though it could have been moved by means of poles, without
being towed, evidently could not have entered the Sabang River on the
13
TRANSPO B
morning of the 5th, when the wind began to increase and the sea to
become rough, on account of the low tide, the shallowness of the
channel, and the boat's draft.
The facts stated in the foregoing paragraph were proved by the said
chart which was exhibited in evidence and not rejected or assailed by
the plaintiff. They were also supported by the sworn testimony of the
patron of the lorcha, unrebutted by any oral evidence on the part of the
plaintiff such as might disprove the certainty of the facts related, and,
according to section 275 of the Code of Civil Procedure, the natural
phenomenon of the tides, mentioned in the official hydrographic map,
Exhibit 7, which is prima facie evidence on the subject, of the hours of
its occurrence and of the conditions and circumstances of the port of
Gubat, shall be judicially recognized without the introduction of proof,
unless the facts to the contrary be proven, which was not done by the
plaintiff, nor was it proven that between the hours of 10 and 11 o'clock
of the morning of December 5, 1908, there did not prevail a state of low
tide in the port of Gubat.
The oral evidence adduced by the plaintiff with respect to the depth of
the Sabang River, was unable to overcome that introduced by the
defendant, especially the said chart. According to section 320 of the
Code of Civil Procedure, such a chart is prima facie evidence of
particulars of general notoriety and interest, such as the existence of
shoals of varying depths in the bar and mouth of the Sabang River and
which obstruct the entrance into the same; the distance, length, and
number of the said shoals, with other details apparently well known to
the patron of the lorcha Pilar, to judge from his testimony.
Vessels of considerable draft, larger than the said lorcha, might have
entered the Sabang River some seven or nine years before, according
to the testimony of the Chinaman, Antonio B. Yap Cunco, though he did
not state whether they did so at high tide; but, since 1901, or previous
years, until 1908, changes may have taken place in the bed of the river,
its mouth and its bar. More shoals may have formed or those in
existence may have increased in extent by the constant action of the
sea. This is the reason why the patron, Gadvilao, who was acquainted
with the conditions of the port and cove of Gubat, positively declared
that the lorcha Pilar could not, on account of her draft, enter the Sabang
River, on account of low water.
The patron of the lorcha, after stating (p.58) that at Gubat or in its
vicinity there is no port that affords shelter, affirmed that it was
impossible to hoist the sails or weigh the anchors on the morning of the
5th of December, owing to the force of the wind and because the boat
would immediately have been dragged or driven upon the shoals; that
furthermore the lorcha was anchored in a channel some 300 brazas
wide, but, notwithstanding this width, the Pilar was, for want of motive
power, unable to move without being exposed to be dashed against the
coast by the strong wind and the heavy sea then prevailing. The
testimony of this witness was neither impugned nor offset by any
evidence whatever; he was a patron of long years of service and of
much practice in seafaring, especially in the port of Gubat and its
vicinity, who had commanded or been intrusted with the command of
other crafts similar to the lorcha Pilar and his testimony was absolutely
uncontradicted.
The patron Gadvilao, being cognizant of the duties imposed upon him
by rules 14 and 15 of article 612, and others, of the Code of Commerce,
remained with sailors, during the time the hurricane was raging, on
board the lorcha from the morning of December 5 until early the
following morning, the 6th, without abandoning the boat,
notwithstanding the imminent peril to which he was exposed, and kept
to his post until after the wreck and the lorcha had been dashed against
the rocks. Then he solicited help from the captain of the steamer Ton
Yek, and, thanks to the relief afforded by a small boat sent by the latter
officer, Gadvilao with his crew succeeded in reaching land and
immediately reported the occurrence to the representative of Inchausti
& Co. and to the public official from whom he obtained the document of
protest, Exhibit 1. By such procedure, he showed that, as a patron
skilled in the exercise of his vocation, he performed the duties imposed
by law in cases of shipwreck brought about by force majeure.
Treating of shipwrecks, article 840 of the Code of Commerce
prescribes:
The losses and damages suffered by a vessel and her cargo by reason
of shipwreck or standing shall be individually for the account of the
owners, the part of the wreck which may be saved belonging to them in
the same proportion.
14
TRANSPO B
And Article 841 of the same code reads:
If the wreck or stranding should arise through the malice, negligence,
or lack of skill of the captain, or because the vessel put to sea
insufficiently repaired and supplied, the owner or the freighters may
demand indemnity of the captain for the damages caused to the vessel
or cargo by the accident, in accordance with the provisions contained
in articles 610, 612, 614, and 621.
The general rule established in the first of the foregoing articles is that
the loss of the vessel and of its cargo, as the result of shipwreck, shall
fall upon the respective owners thereof, save for the exceptions
specified in the second of the said articles.
These legal provisions are in harmony with those of articles 361 and
362 of the Code of Commerce, and are applicable whenever it is proved
that the loss of, or damage to, the goods was the result of a fortuitous
event or of force majeure; but the carrier shall be liable for the loss or
the damage arising from the causes aforementioned, if it shall have
been proven that they occurred through his own fault or negligence or
by his failure to take the same precautions usually adopted by diligent
and careful persons.
In the contract made and entered into by and between the owner of the
goods and the defendant, no term was fixed within which the said
merchandise should be delivered to the former at Catarman, nor was it
proved that there was any delay in loading the goods and transporting
them to their destination. From the 28th of November, when the
steamer Sorsogon arrived at Gubat and landed the said goods
belonging to Ong Bieng Sip to await the lorcha Pilar which was to
convey them to Catarman, as agreed upon, no vessel carrying
merchandise made the voyage from Gubat to the said pueblo of the
Island of Samar, and with Ong Bieng Sip's merchandise there were also
to be shipped goods belonging to the defendant company, which goods
were actually taken on board the said lorcha and suffered the same
damage as those belonging to the Chinaman. So that there was no
negligence, abandonment, or delay in the shipment of Ong Bieng Sip's
merchandise, and all that was done by the carrier, Inchausti & Co., was
what it regularly and usually did in the transportation by sea from Manila
to Catarman of all classes of merchandise. No attempt has been made
to prove that any course other than the foregoing was pursued by that
firm on this occasion; therefore the defendant party is not liable for the
damage occasioned as a result of the wreck or stranding of the lorcha
Pilar because of the hurricane that overtook this craft while it was
anchored in the port of Gubat, on December 5, 1908, ready to be
conveyed to that of Catarman.
It is a fact not disputed, and admitted by the plaintiff, that the lorcha
Pilar was stranded and wrecked on the coast of Gubat during the night
of the 5th or early in the morning of the 6th of December, 1908, as a
result of a violent storm that came from the Pacific Ocean, and,
consequently, it is a proven fact that the loss or damage of the goods
shipped on the said lorcha was due to the force majeure which caused
the wreck of the said craft.
According to the aforecited article 361 of the Code of Commerce,
merchandise shall be transported at the risk and venture of the shipper,
unless the contrary be expressly stipulated. No such stipulation
appears of record, therefore, all damages and impairment suffered by
the goods in transportation, by reason of accident, force majeure, or by
virtue of the nature or defect of the articles, are for the account and risk
of the shipper.
A final clause of this same article adds that the burden of proof of these
accidents is upon the carrier; the trial record fully discloses that the loss
and damage of the goods shipped by the Chinaman, Ong Bieng Sip,
was due to the stranding and wreck of the lorcha Pilar in the heavy
storm or hurricane aforementioned; this the plaintiff did not deny, and
admitted that it took place between the afternoon of the 5th and early
in the morning of the 6th of December, 1908, so it is evident that the
defendant is exempt from the obligation imposed by the law to prove
the occurrence of the said storm, hurricane, or cyclone in the port of
Gubat, and, therefore, if said goods were lost or damaged and could
not be delivered in Catarman, it was due to a fortuitous event and a
superior, irresistible natural force, or force majeure, which completely
disabled the lorcha intended for their transportation to the said port of
the Island of Samar.
15
TRANSPO B
The record bears no proof that the said loss or damage caused by the
stranding or wreck of the lorcha Pilar as a result of the storm mentioned,
occurred through carelessness or negligence on the part of the
defendant company, its agents or the patron of the said lorcha, or
because they did not take the precautions usually adopted by careful
and diligent persons, as required by article 362 of the Code of
Commerce; the defendant company, as well as its agents and the
patron of the lorcha, had a natural interest in preserving the craft and
its own goods laden therein an interest equal to that of the Chinese
shipper in preserving his own which were on board the ship lorcha
and, in fact, the defendant, his agents and the patron did take the
measures which they deemed necessary and proper in order to save
the lorcha and its cargo from the impending danger; accordingly, the
patron, as soon as he was informed that a storm was approaching,
proceeded to clear the boat of all gear which might offer resistance to
the wind, dropped the four anchors he had, and even procured an extra
anchor from the land, together with a new cable, and cast it into the
water, thereby adding, in so far as possible, to the stability and security
of the craft, in anticipation of what might occur, as presaged by the
violence of the wind and the heavy sea; and Inchausti & Company's
agent furnished the articles requested by the patron of the lorcha for
the purpose of preventing the loss of the boat; thus did they all display
all the diligence and care such as might have been employed by
anyone in similar circumstances, especially the patron who was
responsible for the lorcha under his charge; nor is it possible to believe
that the latter failed to adopt all the measures that were necessary to
save his own life and those of the crew and to free himself from the
imminent peril of shipwreck.
In view of the fact that the lorcha Pilar had no means of changing its
anchorage, even supposing that there was a better one, and was
unable to accept help from any steamer that might have towed it to
another point, as wherever it might have anchored, it would continually
have been exposed to the lashing of the waves and to the fury of the
hurricane, for the port of Gubat is a cove or open roadstead with no
shelter whatever from the winds that sweep over it from the Pacific
Ocean, and in view of the circumstances that it was impossible for the
said lorcha, loaded as it then was, to have entered the Sabang River,
even though there had been a steamer to tow it, not only because of an
insufficient depth of water in its channel, but also on account of the very
high bar at the entrance of the said river, it is incontrovertible that the
stranding and wreck of the lorcha Pilar was due to a fortuitous event or
to force majeure and not to the fault and negligence of the defendant
company and its agents or of the patron, Mariano Gadvilao, inasmuch
as the record discloses it to have been duly proved that the latter, in
difficult situation in which unfortunately the boat under his charge was
placed, took all the precautions that any diligent man should have taken
whose duty it was to save the boat and its cargo, and, by the instinct of
self-preservation, his own life and those of the crew of the lorcha;
therefore, considering the conduct of the patron of the lorcha and that
of the defendant's agent in Gubat, during the time of the occurrence of
the disaster, the defendant company has not incurred any liability
whatever for the loss of the goods, the value of which is demanded by
the plaintiff; it must, besides, be taken into account that the defendant
itself also lost goods of its own and the lorcha too.
From the moment that it is held that the loss of the said lorcha was due
to force majeure, a fortuitous event, with no conclusive proof or
negligence or of the failure to take the precautions such as diligent and
careful persons usually adopt to avoid the loss of the boat and its cargo,
it is neither just nor proper to attribute the loss or damage of the goods
in question to any fault, carelessness, or negligence on the part of the
defendant company and its agents and, especially, the patron of the
lorcha Pilar.
Moreover, it is to be noted that, subsequent to the wreck, the defendant
company's agent took all the requisite measures for the salvage of such
of the goods as could be recovered after the accident, which he did with
the knowledge of the shipper, Ong Bieng Sip, and, in effecting their
sale, he endeavored to secure all possible advantage to the Chinese
shipper; in all these proceedings, as shown by the record, he acted in
obedience to the law.
From all the foregoing it is concluded that the defendant is not liable for
the loss and damage of the goods shipped on the lorcha Pilar by the
Chinaman, Ong Bieng Sip, inasmuch as such loss and damage were
the result of a fortuitous event or force majeure, and there was no
negligence or lack of care and diligence on the part of the defendant
company or its agents.
16
TRANSPO B
Therefore, we hold it proper to reverse the judgment appealed from,
and to absolve, as we hereby do, the defendant, Inchausti & Co.,
without special findings as to costs.
4. Martini v. Macondray, 39 Phil. 934
[G.R. No. 13972. July 28, 1919.]
G. MARTINI, LTD., Plaintiff-Appellee, vs. MACONDRAY & CO. (INC.),
Defendant-Appellant.
DECISION
STREET, J.:
In September of the year 1916, the Plaintiff G. Martini, Ltd., arranged
with the Defendant company, as agents of the Eastern and Australian
Steamship Company, for the shipment of two hundred and nineteen
cases or packages of chemical products from Manila, Philippine Islands,
to Kobe, Japan. The goods were embarked at Manila on the steamship
Eastern, and were carried to Kobe on the deck of that ship. Upon arrival
at the port of destination it was found that the chemicals comprised in
the shipment had suffered damage from the effects of both fresh and
salt water; and the present action was instituted by the Plaintiff to recover
the amount of the damage thereby occasioned. In the Court of First
Instance judgment was rendered in favor of the Plaintiffs for the sum of
P34,997.56, with interest from March 24, 1917, and costs of the
proceeding. From this judgment the Defendant appealed.
That the damage was caused by water, either falling in the form of rain
or splashing aboard by the action of wind and waves, is unquestionable;
and the contention of the Plaintiff is that it was the duty of the ships
company to stow this cargo in the hold and not to place it in an exposed
position on the open deck. The defense is that by the contract of
affreightment the cargo in question was to be carried on deck at the
shippers risk; and attention is directed to the fact that on the face of
each bill of lading is clearly stamped with a rubber stencil in conspicuous
letters the words on deck at shippers risk. In this connection the
Defendant relies upon paragraph 19 of the several bills of lading issued
for transportation of this cargo, which reads as follows:
19. Goods signed for on this bill of lading as carried on deck are
entirely at shippers risk, whether carried on deck or under hatches, and
the steamer is not liable for any loss or damage from any cause
whatever.
The Plaintiff insists that the agreement was that the cargo in question
should be carried in the ordinary manner, that is, in the ships hold, and
that the Plaintiff never gave its consent for the goods to be carried on
deck. The material facts bearing on this controverted point appear to be
these: On September 15, 1916, the Plaintiff applied to the Defendant for
necessary space on the steamship Eastern, and received a shipping
order, which constituted authority for the ships officers to receive the
cargo aboard. One part of this document contained a form which, when
signed by the mate, would constitute the mates receipt, showing that
the cargo had been taken on.
Ordinarily the shipper is supposed to produce the mates receipt to the
agents of the ships company, who thereupon issue the bill of lading to
the shipper. When, however, the shipper, as not infrequently happens,
desires to procure the bill of lading before he obtains the mates receipt,
it is customary for him to enter into a written obligation, binding himself,
among other things, to abide by the terms of the mates receipt. In the
present instance the mates receipt did not come to the Plaintiffs hand
until Monday night, but as the Plaintiff was desirous of obtaining the bills
of lading on the Saturday morning preceding in order that he might
negotiate them at the bank, a request was made for the delivery of the
bills of lading on that day To effectuate this, the Plaintiff was required to
enter into the written obligation, calling itself a letter of guarantee,
which was introduced in evidence as Exhibit D-C. This document is of
the date of September 16, 1916, and of the following tenor:
In consideration of your signing us clean B/L for the undermentioned
cargo per above steamer to be shipped on or under deck at ships option,
for Kobe without production of the mates receipt, we hereby guarantee
to hold you free from any responsibility by your doing so, and for any
expense should the whole or part of the cargo be shut out, or otherwise,
17
TRANSPO B
and to hand you said mates receipt as soon as it reaches us and to
abide by all clauses and notations on the same.
In conformity with the purpose of this document the bills of lading were
issued, and the negotiable copies were, upon the same day, negotiated
at the bank by the Plaintiff for 90 per cent of the invoice value of the
goods. As already stated these bills of lading contained on their face,
conspicuously stenciled, the words on deck at shippers risks. The
mates receipt, received by the Plaintiff two days later also bore the
notation on deck at shippers risk, written with pencil, and evidently by
the officer who took the cargo on board and signed the receipt.
The Plaintiff insists that it had at no time agreed for the cargo to be
carried on deck; and G. Martini, manager of Martini & Company, says
that the first intimation he had of this was when, at about 4 p.m. on that
Saturday afternoon, he examined the nonnegotiable copies of the bills
of lading, which had been retained by the house, and discovered the
words on deck at shippers risk stamped thereon. Martini says that
upon seeing this, he at once called the attention of S. Codina thereto,
the latter being an employee of the house whose duty it was to attend to
all shipments of merchandise and who in fact had entire control of all
matters relating to the shipping of this cargo. Codina pretends that up to
the time when Martini directed his attention to the fact, he himself was
unaware that the cargo was being stowed on deck; and upon the
discovery of this fact the two gentlemen mentioned expressed mutual
surprise and dissatisfaction. Martini says that he told Codina to protest
at once to Macondray & Company over the telephone, while Martini
himself proceeded to endite a letter, which appears in evidence as
Exhibit D-T of the Defendant and is in its material part as follows:
MANILA, September 16, 1916.
MESSRS. MACONDRAY & Co.,
Manila,
DEAR SIRS: In re our shipment per steamship Eastern, we are very
much surprised to see that the remark on deck at shippers risk has
been stamped on the bills of lading Nos. 8 to 23. . . . and although not
believing that the same have actually been shipped on deck we must
hold you responsible for any consequence, loss, or damage deriving
from your action should they have been shipped as stated.
Yours faithfully,
G. MARTINI, LTD.
By S. CODINA.
This letter was followed by another of the same date and of substantially
the same tenor but containing the following additional statement:
It is the prevailing practice that, whenever a cargo is being carried on
deck, shipowners or agents give advice of it to shippers previous to
shipment taking place, and obtain their consent to it. If we had been
advised of it, shipment would not have been effected by us. We regret
very much this occurrence, but you will understand that in view of your
having acted in this case on your own responsibility, we shall have to
hold you amenable for any consequences that may be caused from your
action.
The first of these letters was forthwith dispatched by messenger, and
upon receiving it, Macondray & Company called Codina by telephone at
about 4.30 p.m. and, referring to the communication just received, told
him that Macondray & Company could not accept the cargo for
transportation otherwise than on deck and that if Martini & Company
were dissatisfied, the cargo could be discharged from the ship.
There is substantial conformity in the testimony of the two parties with
respect to the time of the conversation by telephone and the nature of
the message which Macondray & Company intended to convey, though
the witnesses differ as to some details and in respect to what occurred
immediately thereafter. Basa, who was in charge of the shipping
department of Macondray & Company and who conducted the
conversation on the part of the latter, says that he told Codina that if
Martini & Company was unwilling for the cargo to be carried on deck that
they could discharge it and further advised him that Macondray &
Companys empty boats were still at the ships side ready to receive the
cargo. In reply Codina stated that Martini, the manager, was then out
and that he would answer in a few minutes, after communication with
18
TRANSPO B
Martini. Within the course of half an hour Codina called Basa up and
said that as the cargo was already stowed on deck, Martini & Company
were willing for it to be carried in this way, and that their protest was a
mere formality. Codina admits that he was informed by Basa that the
cargo could not be carried under the hatches, and that if Martini &
Company were dissatisfied to have it carried on deck, they could
discharge it. He denies being told that it could be taken off in Macondray
& Companys boats. Codina further states that when the conversation
was broken off for the purpose of enabling him to communicate with
Martini, he consulted with the latter, and was directed to say that Martini
& Company did not consent for the cargo to be carried on deck and that
it must be discharged. Upon returning to the telephone, he found that
the connection had been broken, and he says that he was thereafter
unable to get Macondray & Company by telephone during that
afternoon, although he attempted to do so more than once.
In the light of all the evidence the conclusion seems clear enough that,
although Martini & Company would have greatly preferred for the cargo
to be carried under the hatches, they nevertheless consented for it to go
on deck. Codina, if attentive to the interests of his house, must have
known from the tenor of the guaranty to which his signature is affixed
that the Defendant had reserved the right to carry it on deck, and when
the bills of lading were delivered to the Plaintiff they plainly showed that
the cargo would be so carried.
It must therefore be considered that the Plaintiff was duly affected with
notice as to the manner in which the cargo was shipped. No complaint,
however, was made until after the bills of lading had been negotiated at
the bank. When the manager of Martini & Company first had his attention
drawn to the fact that the cargo was being carried on deck, he called
Codina to account, and the latter found it to his interest to feign surprise
and pretend that he had been deceived by Macondray & Company.
Even then there was time to stop the shipment, but Martini & Company
failed to give the necessary instructions, thereby manifesting
acquiescence in the accomplished fact.
In a later letter of October 25, 1916, addressed to Macondray &
Company, Martini, referring to the incident says: If previous to the
mailing of the documents, you had actually notified us by phone or
otherwise that you could not accept our cargo in any other way but on
deck, we should have promptly given you instructions to leave it on the
lighters and at our disposal.
From this it is inferable that one reason why the Plaintiff allowed the
cargo to be carried away without being discharged, was that the bills had
been discounted and to stop the shipment would have entailed the
necessity of refunding the money which the bank had advanced, with
the inconveniences incident thereto. Another reason apparently was that
Martini discerned, or thought he discerned the possibility of shifting the
risk so as to make it fall upon the ships company.
With reference to the practicability of discharging the cargo in the late
afternoon or evening of Saturday, September 16, before the ship
departed, as it did at 8 p.m. some evidence was introduced tending to
show that in order to get the cargo off certain formalities were necessary
which could not be accomplished, as for instance, the return of the
mates receipt (which had not yet come to the Plaintiffs hands), the
securing of a permit from the customs authorities, and the securing of
an order of discharge from the steamship company. In view of the fact
that the Plaintiff did nothing whatever looking towards the discharge of
the cargo, not even so much as to notify Macondray & Company that the
cargo must come off, the proof relative to the practicability of discharge
is inconclusive. If the Plaintiff had promptly informed Macondray &
Company of their resolve to have the cargo discharged, and the latter
had nevertheless permitted the ship to sail without discharging it, there
would have been some ground for Plaintiffs contention that its consent
had not been given for the goods to be carried on deck. Needless to say
we attach no weight to the statement of Codina that he was unable to
get Macondray & Company by telephone in order to communicate
directions for the discharge of the cargo.
The evidence submitted in behalf of the Defendant shows that there was
no space in the hold to take the cargo; and it was therefore unnecessary
to consider whether the chemicals to be shipped were of an explosive
or inflammable character, such as to require stowage on deck. By
reason of the fact that the cargo had to be carried on deck at all events,
if carried at all, the guaranty Exhibit D-C was so drawn as to permit
stowage either on or under deck at the ships option; and the attention
of Codina must have been drawn to this provision because Macondray
& Company refused to issue the bills of lading upon a guaranty signed
19
TRANSPO B
by Codina upon another form (Exhibit R), which contained no such
provision. The messenger between the two establishments who was
sent for the bills of lading accordingly had to make a second trip and go
back for a letter of guaranty signed upon the desired form. The pretense
of Codina that he was deceived into signing a document different from
that which he supposed himself to be signing is wholly unsustained.
The result of the discussion is that Martini & Company must be held to
have assented to the shipment of the cargo on deck and that they are
bound by the bills of lading in the form in which they were issued. The
trial court in our opinion erred in holding otherwise, and in particular by
ignoring, or failing to give sufficient weight to the contract of guaranty.
Having determined that the Plaintiff consented to the shipment of the
cargo on deck, we proceed to consider whether the Defendant can be
held liable for the damage which befell the cargo in question. It of course
goes without saying that if a clean bill of lading had been issued and the
Plaintiff had not consented for the cargo to go on deck, the ships
company would have been liable for all damage which resulted from the
carriage on deck. In the case of The Paragon (1 Ware, 326; 18 Fed.
Cas. No. 10708), decided in 1836 in one of the district courts of the
United States, it appeared that cargo was shipped from Boston,
Massachusetts, to Portland, Maine, upon what is called a clean bill of
lading, that is, one in the common form without any memorandum in the
margin or on its face showing that the goods are to be carried on deck.
It was proved that the shipper had not given his consent for carriage on
deck. Nevertheless, the master stowed the goods on deck; and a storm
having arisen, it became necessary to jettison them. None of the cargo
in the hold was lost. It was thus evident that although the cargo in
question was lost by peril of the sea, it would not have been lost except
for the fact that it was being carried on deck. It was held that the ship
was liable. In the course of the opinion the following language was used:
It is contended that the goods, in this case, having been lost by the
dangers of the seas, both the master and the vessel are exempted from
responsibility within the common exemption in bills of lading; and the
goods having been thrown overboard from necessity, and for the safety
of the vessel and cargo, as well as the lives of the crew, that it presents
a case for a general average or contribution, upon the common principle
that when a sacrifice is made for the benefit of all, that the loss shall be
shared by all. . . . In every contract of affreightment, losses by the
dangers of the seas are excepted from the risks which the master takes
upon himself, whether the exception is expressed in the contract or not.
The exception is made by the law, and falls within the general principle
that no one is responsible for fortuitous events and accidents of major
force. Casus fortuitous nemo praestat. But then the general law is
subject to an exception, that when the inevitable accident is preceded
by a fault of the debtor or person bound without which it would not have
happened, then he becomes responsible for it. (Pothier, des Obligations,
No. 542; Pret. a Usage, No. 57; Story, Bailm., c. 4, No. 241; In Majorious
casibus si culpa ejus interveniat tenetur; Dig. 44, 7, 1, s. 4.)
The master is responsible for the safe and proper stowage of the cargo,
and there is no doubt that by the general maritime law he is bound to
secure the cargo safely under deck. . . . If the master carries goods on
deck without the consent of the shipper . . . he does it at his own risk. If
they are damaged or lost in consequence of their being thus exposed,
he cannot protect himself from responsibility by showing that they were
damaged or lost by the dangers of the seas. . . . When the shipper
consents to his goods being carried on deck, he takes the risk upon
himself of these peculiar perils. . . . This is the doctrine of all the
authorities, ancient and modern.
Van Horn vs. Taylor (2 La. Ann., 587; 46 Am. Dec., 558), was a case
where goods stowed on deck were lost in a collision. The court found
that the ship carrying these goods was not at fault, and that the shipper
had notice of the fact that the cargo was being carried on deck. It was
held that the ship was not liable. Said the court:
It is said that the Plaintiffs goods were improperly stowed on deck; that
the deck load only was thrown overboard by the collision, the cargo in
the hold not being injured. The goods were thus laden with the
knowledge and implied approbation of the Plaintiff. He was a passenger
on board the steamer, and does not appear to have made any objection
to the goods being thus carried, though the collision occurred several
days after the steamer commenced her voyage.
In the case of The Thomas P. Thorn (8 Ben., 3; 23 Fed., Cas. No.
13927), decided in the District Court in the State of New York, it
appeared that tobacco was received upon a canal boat, with the
20
TRANSPO B
understanding that it was to be carried on deck, covered with tarpaulins.
Upon arrival at its destination it was found damaged by water, for the
most part on the top, and evidently as a consequence of rains. At the
same time a quantity of malt stowed below deck on the same voyage
was uninjured. In discussing the question whether upon a contract to
carry on deck, the vessel was liable for the wetting of the tobacco, the
court said:
It is manifest that the injury to the tobacco arose simply from the fact
that it was carried on deck. The malt, carried below, although an article
easily injured, received no damage, and the voyage was performed with
usual care, and without disaster. Indeed, there is evidence of a
statement by the libelant, that tobacco must of necessity be injured by
being carried on deck. But, under a contract to carry upon deck, the risk
of any damage resulting from the place of carriage rests upon the
shipper, and, without proof of negligence causing the damage, there can
be no recovery. Here the evidence shows that all reasonable care was
taken of the tobacco during its transportation; that the manner of stowing
and covering it was known to and assented to by the shipper; and the
inference is warranted that the injury arose, without fault of the carrier,
from rain, to which merchandise transported on deck must necessarily
be in some degree exposed. Any loss arising from damaged thus
occasioned is to be borne by the shipper.
Lawrence vs. Minturn (17 How [U.S,], 100; 15 L ed., 58), was a case
where goods stowed on deck with the consent of the shipper were
jettisoned during a storm at sea. In discussing whether this cargo was
entitled to general average, the Supreme Court of the United States
said:
The maritime codes and writers have recognized the distinction
between cargo placed on deck, with the consent of the shipper, and
cargo under deck.
There is not one of them which gives a recourse against the master, the
vessel, or the owners, if the property lost had been placed on deck with
the consent of its owner, and they afford very high evidence of the
general and appropriate usages, in this particular, of merchants and
shipowners.
So the courts of this country and England, and the writers on this
subject, have treated the owner of goods on deck, with his consent, as
not having a claim on the master or owner of the ship in case of jettison.
The received law, on the point, is expressed by Chancellor Kent, with
his usual precision, in 3 Com., 240: Nor is the carrier in that case
(Jettison of deck load) responsible to the owner, unless the goods were
stowed on deck without the consent of the owner, or a general custom
binding him, and then he would be chargeable with the loss.
In Gould vs. Oliver (4 Bing., N. C., 132), decided in the English Court of
Common Pleas in 1837, Tindal, C.J., said:
Where the loading on deck has taken place with the consent of the
merchant, it is obvious that no remedy against the shipowner or master
for a wrongful loading of the goods on deck can exist. The foreign
authorities are indeed express; on that point. And the general rule of the
English law, that no one can maintain an action for a wrong, where he
has consented or contributed to the act which occasioned his loss, leads
to the same conclusion.
The foregoing authorities fully sustain the proposition that where the
shipper consents to have his goods carried on deck he takes the risks
of any damage or loss sustained as a consequence of their being so
carried. In the present case it is indisputable that the goods were injured
during the voyage and solely as a consequence of their being on deck,
instead of in the ships hold. The loss must therefore fall on the owner.
And this would be true, under the authorities, even though paragraph 19
of the bills of lading, quoted near the beginning of this opinion, had not
been made a term of the contract.
It is undoubtedly true that, upon general principle, and momentarily
ignoring paragraph 19 of these bills of lading, the ships owner might be
held liable for any damage directly resulting from a negligent failure to
exercise the care properly incident to the carriage of the merchandise
on deck. For instance, if it had been improperly placed or secured, and
had been swept overboard as a proximate result of such lack of care,
the ship would be liable, to the same extent as if the cargo had been
deliberately thrown over without justification. So, if it had been shown
that, notwithstanding the stowage of these goods on deck, the damage
could have been prevented, by the exercise of proper skill and diligence
21
TRANSPO B
in the discharge of the duties incumbent on the ship, the owner might
still be held.
To put the point concretely, let it be supposed that a custom had been
proved among mariners to protect deck cargo from the elements by
putting a tarpaulin over it; or approaching still more to imaginable
conditions in the present case, let it be supposed that the persons
charged with the duty of transporting this cargo, being cognizant of the
probability of damage by water, had negligently and without good reason
failed to exercise reasonable care to protect it by covering it with
tarpaulins. In such case it could hardly be denied that the ships
company should be held liable for such damage as might have been
avoided by the use of such precaution.
But it should be borne in mind in this connection that it is incumbent on
the Plaintiff, if his cause of action is founded on negligence of this
character, to allege and prove that the damage suffered was due to
failure of the persons in charge of the cargo to use the diligence properly
incident to carriage under these conditions.
In Clark vs. Barnwell (12 How. [U.S.], 272; 13 L. ed., 985), the Supreme
Court distinguishes with great precision between the situation where the
burden of proof is upon the shipowner to prove that the loss resulted
from an excepted peril and that where the burden of proof is upon the
owner of the cargo to prove that the loss was caused by negligence on
the part of the persons employed in the conveyance of the goods. The
first two syllabi in Clark vs. Barnwell read as follows:
Where goods are shipped and the usual bill of lading given, promising
to deliver them in good order, the dangers of the seas excepted, and
they are found to be damaged the onus probandi is upon the owners of
the vessel, to show that the injury was occasioned by one of the
excepted causes.
But, although the injury may have been occasioned by one of the
excepted causes, yet still the owners of the vessel are responsible if the
injury might have been avoided, by the exercise of reasonable skill and
attention on the part of the persons employed in the conveyance of the
goods. But the onus probandi then becomes shifted upon the shipper,
to show the negligence.
The case just referred to was one where cotton thread, put up in boxes,
had deteriorated during a lengthy voyage in a warm climate, owing to
dampness and humidity. In discussing the question of the responsibility
of the ships owner, the court said:
Notwithstanding, therefore, the proof was clear that the damage was
occasioned by the effect of the humidity and dampness of the vessel,
which is one of the dangers of navigation, it was competent for the
libelants to show that the Respondents might have prevented it by
proper skill and diligence in the discharge of their duties; but no such
evidence is found in the record. For caught that appears every
precaution was taken that is usual or customary, or known to
shipmasters, to avoid the damage in question. And hence we are obliged
to conclude that it is to be attributed exclusively to the dampness of the
atmosphere of the vessel, without negligence or fault on the part of the
master or owners.
Exactly the same words might be used as applicable to the facts of the
present case; and as it is apparent that the damage here was caused by
rain and sea water the risk of which is inherently incident to carriage
on deck the Defendant cannot be held liable. It is not permissible for
the court, in the absence of any allegation or proof of negligence, to
attribute negligence to the ships employees in the matter of protecting
the goods from rains and storms. The complaint on the contrary clearly
indicates that the damage done was due to the mere fact of carriage on
deck, no other fault or delinquency on the part of anybody being alleged.
It will be observed that by the terms of paragraph 19 of the bills of lading,
the ship is not to be held liable, in the case of goods signed for as carried
on deck, for any loss or damage from any cause whatever. We are not
to be understood as holding that this provision would have protected the
ship from liability for the consequences of negligent acts, if negligence
had been alleged and proved. From the discussion in Manila Railroad
Co. vs. Compania Transatlantica and Atlantic, Gulf & Pacific Co. (38
Phil. Rep., 875), it may be collected that the carrier would be held liable
in such case, notwithstanding the exemption contained in paragraph 19.
But however that may be damages certainly cannot be recovered on the
ground of negligence, even from a carrier, where negligence is neither
alleged nor proved.
22
TRANSPO B
The judgment appealed from is reversed and the Defendant is absolved
from the complaint. No express pronouncement will be made as to the
costs of either instance. SO ORDERED.
5. Eastern Shipping v. IAC, 150 SCRA 463, supra
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE
& MARINE INSURANCE CO., LTD., respondents.
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance,
arose from the same incident, the sinking of the M/S ASIATICA when it
caught fire, resulting in the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S
ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc.,
(referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for
transportation to Manila, 5,000 pieces of calorized lance pipes in 28
packages valued at P256,039.00 consigned to Philippine Blooming Mills
Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned
to Central Textile Mills, Inc. Both sets of goods were insured against
marine risk for their stated value with respondent Development
Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on
board 128 cartons of garment fabrics and accessories, in two (2)
containers, consigned to Mariveles Apparel Corporation, and two cases
of surveying instruments consigned to Aman Enterprises and General
Merchandise. The 128 cartons were insured for their stated value by
respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00,
and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd.,
for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank,
resulting in the total loss of ship and cargo. The respective respondent
Insurers paid the corresponding marine insurance values to the
consignees concerned and were thus subrogated unto the rights of the
latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety
Corporation (Development Insurance, for short), having been
subrogated unto the rights of the two insured companies, filed suit
against petitioner Carrier for the recovery of the amounts it had paid to
the insured before the then Court of First instance of Manila, Branch
XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was
due to an extraordinary fortuitous event, hence, it is not liable under the
law.
On August 31, 1979, the Trial Court rendered judgment in favor of
Development Insurance in the amounts of P256,039.00 and P92,361.75,
respectively, with legal interest, plus P35,000.00 as attorney's fees and
costs. Petitioner Carrier took an appeal to the then Court of Appeals
which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
23
TRANSPO B
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co.
NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd.
(DOWA, for brevity), as subrogees of the insured, filed suit against
Petitioner Carrier for the recovery of the insured value of the cargo lost
with the then Court of First Instance of Manila, Branch 11 (Civil Case
No. 116151), imputing unseaworthiness of the ship and non-observance
of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire
which caused the sinking of the ship is an exempting circumstance
under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA);
and that when the loss of fire is established, the burden of proving
negligence of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of
NISSHIN and DOWA in the amounts of US $46,583.00 and US
$11,385.00, respectively, with legal interest, plus attorney's fees of
P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals
on September 10, 1984, affirmed with modification the Trial Court's
judgment by decreasing the amount recoverable by DOWA to US
$1,000.00 because of $500 per package limitation of liability under the
COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on
January 16, 1985 by the First Division, and G. R. No. 71478 on
September 25, 1985 by the Second Division. Upon Petitioner Carrier's
Motion for Reconsideration, however, G.R. No. 69044 was given due
course on March 25, 1985, and the parties were required to submit their
respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought
reconsideration of the Resolution denying the Petition for Review and
moved for its consolidation with G.R. No. 69044, the lower-numbered
case, which was then pending resolution with the First Division. The
same was granted; the Resolution of the Second Division of September
25, 1985 was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator
of the M/S Asiatica but merely a charterer thereof. We note that in G.R.
No. 69044, Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts
where various plaintiffs are represented by various counsel representing
various consignees or insurance companies. The common defendant in
these cases is petitioner herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general
rule, the facts alleged in a party's pleading are deemed admissions of
that party and binding upon it. 2 And an admission in one pleading in
one action may be received in evidence against the pleader or his
successor-in-interest on the trial of another action to which he is a party,
in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern
the Civil Code provisions on Common carriers or the Carriage of Goods
by Sea Act? and (2) who has the burden of proof to show negligence of
the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs
the liability of the common carrier in case of their loss, destruction or
deterioration. 4 As the cargoes in question were transported from Japan
to the Philippines, the liability of Petitioner Carrier is governed primarily
by the Civil Code. 5 However, in all matters not regulated by said Code,
the rights and obligations of common carrier shall be governed by the
Code of Commerce and by special laws. 6 Thus, the Carriage of Goods
by Sea Act, a special law, is suppletory to the provisions of the Civil
Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over goods, according to all the circumstances
of each case. 8 Common carriers are responsible for the loss,
24
TRANSPO B
destruction, or deterioration of the goods unless the same is due to any
of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it
from liability under the phrase "natural disaster or calamity. " However,
we are of the opinion that fire may not be considered a natural disaster
or calamity. This must be so as it arises almost invariably from some act
of man or by human means. 10 It does not fall within the category of an
act of God unless caused by lightning 11 or by other natural disaster or
calamity. 12 It may even be caused by the actual fault or privity of the
carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary
fortuitous event refers to leases of rural lands where a reduction of the
rent is allowed when more than one-half of the fruits have been lost due
to such event, considering that the law adopts a protection policy
towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article
1734, supra, Article 1735 of the Civil Code provides that all cases than
those mention in Article 1734, the common carrier shall be presumed to
have been at fault or to have acted negligently, unless it proves that it
has observed the extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers,
have proven that the transported goods have been lost. Petitioner
Carrier has also proved that the loss was caused by fire. The burden
then is upon Petitioner Carrier to proved that it has exercised the
extraordinary diligence required by law. In this regard, the Trial Court,
concurred in by the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant
placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana
noticed that smoke was coming out from hatch No. 2 and hatch No. 3;
that where the smoke was noticed, the fire was already big; that the fire
must have started twenty-four 24) our the same was noticed; that carbon
dioxide was ordered released and the crew was ordered to open the
hatch covers of No, 2 tor commencement of fire fighting by sea water:
that all of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary
diligence in the vigilance over the goods. The evidence of the defendant
did not show that extraordinary vigilance was observed by the vessel to
prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's
evidence did not likewise show he amount of diligence made by the
crew, on orders, in the care of the cargoes. What appears is that after
the cargoes were stored in the hatches, no regular inspection was made
as to their condition during the voyage. Consequently, the crew could
not have even explain what could have caused the fire. The defendant,
in the Court's mind, failed to satisfactorily show that extraordinary
vigilance and care had been made by the crew to prevent the occurrence
of the fire. The defendant, as a common carrier, is liable to the
consignees for said lack of deligence required of it under Article 1733 of
the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised
the extraordinary diligence required by law, Petitioner Carrier cannot
escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the
meaning of Article 1734 of the Civil Code, it is required under Article
1739 of the same Code that the "natural disaster" must have been the
"proximate and only cause of the loss," and that the carrier has
"exercised due diligence to prevent or minimize the loss before, during
or after the occurrence of the disaster. " This Petitioner Carrier has also
failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage
of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for
loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
25
TRANSPO B
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found,
as a fact, that there was "actual fault" of the carrier shown by "lack of
diligence" in that "when the smoke was noticed, the fire was already big;
that the fire must have started twenty-four (24) hours before the same
was noticed; " and that "after the cargoes were stored in the hatches, no
regular inspection was made as to their condition during the voyage."
The foregoing suffices to show that the circumstances under which the
fire originated and spread are such as to show that Petitioner Carrier or
its servants were negligent in connection therewith. Consequently, the
complete defense afforded by the COGSA when loss results from fire is
unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500
per package as provided in section 4(5) of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or become
liable for any loss or damage to or in connection with the transportation
of goods in an amount exceeding $500 per package lawful money of the
United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in bill of lading. This declaration if
embodied in the bill of lading shall be prima facie evidence, but all be
conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and
the shipper another maximum amount than that mentioned in this
paragraph may be fixed: Provided, That such maximum shall not be less
than the figure above named. In no event shall the carrier be Liable for
more than the amount of damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability
in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited
to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of
the common carrier to a fixed amount per package although the Code
expressly permits a stipulation limiting such liability. Thus, the COGSA
which is suppletory to the provisions of the Civil Code, steps in and
supplements the Code by establishing a statutory provision limiting the
carrier's liability in the absence of a declaration of a higher value of the
goods by the shipper in the bill of lading. The provisions of the Carriage
of Goods by.Sea Act on limited liability are as much a part of a bill of
lading as though physically in it and as much a part thereof as though
placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading
(Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or
destruction of the goods. Nor is there a declaration of a higher value of
the goods. Hence, Petitioner Carrier's liability should not exceed US
$500 per package, or its peso equivalent, at the time of payment of the
value of the goods lost, but in no case "more than the amount of damage
actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was
P256,039 (Exhibit "C"), which was exactly the amount of the insurance
coverage by Development Insurance (Exhibit "A"), and the amount
affirmed to be paid by respondent Court. The goods were shipped in 28
packages (Exhibit "C-2") Multiplying 28 packages by $500 would result
in a product of $14,000 which, at the current exchange rate of P20.44 to
US $1, would be P286,160, or "more than the amount of damage
actually sustained." Consequently, the aforestated amount of P256,039
should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their
actual value was P92,361.75 (Exhibit "I"), which is likewise the insured
value of the cargo (Exhibit "H") and amount was affirmed to be paid by
respondent Court. however, multiplying seven (7) cases by $500 per
package at the present prevailing rate of P20.44 to US $1 (US $3,500 x
P20.44) would yield P71,540 only, which is the amount that should be
paid by Petitioner Carrier for those spare parts, and not P92,361.75.
26
TRANSPO B
In G.R. No. 71478, in so far as the two (2) cases of surveying
instruments are concerned, the amount awarded to DOWA which was
already reduced to $1,000 by the Appellate Court following the statutory
$500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2)
containers and insured with NISSHIN, the Appellate Court also limited
Petitioner Carrier's liability to $500 per package and affirmed the award
of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA
packages) by $500 to arrive at the figure of $64,000, and explained that
"since this amount is more than the insured value of the goods, that is
$46,583, the Trial Court was correct in awarding said amount only for
the 128 cartons, which amount is less than the maximum limitation of
the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2)
containers should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981),
the consignees of tin ingots and the shipper of floor covering brought
action against the vessel owner and operator to recover for loss of ingots
and floor covering, which had been shipped in vessel supplied
containers. The U.S. District Court for the Southern District of New York
rendered judgment for the plaintiffs, and the defendant appealed. The
United States Court of Appeals, Second Division, modified and affirmed
holding that:
When what would ordinarily be considered packages are shipped in a
container supplied by the carrier and the number of such units is
disclosed in the shipping documents, each of those units and not the
container constitutes the "package" referred to in liability limitation
provision of Carriage of Goods by Sea Act. Carriage of Goods by Sea
Act, 4(5), 46 U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left
doubt as to whether carrier-furnished containers whose contents are
disclosed should be treated as packages, the interest in securing
international uniformity would suggest that they should not be so treated.
Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815,
that treating a container as a package is inconsistent with the
congressional purpose of establishing a reasonable minimum level of
liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):
Although this approach has not completely escaped criticism, there is,
nonetheless, much to commend it. It gives needed recognition to the
responsibility of the courts to construe and apply the statute as enacted,
however great might be the temptation to "modernize" or reconstitute it
by artful judicial gloss. If COGSA's package limitation scheme suffers
from internal illness, Congress alone must undertake the surgery. There
is, in this regard, obvious wisdom in the Ninth Circuit's conclusion in
Hartford that technological advancements, whether or not forseeable by
the COGSA promulgators, do not warrant a distortion or artificial
construction of the statutory term "package." A ruling that these large
reusable metal pieces of transport equipment qualify as COGSA
packages at least where, as here, they were carrier owned and
supplied would amount to just such a distortion.
Certainly, if the individual crates or cartons prepared by the shipper and
containing his goods can rightly be considered "packages" standing by
themselves, they do not suddenly lose that character upon being stowed
in a carrier's container. I would liken these containers to detachable
stowage compartments of the ship. They simply serve to divide the
ship's overall cargo stowage space into smaller, more serviceable loci.
Shippers' packages are quite literally "stowed" in the containers utilizing
stevedoring practices and materials analogous to those employed in
traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.)
rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district with
many maritime cases followed Judge Beeks' reasoning in Matsushita
and similarly rejected the functional economics test. Judge Kellam held
that when rolls of polyester goods are packed into cardboard cartons
which are then placed in containers, the cartons and not the containers
are the packages.
xxx xxx xxx
27
TRANSPO B
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui
test:
Eurygenes concerned a shipment of stereo equipment packaged by the
shipper into cartons which were then placed by the shipper into a carrier-
furnished container. The number of cartons was disclosed to the carrier
in the bill of lading. Eurygenes followed the Mitsui test and treated the
cartons, not the container, as the COGSA packages. However,
Eurygenes indicated that a carrier could limit its liability to $500 per
container if the bill of lading failed to disclose the number of cartons or
units within the container, or if the parties indicated, in clear and
unambiguous language, an agreement to treat the container as the
package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package
Limitations and Third World Delivery Problems by Chester D. Hooper &
Keith L. Flicker, published in Fordham International Law Journal, Vol. 6,
1982-83, Number 1) (Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the
contents of the containers, the number of cartons or units, as well as the
nature of the goods, and applying the ruling in the Mitsui and Eurygenes
cases it is clear that the 128 cartons, not the two (2) containers should
be considered as the shipping unit subject to the $500 limitation of
liability.
True, the evidence does not disclose whether the containers involved
herein were carrier-furnished or not. Usually, however, containers are
provided by the carrier. 19 In this case, the probability is that they were
so furnished for Petitioner Carrier was at liberty to pack and carry the
goods in containers if they were not so packed. Thus, at the dorsal side
of the Bill of Lading (Exhibit "A") appears the following stipulation in fine
print:
11. (Use of Container) Where the goods receipt of which is
acknowledged on the face of this Bill of Lading are not already packed
into container(s) at the time of receipt, the Carrier shall be at liberty to
pack and carry them in any type of container(s).
The foregoing would explain the use of the estimate "Say: Two (2)
Containers Only" in the Bill of Lading, meaning that the goods could
probably fit in two (2) containers only. It cannot mean that the shipper
had furnished the containers for if so, "Two (2) Containers" appearing
as the first entry would have sufficed. and if there is any ambiguity in the
Bill of Lading, it is a cardinal principle in the construction of contracts that
the interpretation of obscure words or stipulations in a contract shall not
favor the party who caused the obscurity. 20 This applies with even
greater force in a contract of adhesion where a contract is already
prepared and the other party merely adheres to it, like the Bill of Lading
in this case, which is draw. up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses:
(in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time
to take the depositions of its witnesses in Japan by written
interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present
its evidence but it failed to do so. On this point, the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not to
mention the time from June 27, 1978, when its answer was prepared
and filed in Court, until September 26, 1978, when the pre-trial
conference was conducted for the last time, the defendant had more
than nine months to prepare its evidence. Its belated notice to take
deposition on written interrogatories of its witnesses in Japan, served
upon the plaintiff on August 25th, just two days before the hearing set
28
 TRANSPO B
for August 27th, knowing fully well that it was its undertaking on July 11
the that the deposition of the witnesses would be dispensed with if by
next time it had not yet been obtained, only proves the lack of merit of
the defendant's motion for postponement, for which reason it deserves
no sympathy from the Court in that regard. The defendant has told the
Court since February 16, 1979, that it was going to take the deposition
of its witnesses in Japan. Why did it take until August 25, 1979, or more
than six months, to prepare its written interrogatories. Only the
defendant itself is to blame for its failure to adduce evidence in support
of its defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its side of the case.
23 It cannot complain now that it was denied due process when the Trial
Court rendered its Decision on the basis of the evidence adduced. What
due process abhors is absolute lack of opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases,
respondent Court affirmed the award by the Trial Court of attorney's fees
of P35,000.00 in favor of Development Insurance in G.R. No. 69044,
and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's
fees, it is believed that the amount of P5,000.00 would be more
reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No.
71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that
petitioner Eastern Shipping Lines shall pay the Development Insurance
and Surety Corporation the amount of P256,039 for the twenty-eight (28)
packages of calorized lance pipes, and P71,540 for the seven (7) cases
of spare parts, with interest at the legal rate from the date of the filing of
the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the
costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
6. Asia Lighterage v. Court of Appeals, 409 SCRA 340 supra
[G.R. No. 147246. August 19, 2003]
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF
APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC.,
respondents.
DECISION
PUNO, J.:
On appeal is the Court of Appeals May 11, 2000 Decision[1] in CA-G.R.
CV No. 49195 and February 21, 2001 Resolution[2] affirming with
modification the April 6, 1994 Decision[3] of the Regional Trial Court of
Manila which found petitioner liable to pay private respondent the
amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in
bulk, valued at US$423,192.35[4] was shipped by Marubeni American
Corporation of Portland, Oregon on board the vessel M/V NEO
CYMBIDIUM V-26 for delivery to the consignee, General Milling
Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.[5]
The shipment was insured by the private respondent Prudential
Guarantee and Assurance, Inc. against loss or damage for
P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo
was transferred to the custody of the petitioner Asia Lighterage and
Shipping, Inc. The petitioner was contracted by the consignee as carrier
to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on
barge PSTSI III, evidenced by Lighterage Receipt No. 0364[7] for
delivery to consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was
suspended due to a warning of an incoming typhoon. On August 22,
29
TRANSPO B
1990, the petitioner proceeded to pull the barge to Engineering Island
off Baseco to seek shelter from the approaching typhoon. PSTSI III was
tied down to other barges which arrived ahead of it while weathering out
the storm that night. A few days after, the barge developed a list because
of a hole it sustained after hitting an unseen protuberance underneath
the water. The petitioner filed a Marine Protest on August 28, 1990.[8] It
likewise secured the services of Gaspar Salvaging Corporation which
refloated the barge.[9] The hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed
towards the consignee's wharf on September 5, 1990. Upon reaching
the Sta. Mesa spillways, the barge again ran aground due to strong
current. To avoid the complete sinking of the barge, a portion of the
goods was transferred to three other barges.[10]
The next day, September 6, 1990, the towing bits of the barge broke. It
sank completely, resulting in the total loss of the remaining cargo.[11] A
second Marine Protest was filed on September 7, 1990.[12]
On September 14, 1990, a bidding was conducted to dispose of the
damaged wheat retrieved and loaded on the three other barges.[13] The
total proceeds from the sale of the salvaged cargo was P201,379.75.[14]
On the same date, September 14, 1990, consignee sent a claim letter to
the petitioner, and another letter dated September 18, 1990 to the
private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee
in the amount of P4,104,654.22.[15] Thereafter, as subrogee, it sought
recovery of said amount from the petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the
petitioner for recovery of the amount of indemnity, attorney's fees and
cost of suit.[16] Petitioner filed its answer with counterclaim.[17]
The Regional Trial Court ruled in favor of the private respondent. The
dispositive portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered
ordering defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff
Prudential Guarantee & Assurance Co., Inc. the sum of P4,104,654.22
with interest from the date complaint was filed on July 3, 1991 until fully
satisfied plus 10% of the amount awarded as and for attorney's fees.
Defendant's counterclaim is hereby DISMISSED. With costs against
defendant.[18]
Petitioner appealed to the Court of Appeals insisting that it is not a
common carrier. The appellate court affirmed the decision of the trial
court with modification. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with
modification in the sense that the salvage value of P201,379.75 shall be
deducted from the amount of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise
denied by the appellate court in a Resolution promulgated on February
21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly
committed by the appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY
NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT
PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY
NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED THE
FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF
THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON
CARRIERS, THE LOSS OF THE CARGO IS, THEREFORE, BORNE
BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES
ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY
NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT EFFECTIVELY
30
 TRANSPO B
CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE
DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY
OF THE CONSIGNEES CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised
extraordinary diligence in its care and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons,
corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier.
Allegedly, it has no fixed and publicly known route, maintains no
terminals, and issues no tickets. It points out that it is not obliged to carry
indiscriminately for any person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to the general
public.[20]
We disagree.
In De Guzman vs. Court of Appeals,[21] we held that the definition of
common carriers in Article 1732 of the Civil Code makes no distinction
between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary
activity. We also did not distinguish between a person or enterprise
offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis.
Further, we ruled that Article 1732 does not distinguish between a carrier
offering its services to the general public, and one who offers services
or solicits business only from a narrow segment of the general
population.
In the case at bar, the principal business of the petitioner is that of
lighterage and drayage[22] and it offers its barges to the public for
carrying or transporting goods by water for compensation. Petitioner is
clearly a common carrier. In De Guzman, supra,[23] we considered
private respondent Ernesto Cendaa to be a common carrier even if his
principal occupation was not the carriage of goods for others, but that of
buying used bottles and scrap metal in Pangasinan and selling these
items in Manila.
We therefore hold that petitioner is a common carrier whether its
carrying of goods is done on an irregular rather than scheduled manner,
and with an only limited clientele. A common carrier need not have fixed
and publicly known routes. Neither does it have to maintain terminals or
issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in
Bascos vs. Court of Appeals.[24] The test to determine a common
carrier is whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as
his occupation rather than the quantity or extent of the business
transacted.[25] In the case at bar, the petitioner admitted that it is
engaged in the business of shipping and lighterage,[26] offering its
barges to the public, despite its limited clientele for carrying or
transporting goods by water for compensation.[27]
On the second issue, we uphold the findings of the lower courts that
petitioner failed to exercise extraordinary diligence in its care and
custody of the consignees goods.
Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them.[28] They are presumed
to have been at fault or to have acted negligently if the goods are lost,
destroyed or deteriorated.[29] To overcome the presumption of
negligence in the case of loss, destruction or deterioration of the goods,
the common carrier must prove that it exercised extraordinary diligence.
There are, however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence does not
attach:
31
TRANSPO B
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following
causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke,
resulting in the total loss of its cargo. Petitioner claims that this was
caused by a typhoon, hence, it should not be held liable for the loss of
the cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has
exercised due diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss.[30] The evidence show that,
even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the
Engineering Island. It even suffered a hole. Clearly, this could not be
solely attributed to the typhoon. The partly-submerged vessel was
refloated but its hole was patched with only clay and cement. The patch
work was merely a provisional remedy, not enough for the barge to sail
safely. Thus, when petitioner persisted to proceed with the voyage, it
recklessly exposed the cargo to further damage. A portion of the cross-
examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue
Adjustment Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:[31]
xxxxxxxxx
q - Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they
tried to pull out the barge from the place of the accident, and bring it to
the anchor terminal for safety, then after deciding if the vessel is
stabilized, they tried to pull it to the consignees warehouse, now while
on route another accident occurred, now this time the barge totally hitting
something in the course.
q - You said there was another accident, can you tell the court the nature
of the second accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you know what
caused the sinking?
a - Mostly it was related to the first accident because there was already
a whole (sic) on the bottom part of the barge.
xxxxxxxxx
This is not all. Petitioner still headed to the consignees wharf despite
knowledge of an incoming typhoon. During the time that the barge was
heading towards the consignee's wharf on September 5, 1990, typhoon
Loleng has already entered the Philippine area of responsibility.[32] A
part of the testimony of Robert Boyd, Cargo Operations Supervisor of
the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:[33]
xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow
the Barge to lie where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling
Corporation, the consignee) as I have said was in a hurry for their goods
to be delivered at their Wharf since they needed badly the wheat that
was loaded in PSTSI-3. It was needed badly by the consignee.
q - And this is the reason why you towed the Barge as you did?
32
 TRANSPO B

a - ISLOFF Terminal is far from Manila Bay and anytime even with the
a - Yes, sir. typhoon if you are already inside the vicinity or inside Pasig entrance, it
is a safe place to tow upstream.
xxxxxxxxx
Accordingly, the petitioner cannot invoke the occurrence of the typhoon
CROSS-EXAMINATION BY ATTY. IGNACIO:[34] as force majeure to escape liability for the loss sustained by the private
respondent. Surely, meeting a typhoon head-on falls short of due
xxxxxxxxx diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the
q - And then from ISLOFF Terminal you proceeded to the premises of towing bits of the vessel broke that caused its sinking and the total loss
the GMC? Am I correct? of the cargo upon reaching the Pasig River, it was no longer affected by
the typhoon. The typhoon then is not the proximate cause of the loss of
a - The next day, in the morning, we hired for additional two (2) tugboats the cargo; a human factor, i.e., negligence had intervened.
as I have stated.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court
q - Despite of the threats of an incoming typhoon as you testified a while of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its
ago? Resolution dated February 21, 2001 are hereby AFFIRMED. Costs
against petitioner.
a - It is already in an inner portion of Pasig River. The typhoon would be
coming and it would be dangerous if we are in the vicinity of Manila Bay. SO ORDERED.

q - But the fact is, the typhoon was incoming? Yes or no? 7. Lea Mer Industries, Inc. v. Malayan Insurance Co. Inc., 471 SCRA
698
a - Yes.
LEA MER INDUSTRIES, INC., G.R. No. 161745
q - And yet as a standard operating procedure of your Company, you Petitioner,
have to secure a sort of Certification to determine the weather condition, Present
am I correct? Panganiban, J.,
Chairman,
a - Yes, sir. - versus - Sandoval-Gutierrez,
Corona,
q - So, more or less, you had the knowledge of the incoming typhoon, Carpio Morales, and
right? Garcia, JJ
Promulgated:
a - Yes, sir. MALAYAN INSURANCE CO., INC.,*
Respondent. September 30, 2005
q - And yet you proceeded to the premises of the GMC? x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

33
TRANSPO B
PANGANIBAN, J.:
C the Regional Trial Court (RTC) of Manila on September 4, 1992, for the
ommon carriers are bound to observe extraordinary diligence in their
vigilance over the goods entrusted to them, as required by the nature of
their business and for reasons of public policy. Consequently, the law
presumes that common carriers are at fault or negligent for any loss or
damage to the goods that they transport. In the present case, the
evidence submitted by petitioner to overcome this presumption was
sorely insufficient.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
assailing the October 9, 2002 Decision[2] and the December 29, 2003
Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 66028. The
challenged Decision disposed as follows:
WHEREFORE, the appeal is GRANTED. The December 7, 1999
decision of the Regional Trial Court of Manila, Branch 42 in Civil Case
No. 92-63159 is hereby REVERSED and SET ASIDE. [Petitioner] is
ordered to pay the [herein respondent] the value of the lost cargo in the
amount of P565,000.00. Costs against the [herein petitioner].[4]
The assailed Resolution denied reconsideration.
The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer
Industries, Inc., for the shipment of 900 metric tons of silica sand valued
at P565,000.[5] Consigned to Vulcan Industrial and Mining Corporation,
the cargo was to be transported from Palawan to Manila. On October
25, 1991, the silica sand was placed on board Judy VII, a barge leased
by Lea Mer.[6] During the voyage, the vessel sank, resulting in the loss
of the cargo.[7]
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost
cargo.[8] To recover the amount paid and in the exercise of its right of
subrogation, Malayan demanded reimbursement from Lea Mer, which
refused to comply. Consequently, Malayan instituted a Complaint with
collection of P565,000 representing the amount that respondent had
paid Vulcan.[9]
On October 7, 1999, the trial court dismissed the Complaint, upon
finding that the cause of the loss was a fortuitous event.[10] The RTC
noted that the vessel had sunk because of the bad weather condition
brought about by Typhoon Trining. The court ruled that petitioner had no
advance knowledge of the incoming typhoon, and that the vessel had
been cleared by the Philippine Coast Guard to travel from Palawan to
Manila.[11]
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not seaworthy
when it sailed for Manila. Thus, the loss of the cargo was occasioned by
petitioners fault, not by a fortuitous event.[12]
Hence, this recourse.[13]
The Issues
Petitioner states the issues in this wise:
A. Whether or not the survey report of the cargo surveyor, Jesus Cortez,
who had not been presented as a witness of the said report during the
trial of this case before the lower court can be admitted in evidence to
prove the alleged facts cited in the said report.
B. Whether or not the respondent, Court of Appeals, had validly or legally
reversed the finding of fact of the Regional Trial Court which clearly and
unequivocally held that the loss of the cargo subject of this case was
caused by fortuitous event for which herein petitioner could not be held
liable.
C. Whether or not the respondent, Court of Appeals, had committed
serious error and grave abuse of discretion in disregarding the testimony
34
TRANSPO B
of the witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the
effect that the vessel Judy VII was seaworthy at the time of incident and
further in disregarding the testimony of the PAG-ASA weather specialist,
Ms. Rosa Barba y Saliente, to the effect that typhoon Trining did not hit
Metro Manila or Palawan.[14]
In the main, the issues are as follows: (1) whether petitioner is liable for
the loss of the cargo, and (2) whether the survey report of Jesus Cortez
is admissible in evidence.
The Courts Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of the
cargo was due to a fortuitous event. This issue involves primarily a
question of fact, notwithstanding petitioners claim that it pertains only to
a question of law. As a general rule, questions of fact may not be raised
in a petition for review.[15] The present case serves as an exception to
this rule, because the factual findings of the appellate and the trial courts
vary.[16] This Court meticulously reviewed the records, but found no
reason to reverse the CA.
Rule on Common Carriers
Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or
goods, or both -- by land, water, or air -- when this service is offered to
the public for compensation.[17] Petitioner is clearly a common carrier,
because it offers to the public its business of transporting goods through
its vessels.[18]
Thus, the Court corrects the trial courts finding that petitioner became a
private carrier when Vulcan chartered it.[19] Charter parties are
classified as contracts of demise (or bareboat) and affreightment, which
are distinguished as follows:
Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated.
The charterer mans the vessel with his own people and becomes, in
effect, the owner pro hac vice, subject to liability to others for damages
caused by negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command and
navigation thereof to the charterer; anything short of such a complete
transfer is a contract of affreightment (time or voyage charter party) or
not a charter party at all.[20]
The distinction is significant, because a demise or bareboat charter
indicates a business undertaking that is private in character. [21]
Consequently, the rights and obligations of the parties to a contract of
private carriage are governed principally by their stipulations, not by the
law on common carriers.[22]
The Contract in the present case was one of affreightment, as shown by
the fact that it was petitioners crew that manned the tugboat M/V Ayalit
and controlled the barge Judy VII.[23] Necessarily, petitioner was a
common carrier, and the pertinent law governs the present factual
circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their
vigilance over the goods and the safety of the passengers they transport,
as required by the nature of their business and for reasons of public
policy.[24] Extraordinary diligence requires rendering service with the
greatest skill and foresight to avoid damage and destruction to the goods
entrusted for carriage and delivery.[25]
Common carriers are presumed to have been at fault or to have acted
negligently for loss or damage to the goods that they have
transported.[26] This presumption can be rebutted only by proof that
they observed extraordinary diligence, or that the loss or damage was
occasioned by any of the following causes:[27]
35
TRANSPO B
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.[28]
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that no person shall be
responsible for a fortuitous event which could not be foreseen, or which,
though foreseen, was inevitable. Thus, if the loss or damage was due to
such an event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a fortuitous event as follows: (a)
the cause of the unforeseen and unexpected occurrence, or the failure
of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito
must have been impossible to foresee or, if foreseeable, impossible to
avoid; (c) the occurrence must have been such as to render it impossible
for the debtors to fulfill their obligation in a normal manner; and (d) the
obligor must have been free from any participation in the aggravation of
the resulting injury to the creditor.[29]
To excuse the common carrier fully of any liability, the fortuitous event
must have been the proximate and only cause of the loss.[30] Moreover,
it should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event.[31]
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the present
case. As the common carrier, petitioner bore the burden of proving that
it had exercised extraordinary diligence to avoid the loss, or that the loss
had been occasioned by a fortuitous event -- an exempting
circumstance.
It was precisely this circumstance that petitioner cited to escape liability.
Lea Mer claimed that the loss of the cargo was due to the bad weather
condition brought about by Typhoon Trining.[32] Evidence was
presented to show that petitioner had not been informed of the incoming
typhoon, and that the Philippine Coast Guard had given it clearance to
begin the voyage.[33] On October 25, 1991, the date on which the
voyage commenced and the barge sank, Typhoon Trining was allegedly
far from Palawan, where the storm warning was only Signal No. 1.[34]
The evidence presented by petitioner in support of its defense of
fortuitous event was sorely insufficient. As required by the pertinent law,
it was not enough for the common carrier to show that there was an
unforeseen or unexpected occurrence. It had to show that it was free
from any fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize
or prevent the loss before, during or after the alleged fortuitous
event.[35] Its witness, Joey A. Draper, testified that he could no longer
remember whether anything had been done to minimize loss when water
started entering the barge.[36] This fact was confirmed during his cross-
examination, as shown by the following brief exchange:
Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other precautionary
measure[s] exercised by you and the crew of Judy VII so as to prevent
the los[s] or sinking of barge Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the officers
and crew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking
of barge Judy VII?
xxxxxxxxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on how
to save the barge Judy VII?
Joey Draper:
36
TRANSPO B
I can no longer remember sir, because that happened [a] long time
ago.[37]
Second, the alleged fortuitous event was not the sole and proximate
cause of the loss. There is a preponderance of evidence that the barge
was not seaworthy when it sailed for Manila.[38] Respondent was able
to prove that, in the hull of the barge, there were holes that might have
caused or aggravated the sinking.[39] Because the presumption of
negligence or fault applied to petitioner, it was incumbent upon it to show
that there were no holes; or, if there were, that they did not aggravate
the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its
witness, Domingo A. Luna, testified that the barge was in tip-top or
excellent condition,[40] but that he had not personally inspected it when
it left Palawan.[41]
The submission of the Philippine Coast Guards Certificate of Inspection
of Judy VII, dated July 31, 1991, did not conclusively prove that the
barge was seaworthy.[42] The regularity of the issuance of the
Certificate is disputably presumed.[43] It could be contradicted by
competent evidence, which respondent offered. Moreover, this evidence
did not necessarily take into account the actual condition of
the vessel at the time of the commencement of the voyage.[44]
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report[45] prepared by Jesus Cortez,
the cargo surveyor, should not have been admitted in evidence. The
Court partly agrees. Because he did not testify during the trial,[46] then
the Report that he had prepared was hearsay and therefore inadmissible
for the purpose of proving the truth of its contents.
The Survey Report Not the Sole Evidence
The facts reveal that Cortezs Survey Report was used in the testimonies
of respondents witnesses -- Charlie M. Soriano; and Federico S.
Manlapig, a cargo marine surveyor and the vice-president of Toplis and
Harding Company.[47] Soriano testified that the Survey Report had
been used in preparing the final Adjustment Report conducted by their
company.[48] The final Report showed that the barge was not seaworthy
because of the existence of the holes. Manlapig testified that he had
prepared that Report after taking into account the findings of the
surveyor, as well as the pictures and the sketches of the place where
the sinking occurred.[49] Evidently, the existence of the holes was
proved by the testimonies of the witnesses, not merely by Cortez Survey
Report.
Rule on Independently
Relevant Statement
That witnesses must be examined and presented during the trial,[50]
and that their testimonies must be confined to personal knowledge is
required by the rules on evidence, from which we quote:
Section 36. Testimony generally confined to personal knowledge;
hearsay excluded. A witness can testify only to those facts which he
knows of his personal knowledge; that is, which are derived from his own
perception, except as otherwise provided in these rules.[51]
On this basis, the trial court correctly refused to admit Jesus Cortezs
Affidavit, which respondent had offered as evidence.[52] Well-settled is
the rule that, unless the affiant is presented as a witness, an affidavit is
considered hearsay.[53]
An exception to the foregoing rule is that on independently relevant
statements. A report made by a person is admissible if it is intended to
prove the tenor, not the truth, of the statements.[54] Independent of the
truth or the falsity of the statement given in the report, the fact that it has
been made is relevant. Here, the hearsay rule does not apply.[55]
37
TRANSPO B
In the instant case, the challenged Survey Report prepared by Cortez
was admitted only as part of the testimonies of respondents witnesses.
The referral to Cortezs Report was in relation to Manlapigs final
Adjustment Report. Evidently, it was the existence of the Survey Report
that was testified to. The admissibility of that Report as part of the
testimonies of the witnesses was correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already failed
to overcome the presumption of fault that applies to common carriers.
WHEREFORE, the Petition is DENIED and the assailed Decision and
Resolution are AFFIRMED. Costs against petitioner.
SO ORDERED.
8. Government v. Ynchausti, 40 Phil. 219
G.R. No. 14191 September 29, 1919
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-
appellant,
vs.
YNCHAUSTI & COMPANY, defendant-appellee.
Attorney-General Paredes for the appellant.
Charles C. Cohn for the appellee.
JOHNSON, J.:
The purpose of this action was to recover the sum of P200 as damages
to certain cargo of roofing tiles shipped by the plaintiff from Manila to
Iloilo on a vessel belonging to the defendant. The tiles were delivered by
the defendant to the consignee of the plaintiff at Iloilo. Upon delivery it
was found that some of the tiles had been damaged; that the damage
amounted to about P200. Upon a submission of that question to the
lower court a judgment was rendered against the plaintiff in favor of the
defendant, absolving the latter from all liability under the complaint.
There seems to be no dispute about the facts, except whether or not the
tiles were broken by the negligence of the defendant. The defendant
denied that the tiles were broken by reason of its negligence. The
defendant proved, and the plaintiff did not attempt to dispute, that the
roofing tiles in question were of a brittle and fragile nature; that they were
delivered by the plaintiff to the defendant in bundles of ten each, tied
with bejuco [rattan], without any packing or protective covering. The
plaintiff did not even attempt to prove any negligence on the part of the
defendant. On the hand, the defendant offered proof to show that there
was no negligence on its part, by showing that the tiles were loaded,
stowed, and discharged by handlabor, and not be mechanical devices
which might have caused the breakage in question.
It appears from the record that the tiles in question were received by the
defendant from the plaintiff, as representative on a Government bill of
lading known as "General Form No. 9-A," which was made out and
submitted by a representative of the Bureau of Supply to the defendant.
(Exhibit A.) At the head of Exhibit A is found the following:
You are hereby authorized to receive, carry, and deliver the following
described merchandise to treasurer of Iloilo at Iloilo in accordance with
the authorized and prescribed rates and classifications, and according
to the laws of common carriers in force on the date hereof, settlement
and payment of charges to be made by Bureau of Supply. (Sgd.) T. R.
SCHOON, Chief Division of Supplies, Bureau of Supply.
On the said bill of lading we find the following, which was attempted
thereon by the defendant:
The goods have been accepted for transportation subject to the
conditions prescribed by the Insular Collector of Customs in Philippine
Marine Regulations, page 16, under the heading "Bill of Lading
Conditions."
The lower court, in discussing the said bill of lading with the two
conditions found thereon, reached the conclusion that the plaintiff was
bound by the terms of the bill of lading as issued by the defendant and
not by the terms which the plaintiff attempted to impose, that is to say,
that such merchandise was to be carried at owner's risk only; that there
was no presumption of negligence on the part of the defendant from the
fact that the tiles were broken when received by the consignee; and that
since the plaintiff did not prove negligence on the part of the defendant,
38
TRANSPO B
the former was not entitled to recover damages from the latter. The lower
court rendered judgment absolving the defendant from all liability under
the complaint.
The important questions presented by the appeal are: (a) Where the
terms and conditions stamped by the defendant upon the Government's
bill of lading binding upon the plaintiff? (b) Was there a presumption of
negligence on the part of the defendant?
The record shows that ever since the Government began to use the bill
of lading, General Form No. 9-A, the shipowners had always used the
"stamp" in question; that in the present case the defendant placed said
stamp upon the bill of lading before the plaintiff shipped the tiles in
question; that having shipped the goods under the said bill of lading, with
the terms and conditions of the carriage stamped thereon, the appellant
must be deemed to have assented to the said terms and conditions
thereon stamped.
The appellant contends also that it was not bound by the terms and
conditions inserted by the appellee, because (a) the reference made by
the appellee to the "Philippine Marine Regulations" prescribed by the
Collector of Customs was vague; that the appellee should have
expressed the conditions fully and clearly on the face of the bill of lading;
and (b) that the Insular Collector of Customs had no authority to issue
such regulations.
As to the first contention, it seems that the appellant fully knew the import
and significance of the reference made in said regulations. The appellant
attempted to show that prior to the transaction in question the
Government notified the defendant and other shipowners that it would
not be bound by the "stamp" that was placed by the shipowners on the
Government's bill of lading.
With reference to the contention of the appellant that the Collector of
Customs had no authority to make such regulations, it may be said in
the present case that the binding effect of the conditions stamped on the
bill of lading did not proceed from the authority of the Collector of
Customs but from the actual contract which the parties made in the
present case. Each bill of lading is a contract and the parties thereto are
bound by its terms.
Findings as we do that the tiles in question were shipped at the owner's
risk, under the law in this jurisdiction, the carrier is only liable where the
evidence shows that he was guilty of some negligence and that the
damages claimed were the result of such negligence. As was said
above, the plaintiff offered no proof whatever to show negligence on the
part of the defendant.
The plaintiff cites some American authorities to support its contention
that the carrier is an absolute insurer of merchandise shipped and that
the proof of breakage or damage to goods shipped in the hands of the
carrier makes out a prima facie case of negligence against him, and that
the burden of proof is thrown on him to show due care and diligence.
The law upon that question in this jurisdiction is found in articles 361 and
362 of the Commercial Code. Article 361 provides:
ART. 361. Merchandise shall be transported at the risk and venture
of the shipper, if the contrary be not expressly stipulated.
Therefore, all damages and impairment, suffered by the goods in
transportation by reason of accident, force majeure, or by virtue of the
nature or defect of the articles, shall be for the account and risk of the
shipper.
The proof of these accidents is incumbent upon the carrier.
Article 362 provides:
ART. 362. The carrier, however, shall be liable for the losses and
damages arising from the causes mentioned in the foregoing article, if it
be proved against him that they occurred on account of his negligence
or because he did not take the precautions usually adopted by careful
persons, unless the shipper committed fraud in the bill of lading stating
that the goods were of a class or quality different from what they really
were. . . .
Under the provisions of article 361 the defendant, in order to free itself
from liability, was only obliged to prove that the damages suffered by the
goods were "by virtue of the nature or defect of the articles." Under the
39
 TRANSPO B
provisions of article 362 the plaintiff, in order to hold the defendant liable,
was obliged to prove that the damages to the goods by virtue of their
nature, occurred on account of its negligence or because the defendant
did not take the precaution usually adopted by careful persons.
The defendant herein proved, and the plaintiff did not attempt to dispute,
that the tiles in question were of a brittle and fragile nature and that they
were delivered by the plaintiff to the defendant without any packing or
protective covering. The defendant also offered proof to show that there
was no negligence on its part, by showing that the tiles were loaded,
stowed, and discharged in a careful and diligent manner.
In this jurisdiction there is no presumption of negligence on the part of
the carriers in case like the present. The plaintiff, not having proved
negligence on the part of the defendant, is not entitled to recover
damages.
For the foregoing reasons, the judgment of the lower court is hereby
affirmed, with costs. So ordered.
Arellano, C.J., Araullo, Street, Malcolm and Avancea, JJ., concur.
9. Southern Lines v. CA, 4 SCRA 256
G.R. No. L-16629 January 31, 1962
SOUTHERN LINES, INC., petitioner,
vs.
COURT OF APPEALS and CITY OF ILOILO, respondents.
Jose Ma. Lopez Vito, Jr. for petitioner.
The City Fiscal for respondents.
DE LEON, J.:
This is a petition to review on certiorari the decision of the Court of
Appeals in CA-G.R. No. 15579-R affirming that of the Court of First
Instance of Iloilo which sentenced petitioner Southern Lines, Inc. to pay
respondent City of Iloilo the amount of P4,931.41.
Sometime in 1948, the City of Iloilo requisitioned for rice from the
National Rice and Corn Corporation (hereafter referred to as NARIC) in
Manila. On August 24 of the same year, NARIC, pursuant to the order,
shipped 1,726 sacks of rice consigned to the City of Iloilo on board the
SS "General Wright" belonging to the Southern Lines, Inc. Each sack of
rice weighed 75 kilos and the entire shipment as indicated in the bill of
lading had a total weight of 129,450 kilos. According to the bill of lading,
the cost of the shipment was P63,115.50 itemized and computed as
follows: .
Unit Price per bag P36.25 P62,567.50
Handling at P0.13 per bag 224.38
Trucking at P2.50 per bag 323.62
T o t a l . . . . . .. . . . .
63,115.50
On September 3, 1948, the City of Iloilo received the shipment and paid
the amount of P63,115.50. However, it was noted that the foot of the bill
of lading that the City of Iloilo 'Received the above mentioned
merchandise apparently in same condition as when shipped, save as
noted below: actually received 1685 sacks with a gross weight of
116,131 kilos upon actual weighing. Total shortage ascertained 13,319
kilos." The shortage was equivalent to 41 sacks of rice with a net weight
of 13,319 kilos, the proportionate value of which was P6,486.35.
On February 14, 1951 the City of Iloilo filed a complaint in the Court of
First Instance of Iloilo against NARIC and the Southern Lines, Inc. for
the recovery of the amount of P6,486.35 representing the value of the
shortage of the shipment of rice. After trial, the lower court absolved
NARIC from the complaint, but sentenced the Southern Lines, Inc. to
pay the amount of P4,931.41 which is the difference between the sum
of P6,486.35 and P1,554.94 representing the latter's counterclaim for
handling and freight.
The Southern Lines, Inc. appealed to the Court of Appeals which
affirmed the judgment of the trial court. Hence, this petition for review.
The only question to be determined in this petition is whether or not the
defendant-carrier, the herein petitioner, is liable for the loss or shortage
of the rice shipped.
40
 TRANSPO B
Article 361 of the Code of Commerce provides: .
ART. 361. The merchandise shall be transported at the risk and
venture of the shipper, if the contrary has not been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods
may suffer during the transportation by reason of fortuitous event, force
majeure, or the inherent nature and defect of the goods, shall be for the
account and risk of the shipper.1wph1.t
Proof of these accidents is incumbent upon the carrier.
Article 362 of the same Code provides: .
ART. 362. Nevertheless, the carrier shall be liable for the losses and
damages resulting from the causes mentioned in the preceding article if
it is proved, as against him, that they arose through his negligence or by
reason of his having failed to take the precautions which usage his
establisbed among careful persons, unless the shipper has committed
fraud in the bill of lading, representing the goods to be of a kind or quality
different from what they really were.
If, notwithstanding the precautions referred to in this article, the goods
transported run the risk of being lost, on account of their nature or by
reason of unavoidable accident, there being no time for their owners to
dispose of them, the carrier may proceed to sell them, placing them for
this purpose at the disposal of the judicial authority or of the officials
designated by special provisions.
Under the provisions of Article 361, the defendant-carrier in order to free
itself from liability, was only obliged to prove that the damages suffered
by the goods were "by virtue of the nature or defect of the articles."
Under the provisions of Article 362, the plaintiff, in order to hold the
defendant liable, was obliged to prove that the damages to the goods by
virtue of their nature, occurred on account of its negligence or because
the defendant did not take the precaution adopted by careful persons.
(Government v. Ynchausti & Co., 40 Phil. 219, 223).
Petitioner claims exemption from liability by contending that the shortage
in the shipment of rice was due to such factors as the shrinkage, leakage
or spillage of the rice on account of the bad condition of the sacks at the
time it received the same and the negligence of the agents of respondent
City of Iloilo in receiving the shipment. The contention is untenable, for,
if the fact of improper packing is known to the carrier or his servants, or
apparent upon ordinary observation, but it accepts the goods
notwithstanding such condition, it is not relieved of liability for loss or
injury resulting thereform. (9 Am Jur. 869.) Furthermore, according to
the Court of Appeals, "appellant (petitioner) itself frankly admitted that
the strings that tied the bags of rice were broken; some bags were with
holes and plenty of rice were spilled inside the hull of the boat, and that
the personnel of the boat collected no less than 26 sacks of rice which
they had distributed among themselves." This finding, which is binding
upon this Court, shows that the shortage resulted from the negligence
of petitioner.
Invoking the provisions of Article 366 of the Code of Commerce and
those of the bill of lading, petitioner further contends that respondent is
precluded from filing an action for damages on account of its failure to
present a claim within 24 hours from receipt of the shipment. It also cites
the cases of Government v. Ynchausti & Co., 24 Phil. 315 and Triton
Insurance Co. v. Jose, 33 Phil. 194, ruling to the effect that the
requirement that the claim for damages must be made within 24 hours
from delivery is a condition precedent to the accrual of the right of action
to recover damages. These two cases above-cited are not applicable to
the case at bar. In the first cited case, the plaintiff never presented any
claim at all before filing the action. In the second case, there was
payment of the transportation charges which precludes the presentation
of any claim against the carrier. (See Article 366, Code of Commerce.)
It is significant to note that in the American case of Hoye v. Pennsylvania
Railroad Co., 13 Ann. Case. 414, it has been said: .
... "It has been held that a stipulation in the contract of shipment requiring
the owner of the goods to present a notice of his claim to the carrier
within a specified time after the goods have arrived at their destination
is in the nature of a condition precedent to the owner's right to enforce a
recovery, that he must show in the first instance that be has complied
with the condition, or that the circumstances were such that to have
complied with it would have required him to do an unreasonable thing.
The weight of authority, however, sustains the view that such a
stipulation is more in the nature of a limitation upon the owner's right to
41
TRANSPO B

recovery, and that the burden of proof is accordingly on the carrier to G.R. No. 95245 August 5,1991
show that the limitation was reasonable and in proper form or within the
time stated." (Hutchinson on Carrier, 3d ed., par. 44) Emphasis supplied. RODOLFO T. GANZON, petitioner,
vs.
In the case at bar, the record shows that petitioner failed to plead this THE HONORABLE COURT OF APPEALS and LUIS T. SANTOS, in his
defense in its answer to respondent's complaint and, therefore, the same capacity as the Secretary of the Department of Local Government,
is deemed waived (Section 10, Rule 9, Rules of Court), and cannot be respondents.
raised for the first time at the trial or on appeal. (Maxilom v. Tabotabo, 9
Phil. 390.) Moreover, as the Court of Appeals has said: . Nicolas P. Sonalan for petitioner in 93252.

... the records reveal that the appellee (respondent) filed the present Romeo A. Gerochi for petitioner in 93746.
action, within a reasonable time after the short delivery in the shipment
of the rice was made. It should be recalled that the present action is one Eugenio Original for petitioner in 95245.
for the refund of the amount paid in excess, and not for damages or the
recovery of the shortage; for admittedly the appellee (respondent) had
paid the entire value of the 1726 sacks of rice, subject to subsequent
adjustment, as to shortages or losses. The bill of lading does not at all SARMIENTO, J.:p
limit the time for filing an action for the refund of money paid in excess.
The petitioners take common issue on the power of the President (acting
WHEREFORE, the decision of the Court of Appeals is hereby affirmed through the Secretary of Local Government), to suspend and/or remove
in all respects and the petition for certiorari denied. local officials.

10. Ganzon v. Court of Appeals, 161 SCRA 646 The petitioners are the Mayor of Iloilo City (G.R. Nos. 93252 and 95245)
and a member of the Sangguniang Panglunsod thereof (G.R. No.
G.R. No. 93252August 5, 1991 93746), respectively.

RODOLFO T. GANZON, petitioner, The petitions of Mayor Ganzon originated from a series of administrative
vs. complaints, ten in number, filed against him by various city officials
THE HONORABLE COURT OF APPEALS and LUIS T. SANTOS, sometime in 1988, on various charges, among them, abuse of authority,
respondents. oppression, grave misconduct, disgraceful and immoral conduct,
intimidation, culpable violation of the Constitution, and arbitrary
G.R. No. 93746 August 5,1991 detention. 1 The personalities involved are Joceleehn Cabaluna, a clerk
at the city health office; Salvador Cabaluna, her husband; Dr. Felicidad
MARY ANN RIVERA ARTIEDA, petitioner, Ortigoza, Assistant City Health Officer; Mansueto Malabor, Vice-Mayor;
vs. Rolando Dabao, Dan Dalido, German Gonzales, Larry Ong, and
HON. LUIS SANTOS, in his capacity as Secretary of the Department of Eduardo Pefia Redondo members of the Sangguniang Panglunsod; and
Local Government, NICANOR M. PATRICIO, in his capacity as Chief, Pancho Erbite, a barangay tanod. The complaints against the Mayor are
Legal Service of the Department of Local Government and SALVADOR set forth in the opinion of the respondent Court of Appeals. 2 We quote:
CABALUNA JR., respondents.
xxx xxx xxx
42
TRANSPO B
In her verified complaint (Annex A), Mrs. Cabaluna, a clerk assigned to
the City Health, Office of Iloilo City charged that due to political reasons,
having supported the rival candidate, Mrs. Rosa 0. Caram, the petitioner
City Mayor, using as an excuse the exigency of the service and the
interest of the public, pulled her out from rightful office where her
qualifications are best suited and assigned her to a work that should be
the function of a non-career service employee. To make matters worse,
a utility worker in the office of the Public Services, whose duties are alien
to the complainant's duties and functions, has been detailed to take her
place. The petitioner's act are pure harassments aimed at luring her
away from her permanent position or force her to resign.
In the case of Dra. Felicidad Ortigoza, she claims that the petitioner
handpicked her to perform task not befitting her position as Assistant
City Health Officer of Iloilo City; that her office was padlocked without
any explanation or justification; that her salary was withheld without
cause since April 1, 1988; that when she filed her vacation leave, she
was given the run-around treatment in the approval of her leave in
connivance with Dr. Rodolfo Villegas and that she was the object of a
well-engineered trumped-up charge in an administrative complaint filed
by Dr. Rodolfo Villegas (Annex B).
On the other hand, Mansuelo Malabor is the duly elected Vice-Mayor of
Iloilo City and complainants Rolando Dabao, Dan Dalido, German
Gonzales, Larry Ong and Eduardo Pefia Pedondo are members of the
Sangguniang Panglunsod of the City of Iloilo. Their complaint arose out
from the case where Councilor Larry Ong, whose key to his office was
unceremoniously and without previous notice, taken by petitioner.
Without an office, Councilor Ong had to hold office at Plaza Libertad,
The Vice-Mayor and the other complainants sympathized with him and
decided to do the same. However, the petitioner, together with its fully-
armed security men, forcefully drove them away from Plaza Libertad.
Councilor Ong denounced the petitioner's actuations the following day
in the radio station and decided to hold office at the Freedom
Grandstand at Iloilo City and there were so many people who gathered
to witness the incident. However, before the group could reach the area,
the petitioner, together with his security men, led the firemen using a
firetruck in dozing water to the people and the bystanders.
Another administrative case was filed by Pancho Erbite, a barangay
tanod, appointed by former mayor Rosa O. Caram. On March 13, 1988,
without the benefit of charges filed against him and no warrant of arrest
was issued, Erbite was arrested and detained at the City Jail of Iloilo City
upon orders of petitioner. In jail, he was allegedly mauled by other
detainees thereby causing injuries He was released only the following
day. 3
The Mayor thereafter answered 4 and the cases were shortly set for
hearing. The opinion of the Court of Appeals also set forth the
succeeding events:
xxx xxx xxx
The initial hearing in the Cabaluna and Ortigoza cases were set for
hearing on June 20-21, 1988 at the Regional Office of the Department
of Local Government in Iloilo City. Notices, through telegrams, were sent
to the parties (Annex L) and the parties received them, including the
petitioner. The petitioner asked for a postponement before the
scheduled date of hearing and was represented by counsel, Atty.
Samuel Castro. The hearing officers, Atty. Salvador Quebral and Atty.
Marino Bermudez had to come all the way from Manila for the two-day
hearings but was actually held only on June 20,1988 in view of the
inability and unpreparedness of petitioner's counsel.
The next hearings were re-set to July 25, 26, 27,1988 in the same
venue-Iloilo City. Again, the petitioner attempted to delay the
proceedings and moved for a postponement under the excuse that he
had just hired his counsel. Nonetheless, the hearing officers denied the
motion to postpone, in view of the fact that the parties were notified by
telegrams of the scheduled hearings (Annex M).
In the said hearings, petitioner's counsel cross-examined the
complainants and their witnesses.
Finding probable grounds and reasons, the respondent issued a
preventive suspension order on August 11, 1988 to last until October
11,1988 for a period of sixty (60) days.
43
TRANSPO B
Then the next investigation was set on September 21, 1988 and the
petitioner again asked for a postponement to September 26,1988. On
September 26, 1988, the complainants and petitioner were present,
together with their respective counsel. The petitioner sought for a
postponement which was denied. In these hearings which were held in
Mala the petitioner testified in Adm. Case No. C-10298 and 10299.
The investigation was continued regarding the Malabor case and the
complainants testified including their witnesses.
On October 10, 1988, petitioner's counsel, Atty. Original moved for a
postponement of the October 24, 1988 hearing to November 7 to 11,
1988 which was granted. However, the motion for change of venue as
denied due to lack of funds. At the hearing on November 7, 1988, the
parties and counsel were present. Petitioner reiterated his motion to
change venue and moved for postponement anew. The counsel
discussed a proposal to take the deposition of witnesses in Iloilo City so
the hearing was indefinitely postponed. However, the parties failed to
come to terms and after the parties were notified of the hearing, the
investigation was set to December 13 to 15, 1988.
The petitioner sought for another postponement on the ground that his
witnesses were sick or cannot attend the investigation due to lack of
transportation. The motion was denied and the petitioner was given up
to December 14, 1988 to present his evidence.
On December 14,1988, petitioner's counsel insisted on his motion for
postponement and the hearing officers gave petitioner up to December
15, 1988 to present his evidence. On December 15, 1988, the petitioner
failed to present evidence and the cases were considered submitted for
resolution.
In the meantime, a prima facie evidence was found to exist in the
arbitrary detention case filed by Pancho Erbite so the respondent
ordered the petitioner's second preventive suspension dated October
11, 1988 for another sixty (60) days. The petitioner was able to obtain a
restraining order and a writ of preliminary injunction in the Regional Trial
Court, Branch 33 of Iloilo City. The second preventive suspension was
not enforced. 5
Amidst the two successive suspensions, Mayor Ganzon instituted an
action for prohibition against the respondent Secretary of Local
Government (now, Interior) in the Regional Trial Court, Iloilo City, where
he succeeded in obtaining a writ of preliminary injunction. Presently, he
instituted CA-G.R. SP No. 16417, an action for prohibition, in the
respondent Court of Appeals.
Meanwhile, on May 3, 1990, the respondent Secretary issued another
order, preventively suspending Mayor Ganzon for another sixty days,
the third time in twenty months, and designating meantime Vice-Mayor
Mansueto Malabor as acting mayor. Undaunted, Mayor Ganzon
commenced CA-G.R. SP No. 20736 of the Court of Appeals, a petition
for prohibition, 6 (Malabor it is to be noted, is one of the complainants,
and hence, he is interested in seeing Mayor Ganzon ousted.)
On September 7, 1989, the Court of Appeals rendered judgment,
dismissing CA-G.R. SP No. 16417. On July 5, 1990, it likewise
promulgated a decision, dismissing CA-G.R. SP No. 20736. In a
Resolution dated January 24, 1990, it issued a Resolution certifying the
petition of Mary Ann Artieda, who had been similary charged by the
respondent Secretary, to this Court.
On June 26,1990, we issued a Temporary Restraining Order, barring
the respondent Secretary from implementing the suspension orders, and
restraining the enforcement of the Court of Appeals' two decisions.
In our Resolution of November 29, 1990, we consolidated all three
cases. In our Resolutions of January 15, 1991, we gave due course
thereto.
Mayor Ganzon claims as a preliminary (GR No. 93252), that the
Department of Local Government in hearing the ten cases against him,
had denied him due process of law and that the respondent Secretary
had been "biased, prejudicial and hostile" towards him 7 arising from his
(Mayor Ganzon's) alleged refusal to join the Laban ng Demokratikong
Pilipino party 8 and the running political rivalry they maintained in the
last congressional and local elections; 9 and his alleged refusal to
operate a lottery in Iloilo City. 10 He also alleges that he requested the
Secretary to lift his suspension since it had come ninety days prior to an
election (the barangay elections of November 14, 1988), 11
44
TRANSPO B
notwithstanding which, the latter proceeded with the hearing and meted
out two more suspension orders of the aforementioned cases. 12 He
likewise contends that he sought to bring the cases to Iloilo City (they
were held in Manila) in order to reduce the costs of proceeding, but the
Secretary rejected his request. 13 He states that he asked for
postponement on "valid and justifiable" 14 grounds, among them, that
he was suffering from a heart ailment which required confinement; that
his "vital" 15 witness was also hospitalized 16 but that the latter unduly
denied his request. 17
Mayor Ganzon's primary argument (G.R. Nos. 93252 and 95245) is that
the Secretary of Local Government is devoid, in any event, of any
authority to suspend and remove local officials, an argument reiterated
by the petitioner Mary Ann Rivera Artieda (G.R. No. 93746).
As to Mayor Ganzon's charges of denial of due process, the records do
not show very clearly in what manner the Mayor might have been
deprived of his rights by the respondent Secretary. His claims that he
and Secretary Luis-Santos were (are) political rivals and that his
"persecution" was politically motivated are pure speculation and
although the latter does not appear to have denied these contentions
(as he, Mayor Ganzon, claims), we can not take his word for it the way
we would have under less political circumstances, considering
furthermore that "political feud" has often been a good excuse in
contesting complaints.
The Mayor has failed furthermore to substantiate his say-so's that
Secretary Santos had attempted to seduce him to join the administration
party and to operate a lottery in Iloilo City. Again, although the Secretary
failed to rebut his allegations, we can not accept them, at face value,
much more, as judicial admissions as he would have us accept them 18
for the same reasons above-stated and furthermore, because his say
so's were never corroborated by independent testimonies. As a
responsible public official, Secretary Santos, in pursuing an official
function, is presumed to be performing his duties regularly and in the
absence of contrary evidence, no ill motive can be ascribed to him.
As to Mayor Ganzon's contention that he had requested the respondent
Secretary to defer the hearing on account of the ninety-day ban
prescribed by Section 62 of Batas Blg. 337, the Court finds the question
to be moot and academic since we have in fact restrained the Secretary
from further hearing the complaints against the petitioners. 19
As to his request, finally, for postponements, the Court is afraid that he
has not given any compelling reason why we should overturn the Court
of Appeals, which found no convincing reason to overrule Secretary
Santos in denying his requests. Besides, postponements are a matter of
discretion on the part of the hearing officer, and based on Mayor
Ganzon's above story, we are not convinced that the Secretary has been
guilty of a grave abuse of discretion.
The Court can not say, under these circumstances, that Secretary
Santos' actuations deprived Mayor Ganzon of due process of law.
We come to the core question: Whether or not the Secretary of Local
Government, as the President's alter ego, can suspend and/or remove
local officials.
It is the petitioners' argument that the 1987 Constitution 20 no longer
allows the President, as the 1935 and 1973 Constitutions did, to exercise
the power of suspension and/or removal over local officials. According
to both petitioners, the Constitution is meant, first, to strengthen self-rule
by local government units and second, by deleting the phrase 21 as may
be provided by law to strip the President of the power of control over
local governments. It is a view, so they contend, that finds support in the
debates of the Constitutional Commission. The provision in question
reads as follows:
Sec. 4. The President of the Philippines shall exercise general
supervision over local governments. Provinces with respect to
component cities and municipalities, and cities and municipalities with
respect to component barangays shall ensure that the acts of their
component units are within the scope of their prescribed powers and
functions. 22
It modifies a counterpart provision appearing in the 1935 Constitution,
which we quote:
Sec. 10. The President shall have control of all the executive
departments, bureaus, or offices, exercise general supervision over all
45
TRANSPO B
Local governments as may be provided by law, and take care that the
laws be faithfully executed. 23
The petitioners submit that the deletion (of "as may be provided by law")
is significant, as their argument goes, since: (1) the power of the
President is "provided by law" and (2) hence, no law may provide for it
any longer.
It is to be noted that in meting out the suspensions under question, the
Secretary of Local Government acted in consonance with the specific
legal provisions of Batas Blg. 337, the Local Government Code, we
quote:
Sec. 62. Notice of Hearing. Within seven days after the complaint is
filed, the Minister of local Government, or the sanggunian concerned, as
the case may be, shall require the respondent to submit his verified
answer within seven days from receipt of said complaint, and commence
the hearing and investigation of the case within ten days after receipt of
such answer of the respondent. No investigation shall be held within
ninety days immediately prior to an election, and no preventive
suspension shall be imposed with the said period. If preventive
suspension has been imposed prior to the aforesaid period, the
preventive suspension shall be lifted. 24
Sec. 63.Preventive Suspension. (1) Preventive suspension may be
imposed by the Minister of Local Government if the respondent is a
provincial or city official, by the provincial governor if the respondent is
an elective municipal official, or by the city or municipal mayor if the
respondent is an elective barangay official.
(2) Preventive suspension may be imposed at any time after the
issues are joined, when there is reasonable ground to believe that the
respondent has committed the act or acts complained of, when the
evidence of culpability is strong, when the gravity of the offense so
warrants, or when the continuance in office of the respondent could
influence the witnesses or pose a threat to the safety and integrity of the
records and other evidence. In all cases, preventive suspension shall
not extend beyond sixty days after the start of said suspension.
(3) At the expiration of sixty days, the suspended official shall be
deemed reinstated in office without prejudice to the continuation of the
proceedings against him until its termination. However ' if the delay in
the proceedings of the case is due to his fault, neglect or request, the
time of the delay shall not be counted in computing the time of
suspension. 25
The issue, as the Court understands it, consists of three questions: (1)
Did the 1987 Constitution, in deleting the phrase "as may be provided
by law" intend to divest the President of the power to investigate,
suspend, discipline, and/or remove local officials? (2) Has the
Constitution repealed Sections 62 and 63 of the Local Government
Code? (3) What is the significance of the change in the constitutional
language?
It is the considered opinion of the Court that notwithstanding the change
in the constitutional language, the charter did not intend to divest the
legislature of its right or the President of her prerogative as conferred by
existing legislation to provide administrative sanctions against local
officials. It is our opinion that the omission (of "as may be provided by
law") signifies nothing more than to underscore local governments'
autonomy from congress and to break Congress' "control" over local
government affairs. The Constitution did not, however, intend, for the
sake of local autonomy, to deprive the legislature of all authority over
municipal corporations, in particular, concerning discipline.
Autonomy does not, after all, contemplate making mini-states out of local
government units, as in the federal governments of the United States of
America (or Brazil or Germany), although Jefferson is said to have
compared municipal corporations euphemistically to "small republics."
26 Autonomy, in the constitutional sense, is subject to the guiding star,
though not control, of the legislature, albeit the legislative responsibility
under the Constitution and as the "supervision clause" itself suggest-is
to wean local government units from over-dependence on the central
government.
It is noteworthy that under the Charter, "local autonomy" is not instantly
self-executing, but subject to, among other things, the passage of a local
government code, 27 a local tax law, 28 income distribution legislation,
29 and a national representation law, 30 and measures 31 designed to
46
TRANSPO B
realize autonomy at the local level. It is also noteworthy that in spite of
autonomy, the Constitution places the local government under the
general supervision of the Executive. It is noteworthy finally, that the
Charter allows Congress to include in the local government code
provisions for removal of local officials, which suggest that Congress
may exercise removal powers, and as the existing Local Government
Code has done, delegate its exercise to the President. Thus:
Sec. 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government
structure instituted through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate among the
different local government units their powers, responsibilities and
resources, and provide for the qualifications, election, appointment and
removal, term, salaries, powers and functions and duties of local
officials, and all other matters relating to the organization and operation
of the local units. 32
As hereinabove indicated, the deletion of "as may be provided by law"
was meant to stress, sub silencio, the objective of the framers to
strengthen local autonomy by severing congressional control of its
affairs, as observed by the Court of Appeals, like the power of local
legislation. 33 The Constitution did nothing more, however, and insofar
as existing legislation authorizes the President (through the Secretary of
Local Government) to proceed against local officials administratively, the
Constitution contains no prohibition.
The petitioners are under the impression that the Constitution has left
the President mere supervisory powers, which supposedly excludes the
power of investigation, and denied her control, which allegedly
embraces disciplinary authority. It is a mistaken impression because
legally, "supervision" is not incompatible with disciplinary authority as
this Court has held, 34 thus:
xxx xxx xxx
It is true that in the case of Mondano vs. Silvosa, 51 Off. Gaz., No. 6 p.
2884, this Court had occasion to discuss the scope and extent of the
power of supervision by the President over local government officials in
contrast to the power of control given to him over executive officials of
our government wherein it was emphasized that the two terms, control
and supervision, are two different things which differ one from the other
in meaning and extent. Thus in that case the Court has made the
following digression: "In administration law supervision means
overseeing or the power or authority of an officer to see that subordinate
officers perform their duties. If the latter fail or neglect to fulfill them the
former may take such action or step as prescribed by law to make them
perform their duties. Control, on the other hand, means the power of an
officer to alter or modify or nullify of set aside what a subordinate officer
had done in the performance of his duties and to substitute the judgment
of the former for that of the latter." But from this pronouncement it cannot
be reasonably inferred that the power of supervision of the President
over local government officials does not include the power of
investigation when in his opinion the good of the public service so
requires, as postulated in Section 64(c) of the Revised Administrative
Code. ... 35
xxx xxx xxx
"Control" has been defined as "the power of an officer to alter or modify
or nullify or set aside what a subordinate officer had done in the
performance of his duties and to substitute the judgment of the former
for test of the latter." 36 "Supervision" on the other hand means
"overseeing or the power or authority of an officer to see that subordinate
officers perform their duties. 37 As we held, 38 however, "investigating"
is not inconsistent with "overseeing", although it is a lesser power than
"altering". The impression is apparently exacerbated by the Court's
pronouncements in at least three cases, Lacson v. Roque, 39 Hebron v.
Reyes, 40 and Mondano v. Silvosa, 41 and possibly, a fourth one,
Pelaez v. Auditor General. 42 In Lacson, this Court said that the
President enjoyed no control powers but only supervision "as may be
provided by law," 43 a rule we reiterated in Hebron, and Mondano. In
Pelaez, we stated that the President "may not . . . suspend an elective
official of a regular municipality or take any disciplinary action against
him, except on appeal from a decision of the corresponding provincial
board." 44 However, neither Lacson nor Hebron nor Mondano
categorically banned the Chief Executive from exercising acts of
disciplinary authority because she did not exercise control powers, but
because no law allowed her to exercise disciplinary authority. Thus,
according to Lacson:
47
TRANSPO B
The contention that the President has inherent power to remove or
suspend municipal officers is without doubt not well taken. Removal and
suspension of public officers are always controlled by the particular law
applicable and its proper construction subject to constitutional
limitations. 45
In Hebron we stated:
Accordingly, when the procedure for the suspension of an officer is
specified by law, the same must be deemed mandatory and adhered to
strictly, in the absence of express or clear provision to the contrary-which
does not et with respect to municipal officers ... 46
In Mondano, the Court held:
... The Congress has expressly and specifically lodged the provincial
supervision over municipal officials in the provincial governor who is
authorized to "receive and investigate complaints made under oath
against municipal officers for neglect of duty, oppression, corruption or
other form of maladministration of office, and conviction by final
judgment of any crime involving moral turpitude." And if the charges are
serious, "he shall submit written charges touching the matter to the
provincial board, furnishing a copy of such charges to the accused either
personally or by registered mail, and he may in such case suspend the
officer (not being the municipal treasurer) pending action by the board,
if in his opinion the charge by one affecting the official integrity of the
officer in question." Section 86 of the Revised Administration Code adds
nothing to the power of supervision to be exercised by the Department
Head over the administration of ... municipalities ... . If it be construed
that it does and such additional power is the same authority as that
vested in the Department Head by section 79(c) of the Revised
Administrative Code, then such additional power must be deemed to
have been abrogated by Section 110(l), Article VII of the Constitution.
47
xxx xxx xxx
In Pelaez, we stated that the President can not impose disciplinary
measures on local officials except on appeal from the provincial board
pursuant to the Administrative Code. 48
Thus, in those case that this Court denied the President the power (to
suspend/remove) it was not because we did not think that the President
can not exercise it on account of his limited power, but because the law
lodged the power elsewhere. But in those cases ii which the law gave
him the power, the Court, as in Ganzon v. Kayanan, found little difficulty
in sustaining him. 49
The Court does not believe that the petitioners can rightfully point to the
debates of the Constitutional Commission to defeat the President's
powers. The Court believes that the deliberations are by themselves
inconclusive, because although Commissioner Jose Nolledo would
exclude the power of removal from the President, 50 Commissioner Blas
Ople would not. 51
The Court is consequently reluctant to say that the new Constitution has
repealed the Local Government Code, Batas Blg. 37. As we said,
"supervision" and "removal" are not incompatible terms and one may
stand with the other notwithstanding the stronger expression of local
autonomy under the new Charter. We have indeed held that in spite of
the approval of the Charter, Batas Blg. 337 is still in force and effect. 52
As the Constitution itself declares, local autonomy means "a more
responsive and accountable local government structure instituted
through a system of decentralization." 53 The Constitution as we
observed, does nothing more than to break up the monopoly of the
national government over the affairs of local governments and as put by
political adherents, to "liberate the local governments from the
imperialism of Manila." Autonomy, however, is not meant to end the
relation of partnership and inter-dependence between the central
administration and local government units, or otherwise, to user in a
regime of federalism. The Charter has not taken such a radical step.
Local governments, under the Constitution, are subject to regulation,
however limited, and for no other purpose than precisely, albeit
paradoxically, to enhance self- government.
48
TRANSPO B
As we observed in one case, 54 decentralization means devolution of
national administration but not power to the local levels. Thus:
Now, autonomy is either decentralization of administration or
decentralization of power. There is decentralization of administration
when the central government delegates administrative powers to
political subdivisions in order to broaden the base of government power
and in the process to make local governments "more responsive and
accountable," and "ensure their fullest development as self-reliant
communities and make them more effective partners in the pursuit of
national development and social progress." At the same time, it relieves
the central government of the burden of managing local affairs and
enables it to concentrate on national concerns. The President exercises
"general supervision" over them, but only to "ensure that local affairs are
administered according to law." He has no control over their acts in the
sense that he can substitute their judgments with his own.
Decentralization of power, on the other hand, involves an abdication of
political power in the favor of local governments units declared to be
autonomous, In that case, the autonomous government is free to chart
its own destiny and shape its future with minimum intervention from
central authorities. According to a constitutional author, decentralization
of power amounts to "self-immolation," since in that event, the
autonomous government becomes accountable not to the central
authorities but to its constituency. 55
The successive sixty-day suspensions imposed on Mayor Rodolfo
Ganzon is albeit another matter. What bothers the Court, and what
indeed looms very large, is the fact that since the Mayor is facing ten
administrative charges, the Mayor is in fact facing the possibility of 600
days of suspension, in the event that all ten cases yield prima facie
findings. The Court is not of course tolerating misfeasance in public
office (assuming that Mayor Ganzon is guilty of misfeasance) but it is
certainly another question to make him serve 600 days of suspension,
which is effectively, to suspend him out of office. As we held: 56
2. Petitioner is a duly elected municipal mayor of Lianga, Surigao
del Sur. His term of office does not expire until 1986. Were it not for this
information and the suspension decreed by the Sandiganbayan
according to the Anti-Graft and Corrupt Practices Act, he would have
been all this while in the full discharge of his functions as such municipal
mayor. He was elected precisely to do so. As of October 26, 1983, he
has been unable to. it is a basic assumption of the electoral process
implicit in the right of suffrage that the people are entitled to the services
of elective officials of their choice. For misfeasance or malfeasance, any
of them could, of course, be proceeded against administratively or, as in
this instance, criminally. In either case, Ms culpability must be
established. Moreover, if there be a criminal action, he is entitled to the
constitutional presumption of innocence. A preventive suspension may
be justified. Its continuance, however, for an unreasonable length of time
raises a due process question. For even if thereafter he were acquitted,
in the meanwhile his right to hold office had been nullified. Clearly, there
would be in such a case an injustice suffered by him. Nor is he the only
victim. There is injustice inflicted likewise on the people of Lianga They
were deprived of the services of the man they had elected to serve as
mayor. In that sense, to paraphrase Justice Cardozo, the protracted
continuance of this preventive suspension had outrun the bounds of
reason and resulted in sheer oppression. A denial of due process is thus
quite manifest. It is to avoid such an unconstitutional application that the
order of suspension should be lifted. 57
The plain truth is that this Court has been ill at ease with suspensions,
for the above reasons, 58 and so also, because it is out of the ordinary
to have a vacancy in local government. The sole objective of a
suspension, as we have held, 59 is simply "to prevent the accused from
hampering the normal cause of the investigation with his influence and
authority over possible witnesses" 60 or to keep him off "the records and
other evidence. 61
It is a means, and no more, to assist prosecutors in firming up a case, if
any, against an erring local official. Under the Local Government Code,
it can not exceed sixty days, 62 which is to say that it need not be exactly
sixty days long if a shorter period is otherwise sufficient, and which is
also to say that it ought to be lifted if prosecutors have achieved their
purpose in a shorter span.
Suspension is not a penalty and is not unlike preventive imprisonment
in which the accused is held to insure his presence at the trial. In both
cases, the accused (the respondent) enjoys a presumption of innocence
unless and until found guilty.
49
TRANSPO B
Suspension finally is temporary and as the Local Government Code
provides, it may be imposed for no more than sixty days. As we held, 63
a longer suspension is unjust and unreasonable, and we might add,
nothing less than tyranny.
As we observed earlier, imposing 600 days of suspension which is not
a remote possibility Mayor Ganzon is to all intents and purposes, to
make him spend the rest of his term in inactivity. It is also to make, to all
intents and purposes, his suspension permanent.
It is also, in fact, to mete out punishment in spite of the fact that the
Mayor's guilt has not been proven. Worse, any absolution will be for
naught because needless to say, the length of his suspension would
have, by the time he is reinstated, wiped out his tenure considerably.
The Court is not to be mistaken for obstructing the efforts of the
respondent Secretary to see that justice is done in Iloilo City, yet it is
hardly any argument to inflict on Mayor Ganzon successive suspensions
when apparently, the respondent Secretary has had sufficient time to
gather the necessary evidence to build a case against the Mayor without
suspending him a day longer. What is intriguing is that the respondent
Secretary has been cracking down, so to speak, on the Mayor piecemeal
apparently, to pin him down ten times the pain, when he, the respondent
Secretary, could have pursued a consolidated effort.
We reiterate that we are not precluding the President, through the
Secretary of Interior from exercising a legal power, yet we are of the
opinion that the Secretary of Interior is exercising that power
oppressively, and needless to say, with a grave abuse of discretion.
The Court is aware that only the third suspension is under questions,
and that any talk of future suspensions is in fact premature. The fact
remains, however, that Mayor Ganzon has been made to serve a total
of 120 days of suspension and the possibility of sixty days more is
arguably around the corner (which amounts to a violation of the Local
Government Code which brings to light a pattern of suspensions
intended to suspend the Mayor the rest of his natural tenure. The Court
is simply foreclosing what appears to us as a concerted effort of the
State to perpetuate an arbitrary act.
As we said, we can not tolerate such a state of affairs.
We are therefore allowing Mayor Rodolfo Ganzon to suffer the duration
of his third suspension and lifting, for the purpose, the Temporary
Restraining Order earlier issued. Insofar as the seven remaining
charges are concerned, we are urging the Department of Local
Government, upon the finality of this Decision, to undertake steps to
expedite the same, subject to Mayor Ganzon's usual remedies of
appeal, judicial or administrative, or certiorari, if warranted, and
meanwhile, we are precluding the Secretary from meting out further
suspensions based on those remaining complaints, notwithstanding
findings of prima facie evidence.
In resume the Court is laying down the following rules:
1. Local autonomy, under the Constitution, involves a mere
decentralization of administration, not of power, in which local officials
remain accountable to the central government in the manner the law
may provide;
2. The new Constitution does not prescribe federalism;
3. The change in constitutional language (with respect to the
supervision clause) was meant but to deny legislative control over local
governments; it did not exempt the latter from legislative regulations
provided regulation is consistent with the fundamental premise of
autonomy;
4. Since local governments remain accountable to the national
authority, the latter may, by law, and in the manner set forth therein,
impose disciplinary action against local officials;
5. "Supervision" and "investigation" are not inconsistent terms;
"investigation" does not signify "control" (which the President does not
have);
6. The petitioner, Mayor Rodolfo Ganzon. may serve the
suspension so far ordered, but may no longer be suspended for the
offenses he was charged originally; provided:
50
TRANSPO B
a) that delays in the investigation of those charges "due to his fault,
neglect or request, (the time of the delay) shall not be counted in
computing the time of suspension. [Supra, sec. 63(3)]
b) that if during, or after the expiration of, his preventive
suspension, the petitioner commits another or other crimes and abuses
for which proper charges are filed against him by the aggrieved party or
parties, his previous suspension shall not be a bar to his being
preventively suspended again, if warranted under subpar. (2), Section
63 of the Local Government Code.
WHEREFORE, premises considered, the petitions are DISMISSED. The
Temporary Restraining Order issued is LIFTED. The suspensions of the
petitioners are AFFIRMED, provided that the petitioner, Mayor Rodolfo
Ganzon, may not be made to serve future suspensions on account of
any of the remaining administrative charges pending against him for acts
committed prior to August 11, 1988. The Secretary of Interior is
ORDERED to consolidate all such administrative cases pending against
Mayor Ganzon.
The sixty-day suspension against the petitioner, Mary Ann Rivera
Artieda, is AFFIRMED. No costs.
SO ORDERED.
11. Compania Maritima v. Insurance Company, 12 SCRA 213
G.R. No. L-18965 October 30, 1964
COMPAIA 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 Compaia Maritima, a
shipping corporation, for the shipment of 2,645 bales of hemp from the
former's Sasa private pier at Davao City to Manila and for their
subsequent transhipment to Boston, Massachusetts, U.S.A. on board
the S.S. Steel Navigator. This oral contract was later on confirmed by a
formal and written booking issued by Macleod's branch office in Sasa
and handcarried to Compaia Maritima's branch office in Davao in
compliance with which the latter sent to Macleod's private wharf LCT
Nos. 1023 and 1025 on which the loading of the hemp was completed
on October 29, 1952. These two lighters were manned each by a patron
and an assistant patron. The patrons of both barges issued the
corresponding carrier's receipts and that issued by the 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 Compaia
Maritima on which the hemp was to be loaded. During the night of
October 29, 1952, or at the early hours of October 30, LCT No. 1025
sank, resulting in the damage or loss of 1,162 bales of hemp loaded
therein. On October 30, 1952, Macleod promptly notified the carrier's
main office in Manila and its branch in Davao advising it of its liability.
The damaged hemp was brought to Odell Plantation in Madaum, Davao,
for cleaning, washing, reconditioning, and redrying. During the period
from November 1-15, 1952, the carrier's trucks and lighters hauled from
Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned
hemp out of the original cargo of 1,162 bales weighing 2,324 piculs
which had a total value of 116,835.00. After reclassification, the value of
the reconditioned hemp was reduced to P84,887.28, or a loss in value
of P31,947.72. Adding to this last amount the sum of P8,863.30
representing Macleod's expenses in checking, grading, rebating, and
other fees for washing, cleaning and redrying in the amount of
P19.610.00, the total loss adds up to P60,421.02.
51
TRANSPO B
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
52
 TRANSPO B
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).
53
 TRANSPO B
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.
54
TRANSPO B
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.
12. Lu Do v. Binamira, 101 Phil. 243
G.R. No. L-9840 April 22, 1957
LU DO & LU YM CORPORATION, petitioner-defendant,
vs.
I. V. BINAMIRA, respondent-plaintiff.
Ross, Selph, Carrascoso and Janda for petitioner.
I. V. Binamira in his own behalf.
BAUTISTA ANGELO, J.:
On April 4, 1954, plaintiff filed an action in the Court of First Instance of
Cebu against defendant to recover the sum of P324.63 as value of
certain missing shipment, P150 as actual and compensatory damages,
and P600 as moral and pecuniary damages. After trial, the court
rendered judgment ordering defendant to pay plaintiff the sum of
P216.84, with legal interest. On appeal, the Court of Appeals affirmed
the judgment, hence the present petition for review.
On August 10, 1951, the Delta Photo Supply Company of New York
shipped on board the M/S "FERNSIDE" at New York, U.S.A., six cases
of films and/or photographic supplies consigned to the order of
respondent I. V. Binamira. For this shipment, Bill of Lading No. 29 was
issued. The ship arrived at the port of Cebu on September 23, 1951
and discharged her cargo on September 23, and 24, 1951, including
the shipment in question, placing it in the possession and custody of
the arrastre operator of said port, the Visayan Cebu Terminal Company,
Inc.
Petitioner, as agent of the carrier, hired the Cebu Stevedoring
Company, Inc. to unload its cargo. During the discharge, good order
cargo was separated from the bad order cargo on board the ship, and
a separate list of bad order cargo was prepared by Pascual Villamor,
checker of the stevedoring company. All the cargo unloaded was
received at the pier by the Visayan Cebu Terminal Company Inc,
arrastre operator of the port. This terminal company had also its own
checker, Romeo Quijano, who also recorded and noted down the good
cargo from the bad one. The shipment in question, was not included in
the report of bad order cargo of both checkers, indicating that it was
discharged from the, ship in good order and condition.
On September 26, 1951, three days after the goods were unloaded
from the ship, respondent took delivery of his six cases of photographic
supplies from the arrastre operator. He discovered that the cases
showed signs of pilferage and, consequently, he hired marine
surveyors, R. J. del Pan & Company, Inc., to examine them. The
surveyors examined the cases and made a physical count of their
contents in the presence of representatives of petitioner, respondent
and the stevedoring company. The surveyors examined the cases and
made a physical count of their contents in the presence of
representatives of petitioner, respondent and the stevedoring company.
The finding of the surveyors showed that some films and photographic
supplies were missing valued at P324.63.
It appears from the evidence that the six cases of films and
photographic supplies were discharged from the ship at the port of
Cebu by the stevedoring company hired by petitioner as agent of the
carrier. All the unloaded cargo, including the shipment in question, was
received by the Visayan Cebu Terminal Company Inc., the arrastre
operator appointed by the Bureau of Customs. It also appears that
during the discharge, the cargo was checked both by the stevedoring
company hired by petitioner as well as by the arrastre operator of the
port, and the shipment in question, when discharged from the ship, was
found to be in good order and condition. But after it was delivered to
respondent three days later, the same was examined by a marine
surveyor who found that some films and supplies were missing valued
at P324.63.
55
TRANSPO B
The question now to be considered is: Is the carrier responsible for the
loss considering that the same occurred after the shipment was
discharged from the ship and placed in the possession and custody of
the customs authorities?
The Court of Appeals found for the affirmative, making on this point the
following comment:
In this jurisdiction, a common carrier has the legal duty to deliver goods
to a consignee in the same condition in which it received them. Except
where the loss, destruction or deterioration of the merchandise was due
to any of the cases enumerated in Article 1734 of the new Civil Code,
a carrier is presumed to have been at fault and to have acted
negligently, unless it could prove that it observed extraordinary
diligence in the care and handling of the goods (Article 1735, supra).
Such presumption and the liability of the carrier attach until the goods
are delivered actually or constructively, to the consignee, or to the
person who has a right to receive them (Article 1736, supra), and we
believe delivery to the customs authorities is not the delivery
contemplated by Article 1736, supra, in connection with second
paragraph of Article 1498, supra, because, in such a case, the goods
are then still in the hands of the Government and their owner could not
exercise dominion whatever over them until the duties are paid. In the
case at bar, the presumption against the carrier, represented appellant
as its agent, has not been successfully rebutted.
It is now contended that the Court of Appeals erred in its finding not
only because it made wrong interpretation of the law on the matter, but
also because it ignored the provisions of the bill of lading covering the
shipment wherein it was stipulated that the responsibility of the carrier
is limited only to losses that may occur while the cargo is still under its
custody and control.
We believe this contention is well taken. It is true that, as a rule, a
common carrier is responsible for the loss, destruction or deterioration
of the goods it assumes to carry from one place to another unless the
same is due to any to any of the causes mentioned in Article 1734 on
the new Civil Code, and that, if the goods are lost, destroyed or
deteriorated, for causes other that those mentioned, the common
carrier is presumed to have been at fault or to have acted negligently,
unless it proves that it has observed extraordinary diligence in their care
(Article 1735, Idem.), and that this extraordinary liability lasts from the
time the goods are placed in the possession of the carrier until they are
delivered to the consignee, or "to the person who has the right to
receive them" (Article 1736, Idem.), but these provisions only apply
when the loss, destruction or deterioration takes place while the goods
are in the possession of the carrier, and not after it has lost control of
them. The reason is obvious. While the goods are in its possession, it
is but fair that it exercise extraordinary diligence in protecting them from
damage, and if loss occurs, the law presumes that it was due to its fault
or negligence. This is necessary to protect the interest the interest of
the owner who is at its mercy. The situation changes after the goods
are delivered to the consignee.
While we agree with the Court of Appeals that while delivery of the
cargo to the consignee, or to the person who has a right to receive
them", contemplated in Article 1736, because in such case the goods
are still in the hands of the Government and the owner cannot exercise
dominion over them, we believe however that the parties may agree to
limit the liability of the carrier considering that the goods have still to
through the inspection of the customs authorities before they are
actually turned over to the consignee. This is a situation where we may
say that the carrier losses control of the goods because of a custom
regulation and it is unfair that it be made responsible for what may
happen during the interregnum. And this is precisely what was done by
the parties herein. In the bill of lading that was issued covering the
shipment in question, both the carrier and the consignee have
stipulated to limit the responsibility of the carrier for the loss or damage
that may because to the goods before they are actually delivered by
insert in therein the following provisions:
1. . . . The Carrier shall not be liable in any capacity whatsoever for any
delay, nondelivery or misdelivery, or loss of or damage to the goods
occurring while the goods are not in the actual custody of the Carrier. .
. . (Emphasis ours.)
(Paragraph 1, Exhibit "1")
2. . . . The responsibility of the Carrier in any capacity shall altogether
cease and the goods shall be considered to be delivered and at their
56
TRANSPO B
own risk and expense in every respect when taken into the custody of
customs or other authorities. The Carrier shall not be required to give
any notification of disposition of the goods. . . . (Emphasis ours.)
(Paragraph 12, Exhibit "1")
3. Any provisions herein to the contrary notwithstanding, goods may be
. . . by Carrier at ship's tackle . . . and delivery beyond ship's tackle shall
been tirely at the option of the Carrier and solely at the expense of the
shipper or consignee.
(Paragraph 22, Exhibit "1")
It therefore appears clear that the carrier does not assume liability for
any loss or damage to the goods once they have been "taken into the
custody of customs or other authorities", or when they have been
delivered at ship's tackle. These stipulations are clear. They have been
adopted precisely to mitigate the responsibility of the carrier considering
the present law on the matter, and we find nothing therein that is
contrary to morals or public policy that may justify their nullification. We
are therefore persuaded to conclude that the carrier is not responsible
for the loss in question, it appearing that the same happened after the
shipment had been delivered to the customs authorities.
Wherefore, the decision appealed from is reversed, without
pronouncement as to costs.
13. Eastern Shipping v. CA, 234 SCRA 79
G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE
COMPANY, INC., respondents.
Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.
Zapa Law Office for private respondent.
VITUG, J.:
The issues, albeit not completely novel, are: (a) whether or not a claim
for damage sustained on a shipment of goods can be a solidary, or joint
and several, liability of the common carrier, the arrastre operator and
the customs broker; (b) whether the payment of legal interest on an
award for loss or damage is to be computed from the time the complaint
is filed or from the date the decision appealed from is rendered; and (c)
whether the applicable rate of interest, referred to above, is twelve
percent (12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals, on
the antecedent and undisputed facts that have led to the controversy
are hereunder reproduced:
This is an action against defendants shipping company, arrastre
operator and broker-forwarder for damages sustained by a shipment
while in defendants' custody, filed by the insurer-subrogee who paid the
consignee the value of such losses/damages.
On December 4, 1981, two fiber drums of riboflavin were shipped from
Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned
by defendant Eastern Shipping Lines under Bill of Lading
No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine
Insurance Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was
discharged unto the custody of defendant Metro Port Service, Inc. The
latter excepted to one drum, said to be in bad order, which damage was
unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation received
the shipment from defendant Metro Port Service, Inc., one drum
opened and without seal (per "Request for Bad Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage Corporation
made deliveries of the shipment to the consignee's warehouse. The
latter excepted to one drum which contained spillages, while the rest of
57
TRANSPO B
the contents was adulterated/fake (per "Bad Order Waybill" No. 10649,
Exh. E).
Plaintiff contended that due to the losses/damage sustained by said
drum, the consignee suffered losses totaling P19,032.95, due to the
fault and negligence of defendants. Claims were presented against
defendants who failed and refused to pay the same (Exhs. H, I, J, K,
L).
As a consequence of the losses sustained, plaintiff was compelled to
pay the consignee P19,032.95 under the aforestated marine insurance
policy, so that it became subrogated to all the rights of action of said
consignee against defendants (per "Form of Subrogation", "Release"
and Philbanking check, Exhs. M, N, and O). (pp. 85-86, Rollo.)
There were, to be sure, other factual issues that confronted both courts.
Here, the appellate court said:
Defendants filed their respective answers, traversing the material
allegations of the complaint contending that: As for defendant Eastern
Shipping it alleged that the shipment was discharged in good order from
the vessel unto the custody of Metro Port Service so that any
damage/losses incurred after the shipment was incurred after the
shipment was turned over to the latter, is no longer its liability (p. 17,
Record); Metroport averred that although subject shipment was
discharged unto its custody, portion of the same was already in bad
order (p. 11, Record); Allied Brokerage alleged that plaintiff has no
cause of action against it, not having negligent or at fault for the
shipment was already in damage and bad order condition when
received by it, but nonetheless, it still exercised extra ordinary care and
diligence in the handling/delivery of the cargo to consignee in the same
condition shipment was received by it.
From the evidence the court found the following:
The issues are:
1. Whether or not the shipment sustained losses/damages;
2. Whether or not these losses/damages were sustained while in
the custody of defendants (in whose respective custody, if
determinable);
3. Whether or not defendant(s) should be held liable for the
losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34; Allied's
pre-Trial Brief, adopting plaintiff's Records, p. 38).
As to the first issue, there can be no doubt that the shipment sustained
losses/damages. The two drums were shipped in good order and
condition, as clearly shown by the Bill of Lading and Commercial
Invoice which do not indicate any damages drum that was shipped
(Exhs. B and C). But when on December 12, 1981 the shipment was
delivered to defendant Metro Port Service, Inc., it excepted to one drum
in bad order.
Correspondingly, as to the second issue, it follows that the
losses/damages were sustained while in the respective and/or
successive custody and possession of defendants carrier (Eastern),
arrastre operator (Metro Port) and broker (Allied Brokerage). This
becomes evident when the Marine Cargo Survey Report (Exh. G), with
its "Additional Survey Notes", are considered. In the latter notes, it is
stated that when the shipment was "landed on vessel" to dock of Pier #
15, South Harbor, Manila on December 12, 1981, it was observed that
"one (1) fiber drum (was) in damaged condition, covered by the vessel's
Agent's Bad Order Tally Sheet No. 86427." The report further states
that when defendant Allied Brokerage withdrew the shipment from
defendant arrastre operator's custody on January 7, 1982, one drum
was found opened without seal, cello bag partly torn but contents intact.
Net unrecovered spillages was
15 kgs. The report went on to state that when the drums reached the
consignee, one drum was found with adulterated/faked contents. It is
obvious, therefore, that these losses/damages occurred before the
shipment reached the consignee while under the successive custodies
of defendants. Under Art. 1737 of the New Civil Code, the common
carrier's duty to observe extraordinary diligence in the vigilance of
goods remains in full force and effect even if the goods are temporarily
unloaded and stored in transit in the warehouse of the carrier at the
place of destination, until the consignee has been advised and has had
reasonable opportunity to remove or dispose of the goods (Art. 1738,
58
TRANSPO B
NCC). Defendant Eastern Shipping's own exhibit, the "Turn-Over
Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states that on
December 12, 1981 one drum was found "open".
and thus held:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby
rendered:
A. Ordering defendants to pay plaintiff, jointly and severally:
1. The amount of P19,032.95, with the present legal interest of
12% per annum from October 1, 1982, the date of filing of this
complaints, until fully paid (the liability of defendant Eastern Shipping,
Inc. shall not exceed US$500 per case or the CIF value of the loss,
whichever is lesser, while the liability of defendant Metro Port Service,
Inc. shall be to the extent of the actual invoice value of each package,
crate box or container in no case to exceed P5,000.00 each, pursuant
to Section 6.01 of the Management Contract);
2. P3,000.00 as attorney's fees, and
3. Costs.
B. Dismissing the counterclaims and crossclaim of
defendant/cross-claimant Allied Brokerage Corporation.
SO ORDERED. (p. 207, Record).
Dissatisfied, defendant's recourse to US.
The appeal is devoid of merit.
After a careful scrutiny of the evidence on record. We find that the
conclusion drawn therefrom is correct. As there is sufficient evidence
that the shipment sustained damage while in the successive
possession of appellants, and therefore they are liable to the appellee,
as subrogee for the amount it paid to the consignee. (pp. 87-89, Rollo.)
The Court of Appeals thus affirmed in toto the judgment of the court
a quo.
In this petition, Eastern Shipping Lines, Inc., the common carrier,
attributes error and grave abuse of discretion on the part of the
appellate court when
I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY
LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS
BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS
GRANTED IN THE QUESTIONED DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM
OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE
DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF
TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE
OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE RATE
OF SIX PERCENT PER ANNUM, PRIVATE RESPONDENT'S CLAIM
BEING INDISPUTABLY UNLIQUIDATED.
The petition is, in part, granted.
In this decision, we have begun by saying that the questions raised by
petitioner carrier are not all that novel. Indeed, we do have a fairly good
number of previous decisions this Court can merely tack to.
The common carrier's duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier
for transportation until delivered to, or until the lapse of a reasonable
time for their acceptance by, the person entitled to receive them (Arts.
1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646;
Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). When the goods
shipped either are lost or arrive in damaged condition, a presumption
arises against the carrier of its failure to observe that diligence, and
there need not be an express finding of negligence to hold it liable (Art.
1735, Civil Code; Philippine National Railways vs. Court of Appeals,
139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA
365). There are, of course, exceptional cases when such presumption
of fault is not observed but these cases, enumerated in Article 1734 1
59
TRANSPO B
of the Civil Code, are exclusive, not one of which can be applied to this
case.
The question of charging both the carrier and the arrastre operator with
the obligation of properly delivering the goods to the consignee has,
too, been passed upon by the Court. In Fireman's Fund Insurance vs.
Metro Port Services (182 SCRA 455), we have explained, in holding
the carrier and the arrastre operator liable in solidum, thus:
The legal relationship between the consignee and the arrastre operator
is akin to that of a depositor and warehouseman (Lua Kian v. Manila
Railroad Co., 19 SCRA 5 [1967]. The relationship between the
consignee and the common carrier is similar to that of the consignee
and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al.,
107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to take
good care of the goods that are in its custody and to deliver them in
good condition to the consignee, such responsibility also devolves upon
the CARRIER. Both the ARRASTRE and the CARRIER are therefore
charged with the obligation to deliver the goods in good condition to the
consignee.
We do not, of course, imply by the above pronouncement that the
arrastre operator and the customs broker are themselves always and
necessarily liable solidarily with the carrier, or vice-versa, nor that
attendant facts in a given case may not vary the rule. The instant
petition has been brought solely by Eastern Shipping Lines, which,
being the carrier and not having been able to rebut the presumption of
fault, is, in any event, to be held liable in this particular case. A factual
finding of both the court a quo and the appellate court, we take note, is
that "there is sufficient evidence that the shipment sustained damage
while in the successive possession of appellants" (the herein petitioner
among them). Accordingly, the liability imposed on Eastern Shipping
Lines, Inc., the sole petitioner in this case, is inevitable regardless of
whether there are others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court that
deserves more than just a passing remark.
Let us first see a chronological recitation of the major rulings of this
Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of
money arising out of short deliveries and pilferage of goods. In this
case, appellee Malayan Insurance (the plaintiff in the lower court)
averred in its complaint that the total amount of its claim for the value
of the undelivered goods amounted to P3,947.20. This demand,
however, was neither established in its totality nor definitely
ascertained. In the stipulation of facts later entered into by the parties,
in lieu of proof, the amount of P1,447.51 was agreed upon. The trial
court rendered judgment ordering the appellants (defendants) Manila
Port Service and Manila Railroad Company to pay appellee Malayan
Insurance the sum of P1,447.51 with legal interest thereon from the
date the complaint was filed on 28 December 1962 until full payment
thereof. The appellants then assailed, inter alia, the award of legal
interest. In sustaining the appellants, this Court ruled:
Interest upon an obligation which calls for the payment of money,
absent a stipulation, is the legal rate. Such interest normally is allowable
from the date of demand, judicial or extrajudicial. The trial court opted
for judicial demand as the starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest
"cannot be recovered upon unliquidated claims or damages, except
when the demand can be established with reasonable certainty." And
as was held by this Court in Rivera vs. Perez, 4 L-6998, February 29,
1956, if the suit were for damages, "unliquidated and not known until
definitely ascertained, assessed and determined by the courts after
proof (Montilla c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco
v. Guzman,
38 Phil. 302)," then, interest "should be from the date of the decision."
(Emphasis supplied)
The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was
for "Recovery of Damages for Injury to Person and Loss of Property."
After trial, the lower court decreed:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs
and third party defendants and against the defendants and third party
plaintiffs as follows:
60
TRANSPO B
Ordering defendants and third party plaintiffs Shell and Michael,
Incorporated to pay jointly and severally the following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum
of P131,084.00 which is the value of the boat F B Pacita III together
with its accessories, fishing gear and equipment minus P80,000.00
which is the value of the insurance recovered and the amount of
P10,000.00 a month as the estimated monthly loss suffered by them as
a result of the fire of May 6, 1969 up to the time they are actually paid
or already the total sum of P370,000.00 as of June 4, 1972 with legal
interest from the filing of the complaint until paid and to pay attorney's
fees of P5,000.00 with costs against defendants and third party
plaintiffs. (Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the amount of
damages awarded but sustained the trial court in adjudging legal
interest from the filing of the complaint until fully paid. When the
appellate court's decision became final, the case was remanded to the
lower court for execution, and this was when the trial court issued its
assailed resolution which applied the 6% interest per annum prescribed
in Article 2209 of the Civil Code. In their petition for review on certiorari,
the petitioners contended that Central Bank Circular
No. 416, providing thus
By virtue of the authority granted to it under Section 1 of Act 2655, as
amended, Monetary Board in its Resolution No. 1622 dated July 29,
1974, has prescribed that the rate of interest for the loan, or
forbearance of any money, goods, or credits and the rate allowed in
judgments, in the absence of express contract as to such rate of
interest, shall be twelve (12%) percent per annum. This Circular shall
take effect immediately. (Emphasis found in the text)
should have, instead, been applied. This Court 6 ruled:
The judgments spoken of and referred to are judgments in litigations
involving loans or forbearance of any money, goods or credits. Any
other kind of monetary judgment which has nothing to do with, nor
involving loans or forbearance of any money, goods or credits does not
fall within the coverage of the said law for it is not within the ambit of
the authority granted to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to be executed
is one rendered in an Action for Damages for injury to persons and loss
of property and does not involve any loan, much less forbearances of
any money, goods or credits. As correctly argued by the private
respondents, the law applicable to the said case is Article 2209 of the
New Civil Code which reads
Art. 2209. If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages, there
being no stipulation to the contrary, shall be the payment of interest
agreed upon, and in the absence of stipulation, the legal interest which
is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v.
Cruz, 7 promulgated on 28 July 1986. The case was for damages
occasioned by an injury to person and loss of property. The trial court
awarded private respondent Pedro Manabat actual and compensatory
damages in the amount of P72,500.00 with legal interest thereon from
the filing of the complaint until fully paid. Relying on the Reformina v.
Tomol case, this Court 8 modified the interest award from 12% to 6%
interest per annum but sustained the time computation thereof, i.e.,
from the filing of the complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action
for the recovery of damages arising from the collapse of a building,
ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the
petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the
legal rate from November 29, 1968, the date of the filing of the
complaint until full payment . . . ." Save from the modification of the
amount granted by the lower court, the Court of Appeals sustained the
trial court's decision. When taken to this Court for review, the case, on
03 October 1986, was decided, thus:
61
TRANSPO B
WHEREFORE, the decision appealed from is hereby MODIFIED and
considering the special and environmental circumstances of this case,
we deem it reasonable to render a decision imposing, as We do hereby
impose, upon the defendant and the third-party defendants (with the
exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association of FIVE
MILLION (P5,000,000.00) Pesos to cover all damages (with the
exception to attorney's fees) occasioned by the loss of the building
(including interest charges and lost rentals) and an additional ONE
HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's
fees, the total sum being payable upon the finality of this decision. Upon
failure to pay on such finality, twelve (12%) per cent interest per annum
shall be imposed upon aforementioned amounts from finality until paid.
Solidary costs against the defendant and third-party defendants
(Except Roman Ozaeta). (Emphasis supplied)
A motion for reconsideration was filed by United Construction,
contending that "the interest of twelve (12%) per cent per annum
imposed on the total amount of the monetary award was in
contravention of law." The Court 10 ruled out the applicability of the
Reformina and Philippine Rabbit Bus Lines cases and, in its resolution
of 15 April 1988, it explained:
There should be no dispute that the imposition of 12% interest pursuant
to Central Bank Circular No. 416 . . . is applicable only in the following:
(1) loans; (2) forbearance of any money, goods or credit; and
(3) rate allowed in judgments (judgments spoken of refer to judgments
involving loans or forbearance of any money, goods or credits.
(Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA 160-161 [1986];
Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is true that in the
instant case, there is neither a loan or a forbearance, but then no
interest is actually imposed provided the sums referred to in the
judgment are paid upon the finality of the judgment. It is delay in the
payment of such final judgment, that will cause the imposition of the
interest.
It will be noted that in the cases already adverted to, the rate of interest
is imposed on the total sum, from the filing of the complaint until paid;
in other words, as part of the judgment for damages. Clearly, they are
not applicable to the instant case. (Emphasis supplied.)
The subsequent case of American Express International, Inc., vs.
Intermediate Appellate Court 11 was a petition for review on certiorari
from the decision, dated 27 February 1985, of the then Intermediate
Appellate Court reducing the amount of moral and exemplary damages
awarded by the trial court, to P240,000.00 and P100,000.00,
respectively, and its resolution, dated 29 April 1985, restoring the
amount of damages awarded by the trial court, i.e., P2,000,000.00 as
moral damages and P400,000.00 as exemplary damages with interest
thereon at 12% per annum from notice of judgment, plus costs of suit.
In a decision of 09 November 1988, this Court, while recognizing the
right of the private respondent to recover damages, held the award,
however, for moral damages by the trial court, later sustained by the
IAC, to be inconceivably large. The Court 12 thus set aside the decision
of the appellate court and rendered a new one, "ordering the petitioner
to pay private respondent the sum of One Hundred Thousand
(P100,000.00) Pesos as moral damages, with
six (6%) percent interest thereon computed from the finality of this
decision until paid. (Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case of
Florendo v. Ruiz 13 which arose from a breach of employment contract.
For having been illegally dismissed, the petitioner was awarded by the
trial court moral and exemplary damages without, however, providing
any legal interest thereon. When the decision was appealed to the
Court of Appeals, the latter held:
WHEREFORE, except as modified hereinabove the decision of the CFI
of Negros Oriental dated October 31, 1972 is affirmed in all respects,
with the modification that defendants-appellants, except defendant-
appellant Merton Munn, are ordered to pay, jointly and severally, the
amounts stated in the dispositive portion of the decision, including the
sum of P1,400.00 in concept of compensatory damages, with interest
at the legal rate from the date of the filing of the complaint until fully paid
(Emphasis supplied.)
The petition for review to this Court was denied. The records were
thereupon transmitted to the trial court, and an entry of judgment was
62
TRANSPO B
made. The writ of execution issued by the trial court directed that only
compensatory damages should earn interest at 6% per annum from the
date of the filing of the complaint. Ascribing grave abuse of discretion
on the part of the trial judge, a petition for certiorari assailed the said
order. This Court said:
. . . , it is to be noted that the Court of Appeals ordered the payment of
interest "at the legal rate" from the time of the filing of the complaint. . .
Said circular [Central Bank Circular No. 416] does not apply to actions
based on a breach of employment contract like the case at bar.
(Emphasis supplied)
The Court reiterated that the 6% interest per annum on the damages
should be computed from the time the complaint was filed until the
amount is fully paid.
Quite recently, the Court had another occasion to rule on the matter.
National Power Corporation vs. Angas, 14 decided on 08 May 1992,
involved the expropriation of certain parcels of land. After conducting a
hearing on the complaints for eminent domain, the trial court ordered
the petitioner to pay the private respondents certain sums of money as
just compensation for their lands so expropriated "with legal interest
thereon . . . until fully paid." Again, in applying the 6% legal interest per
annum under the Civil Code, the Court 15 declared:
. . . , (T)he transaction involved is clearly not a loan or forbearance of
money, goods or credits but expropriation of certain parcels of land for
a public purpose, the payment of which is without stipulation regarding
interest, and the interest adjudged by the trial court is in the nature of
indemnity for damages. The legal interest required to be paid on the
amount of just compensation for the properties expropriated is
manifestly in the form of indemnity for damages for the delay in the
payment thereof. Therefore, since the kind of interest involved in the
joint judgment of the lower court sought to be enforced in this case is
interest by way of damages, and not by way of earnings from loans,
etc. Art. 2209 of the Civil Code shall apply.
Concededly, there have been seeming variances in the above holdings.
The cases can perhaps be classified into two groups according to the
similarity of the issues involved and the corresponding rulings rendered
by the court. The "first group" would consist of the cases of Reformina
v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz (1986), Florendo
v. Ruiz (1989)
and National Power Corporation v. Angas (1992). In the "second group"
would be Malayan Insurance Company v. Manila Port Service (1969),
Nakpil and Sons v. Court of Appeals (1988), and American Express
International v. Intermediate Appellate Court (1988).
In the "first group", the basic issue focuses on the application of either
the 6% (under the Civil Code) or 12% (under the Central Bank Circular)
interest per annum. It is easily discernible in these cases that there has
been a consistent holding that the Central Bank Circular imposing the
12% interest per annum applies only to loans or forbearance 16 of
money, goods or credits, as well as to judgments involving such loan or
forbearance of money, goods or credits, and that the 6% interest under
the Civil Code governs when the transaction involves the payment of
indemnities in the concept of damage arising from the breach or a delay
in the performance of obligations in general. Observe, too, that in these
cases, a common time frame in the computation of the 6% interest per
annum has been applied, i.e., from the time the complaint is filed until
the adjudged amount is fully paid.
The "second group", did not alter the pronounced rule on the application
of the 6% or 12% interest per annum, 17 depending on whether or not
the amount involved is a loan or forbearance, on the one hand, or one
of indemnity for damage, on the other hand. Unlike, however, the "first
group" which remained consistent in holding that the running of the
legal interest should be from the time of the filing of the complaint until
fully paid, the "second group" varied on the commencement of the
running of the legal interest.
Malayan held that the amount awarded should bear legal interest from
the date of the decision of the court a quo, explaining that "if the suit
were for damages, 'unliquidated and not known until definitely
ascertained, assessed and determined by the courts after proof,' then,
interest 'should be from the date of the decision.'" American Express
International v. IAC, introduced a different time frame for reckoning the
6% interest by ordering it to be "computed from the finality of (the)
decision until paid." The Nakpil and Sons case ruled that 12% interest
63
TRANSPO B
per annum should be imposed from the finality of the decision until the
judgment amount is paid.
The ostensible discord is not difficult to explain. The factual
circumstances may have called for different applications, guided by the
rule that the courts are vested with discretion, depending on the equities
of each case, on the award of interest. Nonetheless, it may not be
unwise, by way of clarification and reconciliation, to suggest the
following rules of thumb for future guidance.
I. When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts 18 is breached, the contravenor
can be held liable for damages. 19 The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the measure of
recoverable damages. 20
II. With regard particularly to an award of interest in the concept of
actual and compensatory damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment
of a sum of money, i.e., a loan or forbearance of money, the interest
due should be that which may have been stipulated in writing. 21
Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. 22 In the absence of stipulation, the rate
of interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions
of Article 1169 23 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court 24 at the rate of 6% per
annum. 25 No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be established
with reasonable certainty. 26 Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169,
Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to
run only from the date the judgment of the court is made (at which time
the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall,
in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.
WHEREFORE, the petition is partly GRANTED. The appealed decision
is AFFIRMED with the MODIFICATION that the legal interest to be paid
is SIX PERCENT (6%) on the amount due computed from the decision,
dated
03 February 1988, of the court a quo. A TWELVE PERCENT (12%)
interest, in lieu of SIX PERCENT (6%), shall be imposed on such
amount upon finality of this decision until the payment thereof.
SO ORDERED.
14. Delsan Transport Lines Inc. v. American Home Assurance Corp.,
498 SCRA 603
G.R. No. 149019 August 15, 2006
DELSAN TRANSPORT LINES, INC., Petitioner,
vs.
AMERICAN HOME ASSURANCE CORPORATION, Respondent.
DECISION
GARCIA, J.:
By this petition for review on certiorari under Rule 45 of the Rules of
Court, petitioner Delsan Transport Lines, Inc. (Delsan hereafter) assails
and seeks to set aside the Decision, 1 dated July 16, 2001, of the Court
of Appeals (CA) in CA-G.R. CV No. 40951 affirming an earlier decision
of the Regional Trial Court (RTC) of Manila, Branch IX, in two separate
complaints for damages docketed as Civil Case No. 85-29357 and Civil
Case No. 85-30559.
64
TRANSPO B
The facts:
Delsan is a domestic corporation which owns and operates the vessel
MT Larusan. On the other hand, respondent American Home
Assurance Corporation (AHAC for brevity) is a foreign insurance
company duly licensed to do business in the Philippines through its
agent, the American-International Underwriters, Inc. (Phils.). It is
engaged, among others, in insuring cargoes for transportation within
the Philippines.
On August 5, 1984, Delsan received on board MT Larusan a shipment
consisting of 1,986.627 k/l Automotive Diesel Oil (diesel oil) at the
Bataan Refinery Corporation for transportation and delivery to the bulk
depot in Bacolod City of Caltex Phils., Inc. (Caltex), pursuant to a
Contract of Afreightment. The shipment was insured by respondent
AHAC against all risks under Inland Floater Policy No. AH-IF64-
1011549P and Marine Risk Note No. 34-5093-6.
On August 7, 1984, the shipment arrived in Bacolod City. Immediately
thereafter, unloading operations commenced. The discharging of the
diesel oil started at about 1:30 PM of the same day. However, at about
10:30 PM, the discharging had to be stopped on account of the
discovery that the port bow mooring of the vessel was intentionally cut
or stolen by unknown persons. Because there was nothing holding it,
the vessel drifted westward, dragged and stretched the flexible rubber
hose attached to the riser, broke the elbow into pieces, severed
completely the rubber hose connected to the tanker from the main
delivery line at sea bed level and ultimately caused the diesel oil to spill
into the sea. To avoid further spillage, the vessels crew tried water
flushing to clear the line of the diesel oil but to no avail. In the meantime,
the shore tender, who was waiting for the completion of the water
flushing, was surprised when the tanker signaled a "red light" which
meant stop pumping. Unaware of what happened, the shore tender,
thinking that the vessel would, at any time, resume pumping, did not
shut the storage tank gate valve. As all the gate valves remained open,
the diesel oil that was earlier discharged from the vessel into the shore
tank backflowed. Due to non-availability of a pump boat, the vessel
could not send somebody ashore to inform the people at the depot
about what happened. After almost an hour, a gauger and an assistant
surveyor from the Caltexs Bulk Depot Office boarded the vessel. It was
only then that they found out what had happened. Thereafter, the duo
immediately went ashore to see to it that the shore tank gate valve was
closed. The loss of diesel oil due to spillage was placed at 113.788 k/l
while some 435,081 k/l thereof backflowed from the shore tank.
As a result of spillage and backflow of diesel oil, Caltex sought recovery
of the loss from Delsan, but the latter refused to pay. As insurer, AHAC
paid Caltex the sum of P479,262.57 for spillage, pursuant to Marine
Risk Note No. 34-5093-6, and P1,939,575.37 for backflow of the diesel
oil pursuant to Inland Floater Policy No. AH-1F64-1011549P.
On February 19, 1985, AHAC, as Caltexs subrogee, instituted Civil
Case No. 85-29357 against Delsan before the Manila RTC, Branch 9,
for loss caused by the spillage. It likewise prayed that it be indemnified
for damages suffered in the amount of P652,432.57 plus legal interest
thereon.
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC instituted
Civil Case No. 85-30559 against Delsan for the loss caused by the
backflow. It likewise prayed that it be awarded the amount of
P1,939,575.37 for damages and reasonable attorneys fees. As
counterclaim in both cases, AHAC prayed for attorneys fees in the
amount of P200,000.00 and P500.00 for every court appearance.
Since the cause of action in both cases arose out of the same incident
and involved the same issues, the two were consolidated and assigned
to Branch 9 of the court.
On August 31, 1989, the trial court rendered its decision 2 in favor of
AHAC holding Delsan liable for the loss of the cargo for its negligence
in its duty as a common carrier. Dispositively, the decision reads:
WHEREFORE, judgment is hereby rendered:
A). In Civil Case No. 85-30559:
(1) Ordering the defendant (petitioner Delsan) to pay plaintiff
(respondent AHAC) the sum of P1,939,575.37 with interest thereon at
the legal rate from November 21, 1984 until fully paid and satisfied; and
65
TRANSPO B
(2) Ordering defendant to pay plaintiff the sum of P10,000.00 as and
for attorneys fees.
For lack of merit, the counterclaim is hereby dismissed.
B). In Civil Case No. 85-29357:
(1) Ordering defendant to pay plaintiff the sum of P479,262.57 with
interest thereon at the legal rate from February 6, 1985 until fully paid
and satisfied;
(2) Ordering defendant to pay plaintiff the sum of P5,000.00 as and for
attorneys fees.
For lack of merit, the counterclaim is hereby dismissed.
Costs against the defendant.
SO ORDERED.
In time, Delsan appealed to the CA whereat its recourse was docketed
as CA-G.R. CV No. 40951.
In the herein challenged decision, 3 the CA affirmed the findings of the
trial court. In so ruling, the CA declared that Delsan failed to exercise
the extraordinary diligence of a good father of a family in the handling
of its cargo. Applying Article 1736 4 of the Civil Code, the CA ruled that
since the discharging of the diesel oil into Caltex bulk depot had not
been completed at the time the losses occurred, there was no reason
to imply that there was actual delivery of the cargo to Caltex, the
consignee. We quote the fallo of the CA decision:
WHEREFORE, premises considered, the appealed Decision of the
Regional Trial Court of Manila, Branch 09 in Civil Case Nos. 85-29357
and 85-30559 is hereby AFFIRMED with a modification that attorneys
fees awarded in Civil Case Nos. 85-29357 and 85-30559 are hereby
DELETED.
SO ORDERED.
Delsan is now before the Court raising substantially the same issues
proffered before the CA.
Principally, Delsan insists that the CA committed reversible error in
ruling that Article 1734 of the Civil Code cannot exculpate it from liability
for the loss of the subject cargo and in not applying the rule on
contributory negligence against Caltex, the shipper-owner of the cargo,
and in not taking into consideration the fact that the loss due to backflow
occurred when the diesel oil was already completely delivered to
Caltex.
We are not persuaded.
In resolving this appeal, the Court reiterates the oft-stated doctrine that
factual findings of the CA, affirmatory of those of the trial court, are
binding on the Court unless there is a clear showing that such findings
are tainted with arbitrariness, capriciousness or palpable error. 5
Delsan would have the Court absolve it from liability for the loss of its
cargo on two grounds. First, the loss through spillage was partly due to
the contributory negligence of Caltex; and Second, the loss through
backflow should not be borne by Delsan because it was already
delivered to Caltexs shore tank.
Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. They are presumed to
have been at fault or to have acted negligently if the goods are lost,
destroyed or deteriorated. 6 To overcome the presumption of
negligence in case of loss, destruction or deterioration of the goods, the
common carrier must prove that it exercised extraordinary diligence.
There are, however, exceptions to this rule. Article 1734 of the Civil
Code enumerates the instances when the presumption of negligence
does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
1) Flood storm, earthquake, lightning, or other natural disaster or
calamity;
66
TRANSPO B
2) Act of the public enemy in war, whether international or civil;
3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the
containers;
5) Order or act of competent public authority.
Both the trial court and the CA uniformly ruled that Delsan failed to
prove its claim that there was a contributory negligence on the part of
the owner of the goods Caltex. We see no reason to depart therefrom.
As aptly pointed out by the CA, it had been established that the
proximate cause of the spillage and backflow of the diesel oil was due
to the severance of the port bow mooring line of the vessel and the
failure of the shore tender to close the storage tank gate valve even as
a check on the drain cock showed that there was still a product on the
pipeline. To the two courts below, the actuation of the gauger and the
escort surveyor, both personnel from the Caltex Bulk Depot, negates
the allegation that Caltex was remiss in its duties. As we see it, the crew
of the vessel should have promptly informed the shore tender that the
port mooring line was cut off. However, Delsan did not do so on the
lame excuse that there was no available banca. As it is, Delsans
personnel signaled a "red light" which was not a sufficient warning
because such signal only meant that the pumping of diesel oil had been
finished. Neither did the blowing of whistle suffice considering the
distance of more than 2 kilometers between the vessel and the Caltex
Bulk Depot, aside from the fact that it was not the agreed signal. Had
the gauger and the escort surveyor from Caltex Bulk Depot not gone
aboard the vessel to make inquiries, the shore tender would have not
known what really happened. The crew of the vessel should have
exerted utmost effort to immediately inform the shore tender that the
port bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove
that the loss was caused by one of the excepted causes if it were to
seek exemption from responsibility. 7 Unfortunately, it miserably failed
to discharge this burden by the required quantum of proof.
Delsans argument that it should not be held liable for the loss of diesel
oil due to backflow because the same had already been actually and
legally delivered to Caltex at the time it entered the shore tank holds no
water. It had been settled that the subject cargo was still in the custody
of Delsan because the discharging thereof has not yet been finished
when the backflow occurred. Since the discharging of the cargo into the
depot has not yet been completed at the time of the spillage when the
backflow occurred, there is no reason to imply that there was actual
delivery of the cargo to the consignee. Delsan is straining the issue by
insisting that when the diesel oil entered into the tank of Caltex on
shore, there was legally, at that moment, a complete delivery thereof to
Caltex. To be sure, the extraordinary responsibility of 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 a person who has the right to receive them. 8 The
discharging of oil products to Caltex Bulk Depot has not yet been
finished, Delsan still has the duty to guard and to preserve the cargo.
The carrier still has in it the responsibility to guard and preserve the
goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of
each case. 9 The mere proof of delivery of goods in good order to the
carrier, and their arrival in the place of destination in bad order, make
out a prima facie case against the carrier, so that if no explanation is
given as to how the injury occurred, the carrier must be held
responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its
liability. 10
All told, Delsan, being a common carrier, should have exercised
extraordinary diligence in the performance of its duties. Consequently,
it is obliged to prove that the damage to its cargo was caused by one
of the excepted causes if it were to seek exemption from responsibility.
11 Having failed to do so, Delsan must bear the consequences.
67
TRANSPO B
WHEREFORE, petition is DENIED and the assailed decision of the CA
is AFFIRMED in toto.
Cost against petitioner.
SO ORDERED.
15. Heacock v. Macondray, 42 Phil 90
G.R. No. L-16598 October 3, 1921
H. E. HEACOCK COMPANY, plaintiff-appellant,
vs.
MACONDRAY & COMPANY, INC., defendant-appellant.
Fisher & DeWitt for plaintiff-appellant.
Wolfson, Wolfson & Schwarzkopf for defendant-appellant.
JOHNSON, J.:
This action was commenced in the Court of First Instance of the City of
Manila to recover the sum of P240 together with interest thereon. The
facts are stipulated by the parties, and are, briefly, as follows:
(1) On or about the 5th day of June, 1919, the plaintiff caused to be
delivered on board of steamship Bolton Castle, then in the harbor of New
York, four cases of merchandise one of which contained twelve (12) 8-
day Edmond clocks properly boxed and marked for transportation to
Manila, and paid freight on said clocks from New York to Manila in
advance. The said steampship arrived in the port of Manila on or about
the 10th day of September, 1919, consigned to the defendant herein as
agent and representative of said vessel in said port. Neither the master
of said vessel nor the defendant herein, as its agent, delivered to the
plaintiff the aforesaid twelve 8-day Edmond clocks, although demand
was made upon them for their delivery.
(2) The invoice value of the said twelve 8-day Edmond clocks in the city
of New York was P22 and the market value of the same in the City of
Manila at the time when they should have been delivered to the plaintiff
was P420.
(3) The bill of lading issued and delivered to the plaintiff by the master of
the said steamship Bolton Castle contained, among others, the following
clauses:
1. It is mutually agreed that the value of the goods receipted for above
does not exceed $500 per freight ton, or, in proportion for any part of a
ton, unless the value be expressly stated herein and ad valorem freight
paid thereon.
9. Also, that in the event of claims for short delivery of, or damage to,
cargo being made, the carrier shall not be liable for more than the net
invoice price plus freight and insurance less all charges saved, and any
loss or damage for which the carrier may be liable shall be adjusted pro
rata on the said basis.
(4) The case containing the aforesaid twelve 8-day Edmond clocks
measured 3 cubic feet, and the freight ton value thereof was $1,480, U.
S. currency.
(5) No greater value than $500, U. S. currency, per freight ton was
declared by the plaintiff on the aforesaid clocks, and no ad valorem
freight was paid thereon.
(6) On or about October 9, 1919, the defendant tendered to the plaintiff
P76.36, the proportionate freight ton value of the aforesaid twelve 8-day
Edmond clocks, in payment of plaintiff's claim, which tender plaintiff
rejected.
The lower court, in accordance with clause 9 of the bill of lading above
quoted, rendered judgment in favor of the plaintiff against the defendant
for the sum of P226.02, this being the invoice value of the clocks in
question plus the freight and insurance thereon, with legal interest
thereon from November 20, 1919, the date of the complaint, together
with costs. From that judgment both parties appealed to this court.
The plaintiff-appellant insists that it is entitled to recover from the
defendant the market value of the clocks in question, to wit: the sum of
68
 TRANSPO B
P420. The defendant-appellant, on the other hand, contends that, in
accordance with clause 1 of the bill of lading, the plaintiff is entitled to
recover only the sum of P76.36, the proportionate freight ton value of
the said clocks. The claim of the plaintiff is based upon the argument
that the two clause in the bill of lading above quoted, limiting the liability
of the carrier, are contrary to public order and, therefore, null and void.
The defendant, on the other hand, contends that both of said clauses
are valid, and the clause 1 should have been applied by the lower court
instead of clause 9.
I. The appeal of the plaintiff presents this question; May a
common carrier, by stipulations inserted in the bill of lading, limit its
liability for the loss of or damage to the cargo to an agreed valuation of
the latter? 1awph!l.net
Three kinds of stipulations have often been made in a bill of lading. The
first is one exempting the carrier from any and all liability for loss or
damage occasioned by its own negligence. The second is one providing
for an unqualified limitation of such liability to an agreed valuation. And
the third is one limiting the liability of the carrier to an agreed valuation
unless the shipper declares a higher value and pays a higher rate of
freight. According to an almost uniform weight of authority, the first and
second kinds of stipulations are invalid as being contrary to public policy,
but the third is valid and enforceable.
The authorities relied upon by the plaintiff-appellant (the Harter Act [Act
of Congress of February 13, 1893]: Louisville Ry. Co. vs. Wynn, 88
Tenn., 320; and Galt vs. Adams Express Co., 4 McAr., 124; 48 Am. Rep.,
742) support the proposition that the first and second stipulations in a
bill of lading are invalid which either exempt the carrier from liability for
loss or damage occasioned by its negligence, or provide for an
unqualified limitation of such liability to an agreed valuation.
A reading of clauses 1 and 9 of the bill of lading here in question,
however, clearly shows that the present case falls within the third
stipulation, to wit: That a clause in a bill of lading limiting the liability of
the carrier to a certain amount unless the shipper declares a higher value
and pays a higher rate of freight, is valid and enforceable. This
proposition is supported by a uniform lien of decisions of the Supreme
Court of the United States rendered both prior and subsequent to the
passage of the Harter Act, from the case of Hart vs. Pennsylvania R. R.
Co. (decided Nov. 24, 1884; 112 U. S., 331), to the case of the Union
Pacific Ry. Co. vs. Burke (decided Feb. 28, 1921, Advance Opinions,
1920-1921, p. 318).
In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that
"where a contract of carriage, signed by the shipper, is fairly made with
a railroad company, agreeing on a valuation of the property carried, with
the rate of freight based on the condition that the carrier assumes liability
only to the extent of the agreed valuation, even in case of loss or damage
by the negligence of the carrier, the contract will be upheld as proper
and lawful mode of securing a due proportion between the amount for
which the carrier may be responsible and the freight he receives, and
protecting himself against extravagant and fanciful valuations."
In the case of Union Pacific Railway Co. vs. Burke, supra, the court said:
"In many cases, from the decision in Hart vs. Pennsylvania R. R. Co.
(112 U. S. 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151, decided in 1884),
to Boston and M. R. Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38
Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been
declared to be the settled Federal law that if a common carrier gives to
a shipper the choice of two rates, the lower of the conditioned upon his
agreeing to a stipulated valuation of his property in case of loss, even by
the carrier's negligence, if the shipper makes such a choice,
understandingly and freely, and names his valuation, he cannot
thereafter recover more than the value which he thus places upon his
property. As a matter of legal distinction, estoppel is made the basis of
this ruling, that, having accepted the benefit of the lower rate, in
common honesty the shipper may not repudiate the conditions on which
it was obtained, but the rule and the effect of it are clearly
established."
The syllabus of the same case reads as follows: "A carrier may not, by
a valuation agreement with a shipper, limit its liability in case of the loss
by negligence of an interstate shipment to less than the real value
thereof, unless the shipper is given a choice of rates, based on
valuation."
A limitation of liability based upon an agreed value to obtain a lower rate
does not conflict with any sound principle of public policy; and it is not
69
TRANSPO B
conformable to plain principles of justice that a shipper may understate
value in order to reduce the rate and then recover a larger value in case
of loss. (Adams Express Co. vs. Croninger 226 U. S. 491, 492.) See also
Reid vs. Farbo (130 C. C. A., 285); Jennings vs. Smith (45 C. C. A., 249);
George N. Pierce Co. vs. Wells, Fargo and Co. (227 U. S., 278); Wells,
Fargo & Co. vs. Neiman-Marcus Co. (227 U. S., 469).
It seems clear from the foregoing authorities that the clauses (1 and 9)
of the bill of lading here in question are not contrary to public order.
Article 1255 of the Civil Code provides that "the contracting parties may
establish any agreements, terms and conditions they may deem
advisable, provided they are not contrary to law, morals or public order."
Said clauses of the bill of lading are, therefore, valid and binding upon
the parties thereto.
II. The question presented by the appeal of the defendant is
whether clause 1 or clause 9 of the bill of lading here in question is to be
adopted as the measure of defendant's liability. Clause 1 provides as
follows:
1. It is mutually agreed that the value of the goods receipted for
above does not exceed $500 per freight ton, or, in proportion for any part
of a ton, unless the value be expressly stated herein and ad valorem
freight paid thereon. Clause 9 provides:
9. Also, that in the even of claims for short delivery of, or damage
to, cargo being made, the carrier shall not be liable for more than the net
invoice price plus freight and insurance less all charges saved, and any
loss or damage for which the carrier may be liable shall be adjusted pro
rata on the said basis.
The defendant-appellant contends that these two clauses, if construed
together, mean that the shipper and the carrier stipulate and agree that
the value of the goods receipted for does not exceed $500 per freight
ton, but should the invoice value of the goods be less than $500 per
freight ton, then the invoice value governs; that since in this case the
invoice value is more than $500 per freight ton, the latter valuation
should be adopted and that according to that valuation, the proportionate
value of the clocks in question is only P76.36 which the defendant is
ready and willing to pay to the plaintiff.
It will be noted, however, that whereas clause 1 contains only an implied
undertaking to settle in case of loss on the basis of not exceeding $500
per freight ton, clause 9 contains an express undertaking to settle on the
basis of the net invoice price plus freight and insurance less all charges
saved. "Any loss or damage for which the carrier may be liable shall be
adjusted pro rata on the said basis," clause 9 expressly provides. It
seems to us that there is an irreconcilable conflict between the two
clauses with regard to the measure of defendant's liability. It is difficult
to reconcile them without doing violence to the language used and
reading exceptions and conditions into the undertaking contained in
clause 9 that are not there. This being the case, the bill of lading in
question should be interpreted against the defendant carrier, which drew
said contract. "A written contract should, in case of doubt, be interpreted
against the party who has drawn the contract." (6 R. C. L. 854.) It is a
well-known principle of construction that ambiguity or uncertainty in an
agreement must be construed most strongly against the party causing
it. (6 R. C. L., 855.) These rules as applicable to contracts contained in
bills of lading. "In construing a bill of lading given by the carrier for the
safe transportation and delivery of goods shipped by a consignor, the
contract will be construed most strongly against the carrier, and
favorably to the consignor, in case of doubt in any matter of
construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am.
St. Rep., 119.)
It follows from all of the foregoing that the judgment appealed from
should be affirmed, without any finding as to costs. So ordered.
16. Shewaram v. PAL, 17 SCRA 606
G.R. No. L-20099 July 7, 1966
PARMANAND SHEWARAM, plaintiff and appellee,
vs.
PHILIPPINE AIR LINES, INC., defendant and appellant.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant and
appellant.
Climaco and Associates for plaintiff and appellee.
70
TRANSPO B
ZALDIVAR, J.:
Before the municipal court of Zamboanga City, plaintiff-appellee
Parmanand Shewaram instituted an action to recover damages
suffered by him due to the alleged failure of defendant-appellant
Philippines Air Lines, Inc. to observe extraordinary diligence in the
vigilance and carriage of his luggage. After trial the municipal court of
Zamboanga City rendered judgment ordering the appellant to pay
appellee P373.00 as actual damages, P100.00 as exemplary damages,
P150.00 as attorney's fees, and the costs of the action.
Appellant Philippine Air Lines appealed to the Court of First Instance of
Zamboanga City. After hearing the Court of First Instance of
Zamboanga City modified the judgment of the inferior court by ordering
the appellant to pay the appellee only the sum of P373.00 as actual
damages, with legal interest from May 6, 1960 and the sum of P150.00
as attorney's fees, eliminating the award of exemplary damages.
From the decision of the Court of First Instance of Zamboanga City,
appellant appeals to this Court on a question of law, assigning two
errors allegedly committed by the lower court a quo, to wit:
1. The lower court erred in not holding that plaintiff-appellee was bound
by the provisions of the tariff regulations filed by defendant-appellant
with the civil aeronautics board and the conditions of carriage printed
at the back of the plane ticket stub.
2. The lower court erred in not dismissing this case or limiting the liability
of the defendant-appellant to P100.00.
The facts of this case, as found by the trial court, quoted from the
decision appealed from, are as follows:
That Parmanand Shewaram, the plaintiff herein, was on November 23,
1959, a paying passenger with ticket No. 4-30976, on defendant's
aircraft flight No. 976/910 from Zamboanga City bound for Manila; that
defendant is a common carrier engaged in air line transportation in the
Philippines, offering its services to the public to carry and transport
passengers and cargoes from and to different points in the Philippines;
that on the above-mentioned date of November 23, 1959, he checked
in three (3) pieces of baggages a suitcase and two (2) other pieces;
that the suitcase was mistagged by defendant's personnel in
Zamboanga City, as I.G.N. (for Iligan) with claim check No. B-3883,
instead of MNL (for Manila). When plaintiff Parmanand Shewaram
arrived in Manila on the date of November 23, 1959, his suitcase did
not arrive with his flight because it was sent to Iligan. So, he made a
claim with defendant's personnel in Manila airport and another suitcase
similar to his own which was the only baggage left for that flight, the rest
having been claimed and released to the other passengers of said
flight, was given to the plaintiff for him to take delivery but he did not
and refused to take delivery of the same on the ground that it was not
his, alleging that all his clothes were white and the National transistor 7
and a Rollflex camera were not found inside the suitcase, and
moreover, it contained a pistol which he did not have nor placed inside
his suitcase; that after inquiries made by defendant's personnel in
Manila from different airports where the suitcase in question must have
been sent, it was found to have reached Iligan and the station agent of
the PAL in Iligan caused the same to be sent to Manila for delivery to
Mr. Shewaram and which suitcase belonging to the plaintiff herein
arrived in Manila airport on November 24, 1959; that it was also found
out that the suitcase shown to and given to the plaintiff for delivery
which he refused to take delivery belonged to a certain Del Rosario who
was bound for Iligan in the same flight with Mr. Shewaram; that when
the plaintiff's suitcase arrived in Manila as stated above on November
24, 1959, he was informed by Mr. Tomas Blanco, Jr., the acting station
agent of the Manila airport of the arrival of his suitcase but of course
minus his Transistor Radio 7 and the Rollflex Camera; that Shewaram
made demand for these two (2) items or for the value thereof but the
same was not complied with by defendant.
xxx xxx xxx
It is admitted by defendant that there was mistake in tagging the
suitcase of plaintiff as IGN. The tampering of the suitcase is more
apparent when on November 24, 1959, when the suitcase arrived in
Manila, defendant's personnel could open the same in spite of the fact
that plaintiff had it under key when he delivered the suitcase to
defendant's personnel in Zamboanga City. Moreover, it was
established during the hearing that there was space in the suitcase
where the two items in question could have been placed. It was also
71
TRANSPO B
shown that as early as November 24, 1959, when plaintiff was notified
by phone of the arrival of the suitcase, plaintiff asked that check of the
things inside his suitcase be made and defendant admitted that the two
items could not be found inside the suitcase. There was no evidence
on record sufficient to show that plaintiff's suitcase was never opened
during the time it was placed in defendant's possession and prior to its
recovery by the plaintiff. However, defendant had presented evidence
that it had authority to open passengers' baggage to verify and find its
ownership or identity. Exhibit "1" of the defendant would show that the
baggage that was offered to plaintiff as his own was opened and the
plaintiff denied ownership of the contents of the baggage. This proven
fact that baggage may and could be opened without the necessary
authorization and presence of its owner, applied too, to the suitcase of
plaintiff which was mis-sent to Iligan City because of mistagging. The
possibility of what happened in the baggage of Mr. Del Rosario at the
Manila Airport in his absence could have also happened to plaintiffs
suitcase at Iligan City in the absence of plaintiff. Hence, the Court
believes that these two items were really in plaintiff's suitcase and
defendant should be held liable for the same by virtue of its contract of
carriage.
It is clear from the above-quoted portions of the decision of the trial
court that said court had found that the suitcase of the appellee was
tampered, and the transistor radio and the camera contained therein
were lost, and that the loss of those articles was due to the negligence
of the employees of the appellant. The evidence shows that the
transistor radio cost P197.00 and the camera cost P176.00, so the total
value of the two articles was P373.00.
There is no question that the appellant is a common carrier.1 As such
common carrier the appellant, from the nature of its business and for
reasons of public policy, is bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers
transported by it according to the circumstances of each case. 2 It
having been shown that the loss of the transistor radio and the camera
of the appellee, costing P373.00, was due to the negligence of the
employees of the appellant, it is clear that the appellant should be held
liable for the payment of said loss.3
It is, however, contended by the appellant that its liability should be
limited to the amount stated in the conditions of carriage printed at the
back of the plane ticket stub which was issued to the appellee, which
conditions are embodied in Domestic Tariff Regulations No. 2 which
was filed with the Civil Aeronautics Board. One of those conditions,
which is pertinent to the issue raised by the appellant in this case
provides as follows:
The liability, if any, for loss or damage to checked baggage or for delay
in the delivery thereof is limited to its value and, unless the passenger
declares in advance a higher valuation and pay an additional charge
therefor, the value shall be conclusively deemed not to exceed P100.00
for each ticket.
The appellant maintains that in view of the failure of the appellee to
declare a higher value for his luggage, and pay the freight on the basis
of said declared value when he checked such luggage at the
Zamboanga City airport, pursuant to the abovequoted condition,
appellee can not demand payment from the appellant of an amount in
excess of P100.00.
The law that may be invoked, in this connection is Article 1750 of the
New Civil Code which provides as follows:
A contract fixing the sum that may be recovered by the owner or shipper
for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and
freely agreed upon.
In accordance with the above-quoted provision of Article 1750 of the
New Civil Code, the pecuniary liability of a common carrier may, by
contract, be limited to a fixed amount. It is required, however, that the
contract must be "reasonable and just under the circumstances and has
been fairly and freely agreed upon."
The requirements provided in Article 1750 of the New Civil Code must
be complied with before a common carrier can claim a limitation of its
pecuniary liability in case of loss, destruction or deterioration of the
goods it has undertaken to transport. In the case before us We believe
that the requirements of said article have not been met. It can not be
72
TRANSPO B

said that the appellee had actually entered into a contract with the
appellant, embodying the conditions as printed at the back of the ticket
stub that was issued by the appellant to the appellee. The fact that
those conditions are printed at the back of the ticket stub in letters so
small that they are hard to read would not warrant the presumption that
the appellee was aware of those conditions such that he had "fairly and
freely agreed" to those conditions. The trial court has categorically
stated in its decision that the "Defendant admits that passengers do not
sign the ticket, much less did plaintiff herein sign his ticket when he
made the flight on November 23, 1959." We hold, therefore, that the
appellee is not, and can not be, bound by the conditions of carriage
found at the back of the ticket stub issued to him when he made the
flight on appellant's plane on November 23, 1959.
The liability of the appellant in the present case should be governed by
the provisions of Articles 1734 and 1735 of the New Civil Code, which
We quote as follows:
ART. 1734. Common carries are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
It having been clearly found by the trial court that the transistor radio
and the camera of the appellee were lost as a result of the negligence
of the appellant as a common carrier, the liability of the appellant is
clear it must pay the appellee the value of those two articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial
court in support of its decision, this Court had laid down the rule that
the carrier can not limit its liability for injury to or loss of goods shipped
where such injury or loss was caused by its own negligence.
Corpus Juris, volume 10, p. 154, says:
"Par. 194, 6. Reasonableness of Limitations. The validity of
stipulations limiting the carrier's liability is to be determined by their
reasonableness and their conformity to the sound public policy, in
accordance with which the obligations of the carrier to the public are
settled. It cannot lawfully stipulate for exemption from liability, unless
such exemption is just and reasonable, and unless the contract is freely
and fairly made. No contractual limitation is reasonable which is
subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible. a. Negligence
(1) Rule in America (a) In Absence of Organic or Statutory
Provisions Regulating Subject aa. Majority Rule. In the absence
of statute, it is settled by the weight of authority in the United States,
that whatever limitations against its common-law liability are
permissible to a carrier, it cannot limit its liability for injury to or loss of
goods shipped, where such injury or loss is caused by its own
negligence. This is the common law doctrine and it makes no difference
that there is no statutory prohibition against contracts of this character.

(5) Order or act of competent public authority.1wph1.t
ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4
and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.
"Par. 196. bb. Considerations on which Rule Based. The rule, it is
said, rests on considerations of public policy. The undertaking is to
carry the goods, and to relieve the shipper from all liability for loss or
damage arising from negligence in performing its contract is to ignore
the contract itself. The natural effect of a limitation of liability against
negligence is to induce want of care on the part of the carrier in the
performance of its duty. The shipper and the common carrier are not
on equal terms; the shipper must send his freight by the common
carrier, or not at all; he is therefore entirely at the mercy of the carrier
73
TRANSPO B
unless protected by the higher power of the law against being forced
into contracts limiting the carrier's liability. Such contracts are wanting
in the element of voluntary assent.
"Par. 197. cc. Application and Extent of Rule (aa) Negligence of
Servants. The rule prohibiting limitation of liability for negligence is
often stated as a prohibition of any contract relieving the carrier from
loss or damage caused by its own negligence or misfeasance, or that
of its servants; and it has been specifically decided in many cases that
no contract limitation will relieve the carrier from responsibility for the
negligence, unskillfulness, or carelessness of its employer." (Cited in
Ysmael and Co. vs. Barreto, 51 Phil. 90, 98, 99).
In view of the foregoing, the decision appealed from is affirmed, with
costs against the appellant.
17. Ong Yiu v. Ca, 91 SCRA 223
G.R. No. L-40597 June 29, 1979
AGUSTINO B. ONG YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES,
INC., respondents.
MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a practicing lawyer
and businessman, seeks a reversal of the Decision of the Court of
Appeals in CA-G.R. No. 45005-R, which reduced his claim for damages
for breach of contract of transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of
respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R,
from Mactan Cebu, bound for Butuan City. He was scheduled to attend
the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in the Court
of First Instance, Branch II, thereat, set for hearing on August 28-31,
1967. As a passenger, he checked in one piece of luggage, a blue
"maleta" for which he was issued Claim Check No. 2106-R (Exh. "A").
The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and
arrived at Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the
same day. Upon arrival, petitioner claimed his luggage but it could not
be found. According to petitioner, it was only after reacting indignantly to
the loss that the matter was attended to by the porter clerk, Maximo
Gomez, which, however, the latter denies, At about 3:00 o'clock P.M.,
PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing
luggage, which message was, in turn relayed in full to the Mactan Airport
teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It must
have been transmitted to Manila immediately, for at 3:59 that same
afternoon, PAL Manila wired PAL Cebu advising that the luggage had
been over carried to Manila aboard Flight No. 156 and that it would be
forwarded to Cebu on Flight No. 345 of the same day. Instructions were
also given that the luggage be immediately forwarded to Butuan City on
the first available flight (Exh. "3"). At 5:00 P.M. of the same afternoon,
PAL Cebu sent a message to PAL Butuan that the luggage would be
forwarded on Fright No. 963 the following day, August 27, 196'(.
However, this message was not received by PAL Butuan as all the
personnel had already left since there were no more incoming flights that
afternoon.
In the meantime, petitioner was worried about the missing luggage
because it contained vital documents needed for trial the next day. At
10:00 o'clock that evening, petitioner wired PAL Cebu demanding the
delivery of his baggage before noon the next day, otherwise, he would
hold PAL liable for damages, and stating that PAL's gross negligence
had caused him undue inconvenience, worry, anxiety and extreme
embarrassment (Exh. "B"). This telegram was received by the Cebu PAL
supervisor but the latter felt no need to wire petitioner that his luggage
had already been forwarded on the assumption that by the time the
message reached Butuan City, the luggage would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner went to
the Bancasi Airport to inquire about his luggage. He did not wait,
however, for the morning flight which arrived at 10:00 o'clock that
morning. This flight carried the missing luggage. The porter clerk,
Maximo Gomez, paged petitioner, but the latter had already left. A
74
 TRANSPO B
certain Emilio Dagorro a driver of a "colorum" car, who also used to drive
for petitioner, volunteered to take the luggage to petitioner. As Maximo
Gomez knew Dagorro to be the same driver used by petitioner whenever
the latter was in Butuan City, Gomez took the luggage and placed it on
the counter. Dagorro examined the lock, pressed it, and it opened. After
calling the attention of Maximo Gomez, the "maleta" was opened,
Gomez took a look at its contents, but did not touch them. Dagorro then
delivered the "maleta" to petitioner, with the information that the lock was
open. Upon inspection, petitioner found that a folder containing certain
exhibits, transcripts and private documents in Civil Case No. 1005 and
Sp. Procs. No. 1126 were missing, aside from two gift items for his
parents-in-law. Petitioner refused to accept the luggage. Dagorro
returned it to the porter clerk, Maximo Gomez, who sealed it and
forwarded the same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the hearing of Civil
Case No. 1005 due to loss of his documents, which was granted by the
Court (Exhs. "C" and "C-1"). Petitioner returned to Cebu City on August
28, 1967. In a letter dated August 29, 1967 addressed to PAL, Cebu,
petitioner called attention to his telegram (Exh. "D"), demanded that his
luggage be produced intact, and that he be compensated in the sum of
P250,000,00 for actual and moral damages within five days from receipt
of the letter, otherwise, he would be left with no alternative but to file suit
(Exh. "D").
On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL
Cebu, went to petitioner's office to deliver the "maleta". In the presence
of Mr. Jose Yap and Atty. Manuel Maranga the contents were listed and
receipted for by petitioner (Exh. "E").
On September 5, 1967, petitioner sent a tracer letter to PAL Cebu
inquiring about the results of the investigation which Messrs. de Leon,
Navarsi, and Agustin had promised to conduct to pinpoint responsibility
for the unauthorized opening of the "maleta" (Exh. "F").
The following day, September 6, 1967, PAL sent its reply hereinunder
quoted verbatim:
Dear Atty. Ong Yiu:
This is with reference to your September 5, 1967, letter to Mr. Ricardo
G. Paloma, Acting Manager, Southern Philippines.
First of all, may we apologize for the delay in informing you of the result
of our investigation since we visited you in your office last August 31,
1967. Since there are stations other than Cebu which are involved in
your case, we have to communicate and await replies from them. We
regret to inform you that to date we have not found the supposedly lost
folder of papers nor have we been able to pinpoint the personnel who
allegedly pilferred your baggage.
You must realize that no inventory was taken of the cargo upon loading
them on any plane. Consequently, we have no way of knowing the real
contents of your baggage when same was loaded.
We realized the inconvenience you encountered of this incident but we
trust that you will give us another opportunity to be of better service to
you.
Very truly yours,
PHILIPPINE AIR LINES, INC.
(Sgd) JEREMIAS S. AGUSTIN
Branch Supervisor
Cebu
(Exhibit G, Folder of Exhibits) 1
On September 13, 1967, petitioner filed a Complaint against PAL for
damages for breach of contract of transportation with the Court of First
Instance of Cebu, Branch V, docketed as Civil Case No. R-10188, which
PAL traversed. After due trial, the lower Court found PAL to have acted
in bad faith and with malice and declared petitioner entitled to moral
damages in the sum of P80,000.00, exemplary damages of P30,000.00,
attorney's fees of P5,000.00, and costs.
75
 TRANSPO B
Both parties appealed to the Court of Appeals petitioner in so far as
he was awarded only the sum of P80,000.00 as moral damages; and
defendant because of the unfavorable judgment rendered against it.
On August 22, 1974, the Court of Appeals,* finding that PAL was guilty
only of simple negligence, reversed the judgment of the trial Court
granting petitioner moral and exemplary damages, but ordered PAL to
pay plaintiff the sum of P100.00, the baggage liability assumed by it
under the condition of carriage printed at the back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with
petitioner making the following Assignments of Error:
I. THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE
NEGLIGENCE AND NOT BAD FAITH IN THE BREACH OF ITS
CONTRACT OF TRANSPORTATION WITH PETITIONER.
II. THE HONORABLE COURT OF APPEALS MISCONSTRUED
THE EVIDENCE AND THE LAW WHEN IT REVERSED THE
DECISION OF THE LOWER COURT AWARDING TO PETITIONER
MORAL DAMAGES IN THE AMOUNT OF P80,000.00, EXEMPLARY
DAMAGES OF P30,000.00, AND P5,000.00 REPRESENTING
ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL TO
COMPENSATE PLAINTIFF THE SUM OF P100.00 ONLY, CONTRARY
TO THE EXPLICIT PROVISIONS OF ARTICLES 2220, 2229, 2232
AND 2234 OF THE CIVIL CODE OF THE PHILIPPINES.
On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the delivery of
petitioner's luggage. The question is the correctness of respondent
Court's conclusion that there was no gross negligence on the part of PAL
and that it had not acted fraudulently or in bad faith as to entitle petitioner
to an award of moral and exemplary damages.
From the facts of the case, we agree with respondent Court that PAL
had not acted in bad faith. Bad faith means a breach of a known duty
through some motive of interest or ill will. 2 It was the duty of PAL to look
for petitioner's luggage which had been miscarried. PAL exerted due
diligence in complying with such duty.
As aptly stated by the appellate Court:
We do not find any evidence of bad faith in this. On the contrary, We find
that the defendant had exerted diligent effort to locate plaintiff's
baggage. The trial court saw evidence of bad faith because PAL sent
the telegraphic message to Mactan only at 3:00 o'clock that same
afternoon, despite plaintiff's indignation for the non-arrival of his
baggage. The message was sent within less than one hour after
plaintiff's luggage could not be located. Efforts had to be exerted to
locate plaintiff's maleta. Then the Bancasi airport had to attend to other
incoming passengers and to the outgoing passengers. Certainly, no
evidence of bad faith can be inferred from these facts. Cebu office
immediately wired Manila inquiring about the missing baggage of the
plaintiff. At 3:59 P.M., Manila station agent at the domestic airport wired
Cebu that the baggage was over carried to Manila. And this message
was received in Cebu one minute thereafter, or at 4:00 P.M. The
baggage was in fact sent back to Cebu City that same afternoon. His
Honor stated that the fact that the message was sent at 3:59 P.M. from
Manila and completely relayed to Mactan at 4:00 P.M., or within one
minute, made the message appear spurious. This is a forced reasoning.
A radio message of about 50 words can be completely transmitted in
even less than one minute depending upon atmospheric conditions.
Even if the message was sent from Manila or other distant places, the
message can be received within a minute. that is a scientific fact which
cannot be questioned. 3
Neither was the failure of PAL Cebu to reply to petitioner's rush telegram
indicative of bad faith, The telegram (Exh. B) was dispatched by
petitioner at around 10:00 P.M. of August 26, 1967. The PAL supervisor
at Mactan Airport was notified of it only in the morning of the following
day. At that time the luggage was already to be forwarded to Butuan
City. There was no bad faith, therefore, in the assumption made by said
supervisor that the plane carrying the bag would arrive at Butuan earlier
than a reply telegram. Had petitioner waited or caused someone to wait
at the Bancasi airport for the arrival of the morning flight, he would have
been able to retrieve his luggage sooner.
76
 TRANSPO B
In the absence of a wrongful act or omission or of fraud or bad faith,
petitioner is not entitled to moral damages.
Art. 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be recovered
if they are the proximate result of the defendant's wrongful act of
omission.
Art. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad
faith.
Petitioner is neither entitled to exemplary damages. In contracts, as
provided for in Article 2232 of the Civil Code, exemplary damages can
be granted if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner, which has not been proven in this
case.
Petitioner further contends that respondent Court committed grave error
when it limited PAL's carriage liability to the amount of P100.00 as
stipulated at the back of the ticket. In this connection, respondent Court
opined:
As a general proposition, the plaintiff's maleta having been pilfered while
in the custody of the defendant, it is presumed that the defendant had
been negligent. The liability, however, of PAL for the loss, in accordance
with the stipulation written on the back of the ticket, Exhibit 12, is limited
to P100.00 per baggage, plaintiff not having declared a greater value,
and not having called the attention of the defendant on its true value and
paid the tariff therefor. The validity of this stipulation is not questioned
by the plaintiff. They are printed in reasonably and fairly big letters, and
are easily readable. Moreover, plaintiff had been a frequent passenger
of PAL from Cebu to Butuan City and back, and he, being a lawyer and
businessman, must be fully aware of these conditions. 4
We agree with the foregoing finding. The pertinent Condition of Carriage
printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost
or damaged baggage of the passenger is LIMITED TO P100.00 for each
ticket unless a passenger declares a higher valuation in excess of
P100.00, but not in excess, however, of a total valuation of P1,000.00
and additional charges are paid pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value for
his luggage, much less did he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that
he had actually entered into a contract with PAL limiting the latter's
liability for loss or delay of the baggage of its passengers, and that Article
1750* of the Civil Code has not been complied with.
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". 5 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. 6 And as held in Randolph
v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein
vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "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.
Considering, therefore, that petitioner had failed to declare a higher
value for his baggage, he cannot be permitted a recovery in excess of
P100.00.Besides, passengers are advised not to place valuable items
inside their baggage but "to avail of our V-cargo service " (Exh. "1"). I t
is likewise to be noted that there is nothing in the evidence to show the
actual value of the goods allegedly lost by petitioner.
77
TRANSPO B
There is another matter involved, raised as an error by PAL the fact
that on October 24, 1974 or two months after the promulgation of the
Decision of the appellate Court, petitioner's widow filed a Motion for
Substitution claiming that petitioner died on January 6, 1974 and that
she only came to know of the adverse Decision on October 23, 1974
when petitioner's law partner informed her that he received copy of the
Decision on August 28, 1974. Attached to her Motion was an Affidavit of
petitioner's law partner reciting facts constitutive of excusable
negligence. The appellate Court noting that all pleadings had been
signed by petitioner himself allowed the widow "to take such steps as
she or counsel may deem necessary." She then filed a Motion for
Reconsideration over the opposition of PAL which alleged that the Court
of Appeals Decision, promulgated on August 22, 1974, had already
become final and executory since no appeal had been interposed
therefrom within the reglementary period.
Under the circumstances, considering the demise of petitioner himself,
who acted as his own counsel, it is best that technicality yields to the
interests of substantial justice. Besides, in the 'last analysis, no serious
prejudice has been caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent Court from
the evidence on record are not erroneous.
WHEREFORE, for lack of merit, the instant Petition is hereby denied,
and the judgment sought to be reviewed hereby affirmed in toto.
No costs.
SO ORDERED.
18. Pan Am v. IAC, 164 SCRA 268
G.R. No. 70462 August 11, 1988
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG
BASTOS PRODUCTIONS and ARCHER PRODUCTIONS,
respondents.
Guerrero & Torres for petitioner.
Jose B. Layug for private respondents.
CORTES, J.:
Before the Court is a petition filed by an international air carrier seeking
to limit its liability for lost baggage, containing promotional and
advertising materials for films to be exhibited in Guam and the U.S.A.,
clutch bags, barong tagalogs and personal belongings, to the amount
specified in the airline ticket absent a declaration of a higher valuation
and the payment of additional charges.
The undisputed facts of the case, as found by the trial court and
adopted by the appellate court, are as follows:
On April 25, 1978, plaintiff Rene V. Pangan, president and general
manager of the plaintiffs Sotang Bastos and Archer Production while in
San Francisco, Califonia and Primo Quesada of Prime Films, San
Francisco, California, entered into an agreement (Exh. A) whereby the
former, for and in consideration of the amount of US $2,500.00 per
picture, bound himself to supply the latter with three films. 'Ang Mabait,
Masungit at ang Pangit,' 'Big Happening with Chikiting and Iking,' and
'Kambal Dragon' for exhibition in the United States. It was also their
agreement that plaintiffs would provide the necessary promotional and
advertising materials for said films on or before May 30, 1978.
On his way home to the Philippines, plaintiff Pangan visited Guam
where he contacted Leo Slutchnick of the Hafa Adai Organization.
Plaintiff Pangan likewise entered into a verbal agreement with
Slutchnick for the exhibition of two of the films above-mentioned at the
Hafa Adai Theater in Guam on May 30, 1978 for the consideration of
P7,000.00 per picture (p. 11, tsn, June 20, 1979). Plaintiff Pangan
undertook to provide the necessary promotional and advertising
materials for said films on or before the exhibition date on May 30,1978.
78
TRANSPO B
By virtue of the above agreements, plaintiff Pangan caused the
preparation of the requisite promotional handbills and still pictures for
which he paid the total sum of P12,900.00 (Exhs. B, B-1, C and C1).
Likewise in preparation for his trip abroad to comply with his contracts,
plaintiff Pangan purchased fourteen clutch bags, four capiz lamps and
four barong tagalog, with a total value of P4,400.00 (Exhs. D, D-1, E,
and F).
On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's
Manila Office, through the Your Travel Guide, an economy class
airplane ticket with No. 0269207406324 (Exh. G) for passage from
Manila to Guam on defendant's Flight No. 842 of May 27,1978, upon
payment by said plaintiff of the regular fare. The Your Travel Guide is a
tour and travel office owned and managed by plaintiffs witness Mila de
la Rama.
On May 27, 1978, two hours before departure time plaintiff Pangan was
at the defendant's ticket counter at the Manila International Airport and
presented his ticket and checked in his two luggages, for which he was
given baggage claim tickets Nos. 963633 and 963649 (Exhs. H and H-
1). The two luggages contained the promotional and advertising
materials, the clutch bags, barong tagalog and his personal belongings.
Subsequently, Pangan was informed that his name was not in the
manifest and so he could not take Flight No. 842 in the economy class.
Since there was no space in the economy class, plaintiff Pangan took
the first class because he wanted to be on time in Guam to comply with
his commitment, paying an additional sum of $112.00.
When plaintiff Pangan arrived in Guam on the date of May 27, 1978,
his two luggages did not arrive with his flight, as a consequence of
which his agreements with Slutchnick and Quesada for the exhibition
of the films in Guam and in the United States were cancelled (Exh. L).
Thereafter, he filed a written claim (Exh. J) for his missing luggages.
Upon arrival in the Philippines, Pangan contacted his lawyer, who made
the necessary representations to protest as to the treatment which he
received from the employees of the defendant and the loss of his two
luggages (Exh. M, O, Q, S, and T). Defendant Pan Am assured plaintiff
Pangan that his grievances would be investigated and given its
immediate consideration (Exhs. N, P and R). Due to the defendant's
failure to communicate with Pangan about the action taken on his
protests, the present complaint was filed by the plaintiff. (Pages 4-7,
Record On Appeal). [Rollo, pp. 27-29.]
On the basis of these facts, the Court of First Instance found petitioner
liable and rendered judgment as follows:
(1) Ordering defendant Pan American World Airways, Inc. to pay all
the plaintiffs the sum of P83,000.00, for actual damages, with interest
thereon at the rate of 14% per annum from December 6, 1978, when
the complaint was filed, until the same is fully paid, plus the further sum
of P10,000.00 as attorney's fees;
(2) Ordering defendant Pan American World Airways, Inc. to pay
plaintiff Rene V. Pangan the sum of P8,123.34, for additional actual
damages, with interest thereon at the rate of 14% per annum from
December 6, 1978, until the same is fully paid;
(3) Dismissing the counterclaim interposed by defendant Pan
American World Airways, Inc.; and
(4) Ordering defendant Pan American World Airways, Inc. to pay
the costs of suit. [Rollo, pp. 106-107.]
On appeal, the then Intermediate Appellate Court affirmed the trial court
decision.
Hence, the instant recourse to this Court by petitioner.
The petition was given due course and the parties, as required,
submitted their respective memoranda. In due time the case was
submitted for decision.
In assailing the decision of the Intermediate Appellate Court petitioner
assigned the following errors:
1. The respondent court erred as a matter of law in affirming the
trial court's award of actual damages beyond the limitation of liability
set forth in the Warsaw Convention and the contract of carriage.
79
TRANSPO B
2. The respondent court erred as a matter of law in affirming the
trial court's award of actual damages consisting of alleged lost profits in
the face of this Court's ruling concerning special or consequential
damages as set forth in Mendoza v. Philippine Airlines [90 Phil. 836
(1952).]
The assigned errors shall be discussed seriatim
1. The airline ticket (Exh. "G') contains the following conditions:
NOTICE
If the passenger's journey involves an ultimate destination or stop in a
country other than the country of departure the Warsaw Convention
may be applicable and the Convention governs and in most cases limits
the liability of carriers for death or personal injury and in respect of loss
of or damage to baggage. See also notice headed "Advice to
International Passengers on Limitation of Liability.
CONDITIONS OF CONTRACT
1. As used in this contract "ticket" means this passenger ticket and
baggage check of which these conditions and the notices form part,
"carriage" is equivalent to "transportation," "carrier" means all air
carriers that carry or undertake to carry the passenger or his baggage
hereunder or perform any other service incidental to such air carriage.
"WARSAW CONVENTION" means the convention for the Unification of
Certain Rules Relating to International Carriage by Air signed at
Warsaw, 12th October 1929, or that Convention as amended at The
Hague, 28th September 1955, whichever may be applicable.
2. Carriage hereunder is subject to the rules and limitations relating to
liability established by the Warsaw Convention unless such carriage is
not "international carriage" as defined by that Convention.
3. To the extent not in conflict with the foregoing carriage and other
services performed by each carrier are subject to: (i) provisions
contained in this ticket, (ii) applicable tariffs, (iii) carrier's conditions of
carriage and related regulations which are made part hereof (and are
available on application at the offices of carrier), except in
transportation between a place in the United States or Canada and any
place outside thereof to which tariffs in force in those countries apply.
xxx xxx xxx
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as follows
unless a higher value is declared in advance and additional charges
are paid: (1)for most international travel (including domestic portions of
international journeys) to approximately $9.07 per pound ($20.00 per
kilo) for checked baggage and $400 per passenger for unchecked
baggage: (2) for travel wholly between U.S. points, to $750 per
passenger on most carriers (a few have lower limits). Excess valuation
may not be declared on certain types of valuable articles. Carriers
assume no liability for fragile or perishable articles. Further information
may be obtained from the carrier. [Emphasis supplied.].
On the basis of the foregoing stipulations printed at the back of the
ticket, petitioner contends that its liability for the lost baggage of private
respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter
did not declare a higher value for his baggage and pay the
corresponding additional charges.
To support this contention, petitioner cites the case of Ong Yiu v. Court
of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA 223], where
the Court sustained the validity of a printed stipulation at the back of an
airline ticket limiting the liability of the carrier for lost baggage to a
specified amount and ruled that the carrier's liability was limited to said
amount since the passenger did not declare a higher value, much less
pay additional charges.
We find the ruling in Ong Yiu squarely applicable to the instant case. In
said case, the Court, through Justice Melencio Herrera, stated:
Petitioner further contends that respondent Court committed grave
error when it limited PAL's carriage liability to the amount of P100.00
as stipulated at the back of the ticket....
80
TRANSPO B
We agree with the foregoing finding. The pertinent Condition of
Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or
damage baggage of the passenger is LIMITED TO P100.00 for each
ticket unless a passenger declares a higher valuation in excess of
P100.00, but not in excess, however, of a total valuation of Pl,000.00
and additional charges are paid pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value for
his luggage, much less (lid he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that
he had actually entered into a contract with PAL limiting the latter's
liability for loss or delay of the baggage of its passengers, and that
Article 1750 * of the Civil Code has not been complied with.
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." [Tannebaum v. National Airline,
Inc., 13 Misc. 2d 450,176 N.Y.S. 2d 400; Lichten v. Eastern Airlines, 87
Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla., 63 So. 2d 634.]
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]. And as
held in Randolph v. American Airlines, 103 Ohio App. 172,144 N.E. 2d
878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483.] "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."
Considering, therefore, that petitioner had failed to declare a higher
value for his baggage, he cannot be permitted a recovery in excess of
P100.00....
On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc.
[G.R. No. L-20099, July 2, 1966, 17 SCRA 606], where the Court held
that the stipulation limiting the carrier's liability to a specified amount
was invalid, finds no application in the instant case, as the ruling in said
case was premised on the finding that the conditions printed at the back
of the ticket were so small and hard to read that they would not warrant
the presumption that the passenger was aware of the conditions and
that he had freely and fairly agreed thereto. In the instant case, similar
facts that would make the case fall under the exception have not been
alleged, much less shown to exist.
In view thereof petitioner's liability for the lost baggage is limited to
$20.00 per kilo or $600.00, as stipulated at the back of the ticket.
At this juncture, in order to rectify certain misconceptions the Court finds
it necessary to state that the Court of Appeal's reliance on a quotation
from Northwest Airlines, Inc. v. Cuenca [G.R. No. L-22425, August 31,
1965, 14 SCRA 1063] to sustain the view that "to apply the Warsaw
Convention which limits a carrier's liability to US$9.07 per pound or
US$20.00 per kilo in cases of contractual breach of carriage ** is
against public policy" is utterly misplaced, to say the least. In said case,
while the Court, as quoted in the Intermediate Appellate Court's
decision, said:
Petitioner argues that pursuant to those provisions, an air "carrier is
liable only" in the event of death of a passenger or injury suffered by
him, or of destruction or loss of, or damages to any checked baggage
or any goods, or of delay in the transportation by air of passengers,
baggage or goods. This pretense is not borne out by the language of
said Articles. The same merely declare the carrier liable for damages
in enumerated cases, if the conditions therein specified are present.
Neither said provisions nor others in the aforementioned Convention
regulate or exclude liability for other breaches of contract by the carrier.
Under petitioner's theory, an air carrier would be exempt from any
liability for damages in the event of its absolute refusal, in bad faith, to
comply with a contract of carriage, which is absurd.
it prefaced this statement by explaining that:
81
TRANSPO B
...The case is now before us on petition for review by certiorari, upon
the ground that the lower court has erred: (1) in holding that the Warsaw
Convention of October 12, 1929, relative to transportation by air is not
in force in the Philippines: (2) in not holding that respondent has no
cause of action; and (3) in awarding P20,000 as nominal damages.
We deem it unnecessary to pass upon the First assignment of error
because the same is the basis of the second assignment of error, and
the latter is devoid of merit, even if we assumed the former to be well
taken. (Emphasis supplied.)
Thus, it is quite clear that the Court never intended to, and in fact never
did, rule against the validity of provisions of the Warsaw Convention.
Consequently, by no stretch of the imagination may said quotation from
Northwest be considered as supportive of the appellate court's
statement that the provisions of the Warsaw Convention limited a
carrier's liability are against public policy.
2. The Court finds itself unable to agree with the decision of the trial
court, and affirmed by the Court of Appeals, awarding private
respondents damages as and for lost profits when their contracts to
show the films in Guam and San Francisco, California were cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836
(1952)] cannot be any clearer:
...Under Art.1107 of the Civil Code, a debtor in good faith like the
defendant herein, may be held liable only for damages that were
foreseen or might have been foreseen at the time the contract of
transportation was entered into. The trial court correctly found that the
defendant company could not have foreseen the damages that would
be suffered by Mendoza upon failure to deliver the can of film on the
17th of September, 1948 for the reason that the plans of Mendoza to
exhibit that film during the town fiesta and his preparations, specially
the announcement of said exhibition by posters and advertisement in
the newspaper, were not called to the defendant's attention.
In our research for authorities we have found a case very similar to the
one under consideration. In the case of Chapman vs. Fargo, L.R.A.
(1918 F) p. 1049, the plaintiff in Troy, New York, delivered motion
picture films to the defendant Fargo, an express company, consigned
and to be delivered to him in Utica. At the time of shipment the attention
of the express company was called to the fact that the shipment
involved motion picture films to be exhibited in Utica, and that they
should be sent to their destination, rush. There was delay in their
delivery and it was found that the plaintiff because of his failure to
exhibit the film in Utica due to the delay suffered damages or loss of
profits. But the highest court in the State of New York refused to award
him special damages. Said appellate court observed:
But before defendant could be held to special damages, such as the
present alleged loss of profits on account of delay or failure of delivery,
it must have appeared that he had notice at the time of delivery to him
of the particular circumstances attending the shipment, and which
probably would lead to such special loss if he defaulted. Or, as the rule
has been stated in another form, in order to purpose on the defaulting
party further liability than for damages naturally and directly, i.e., in the
ordinary course of things, arising from a breach of contract, such
unusual or extraordinary damages must have been brought within the
contemplation of the parties as the probable result of breach at the time
of or prior to contracting. Generally, notice then of any special
circumstances which will show that the damages to be anticipated from
a breach would be enhanced has been held sufficient for this effect.
As may be seen, that New York case is a stronger one than the present
case for the reason that the attention of the common carrier in said case
was called to the nature of the articles shipped, the purpose of
shipment, and the desire to rush the shipment, circumstances and facts
absent in the present case. [Emphasis supplied.]
Thus, applying the foregoing ruling to the facts of the instant case, in
the absence of a showing that petitioner's attention was called to the
special circumstances requiring prompt delivery of private respondent
Pangan's luggages, petitioner cannot be held liable for the cancellation
of private respondents' contracts as it could not have foreseen such an
eventuality when it accepted the luggages for transit.
The Court is unable to uphold the Intermediate Appellate Court's
disregard of the rule laid down in Mendoza and affirmance of the trial
court's conclusion that petitioner is liable for damages based on the
82
TRANSPO B
finding that "[tlhe undisputed fact is that the contracts of the plaintiffs for
the exhibition of the films in Guam and California were cancelled
because of the loss of the two luggages in question." [Rollo, p. 36] The
evidence reveals that the proximate cause of the cancellation of the
contracts was private respondent Pangan's failure to deliver the
promotional and advertising materials on the dates agreed upon. For
this petitioner cannot be held liable. Private respondent Pangan had not
declared the value of the two luggages he had checked in and paid
additional charges. Neither was petitioner privy to respondents'
contracts nor was its attention called to the condition therein requiring
delivery of the promotional and advertising materials on or before a
certain date.
3. With the Court's holding that petitioner's liability is limited to the
amount stated in the ticket, the award of attorney's fees, which is
grounded on the alleged unjustified refusal of petitioner to satisfy
private respondent's just and valid claim, loses support and must be set
aside.
WHEREFORE, the Petition is hereby GRANTED and the Decision of
the Intermediate Appellate Court is SET ASIDE and a new judgment is
rendered ordering petitioner to pay private respondents damages in the
amount of US $600.00 or its equivalent in Philippine currency at the
time of actual payment.
SO ORDERED.
19. Cathay Pacific v. CA, 219 SCRA 520
G.R. No. 60501. March 5, 1993.
CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF
APPEALS and TOMAS L. ALCANTARA, respondents.
Siguion-Reyna, Montecillo & Ongsiako and Tomacruz, Manguiat &
Associates for petitioner.
Tanjuatco, Oreta, Tanjuatco, Berenger & Corpus for private
respondent.
SYLLABUS
1. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH
THEREOF; PETITIONER BREACHED ITS CONTRACT OF
CARRIAGE WITH PRIVATE RESPONDENT WHEN IT FAILED TO
DELIVER HIS LUGGAGE AT THE DESIGNATED PLACE AND TIME.
Petitioner breached its contract of carriage with private respondent
when it failed to deliver his luggage at the designated place and time, it
being the obligation of a common carrier to carry its passengers and
their luggage safely to their destination, which includes the duty not to
delay their transportation, and the evidence shows that petitioner acted
fraudulently or in bad faith.
2. DAMAGES; MORAL AND EXEMPLARY DAMAGES
PREDICATED UPON A BREACH OF CONTRACT OF CARRIAGE;
RECOVERABLE ONLY IN INSTANCES WHERE THE MISHAP
RESULTS IN DEATH OF A PASSENGER, OR WHERE THE
CARRIER IS GUILTY OF FRAUD OR BAD FAITH; THE CONDUCT
OF PETITIONER'S REPRESENTATIVE TOWARDS RESPONDENT
JUSTIFIES THE GRANT OF MORAL AND EXEMPLARY DAMAGES
IN CASE AT BAR. Moral damages predicated upon a breach of
contract of carriage may only be recoverable in instances where the
mishap results in death of a passenger, or where the carrier is guilty of
fraud or bad faith. The language and conduct of petitioner's
representative towards respondent Alcantara was discourteous or
arbitrary to justify the grant of moral damages. The CATHAY
representative was not only indifferent and impatient; he was also rude
and insulting. He simply advised Alcantara to buy anything he wanted.
But even that was not sincere because the representative knew that the
passenger was limited only to $20.00 which, certainly, was not enough
to purchase comfortable clothings appropriate for an executive
conference. Considering that Alcantara was not only a revenue
passenger but even paid for a first class airline accommodation and
accompanied at the time by the Commercial Attache of the Philippine
Embassy who was assisting him in his problem, petitioner or its agents
should have been more courteous and accommodating to private
respondent, instead of giving him a curt reply, "What can we do, the
baggage is missing. I cannot do anything . . . Anyhow, you can buy
anything you need, charged to Cathay Pacific." Where in breaching the
contract of carriage the defendant airline is not shown to have acted
83
TRANSPO B
fraudulently or in bad faith, liability for damages is limited to the natural
and probable consequences of the breach of obligation which the
parties had foreseen or could have reasonably foreseen. In that case,
such liability does not include moral and exemplary damages.
Conversely, if the defendant airline is shown to have acted fraudulently
or in bad faith, the award of moral and exemplary damages is proper.
3. TEMPERATE DAMAGES; RECOVERABLE ONLY UPON
PROOF THAT THE CLAIMANT SUSTAINED SOME PECUNIARY
LOSS. However, respondent Alcantara is not entitled to temperate
damages, contrary to the ruling of the court a quo, in the absence of
any showing that he sustained some pecuniary loss. It cannot be
gainsaid that respondent's luggage was ultimately delivered to him
without serious or appreciable damage.
4. WARSAW CONVENTION; DOES NOT OPERATE AS AN
EXCLUSIVE ENUMERATION OF THE INSTANCES FOR
DECLARING A CARRIER LIABLE FOR BREACH OF CONTRACT OF
CARRIAGE OR AS AN ABSOLUTE LIMIT OF THE EXTENT OF THAT
LIABILITY; DOES NOT PRECLUDE THE OPERATION OF THE CIVIL
CODE AND OTHER PERTINENT LAWS. As We have repeatedly
held, although the Warsaw Convention has the force and effect of law
in this country, being a treaty commitment assumed by the Philippine
government, said convention does not operate as an exclusive
enumeration of the instances for declaring a carrier liable for breach of
contract of carriage or as an absolute limit of the extent of that liability.
The Warsaw Convention declares the carrier liable for damages in the
enumerated cases and under certain limitations. However, it must not
be construed to preclude the operation of the Civil Code and other
pertinent laws. It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the
contract of carriage, especially if wilfull misconduct on the part of the
carrier's employees is found or established, which is clearly the case
before Us.
DECISION
BELLOSILLO, J p:
This is a petition for review on certiorari of the decision of the Court of
Appeals which affirmed with modification that of the trial court by
increasing the award of damages in favor of private respondent Tomas
L. Alcantara.
The facts are undisputed: On 19 October 1975, respondent Tomas L.
Alcantara was a first class passenger of petitioner Cathay Pacific
Airways, Ltd. (CATHAY for brevity) on its Flight No. CX-900 from Manila
to Hongkong and onward from Hongkong to Jakarta on Flight No. CX-
711. The purpose of his trip was to attend the following day, 20 October
1975, a conference with the Director General of Trade of Indonesia,
Alcantara being the Executive Vice-President and General Manager of
Iligan Cement Corporation, Chairman of the Export Committee of the
Philippine Cement Corporation, and representative of the Cement
Industry Authority and the Philippine Cement Corporation. He checked
in his luggage which contained not only his clothing and articles for
personal use but also papers and documents he needed for the
conference.
Upon his arrival in Jakarta, respondent discovered that his luggage was
missing. When he inquired about his luggage from CATHAY's
representative in Jakarta, private respondent was told that his luggage
was left behind in Hongkong. For this, respondent Alcantara was
offered $20.00 as "inconvenience money" to buy his immediate
personal needs until the luggage could be delivered to him.
His luggage finally reached Jakarta more than twenty four (24) hours
after his arrival. However, it was not delivered to him at his hotel but
was required by petitioner to be picked up by an official of the Philippine
Embassy.
On 1 March 1976, respondent filed his complaint against petitioner with
the Court of First Instance (now Regional Trial Court) of Lanao del
Norte praying for temperate, moral and exemplary damages, plus
attorney's fees.
On 18 April 1976, the trial court rendered its decision ordering CATHAY
to pay Plaintiff P20,000.00 for moral damages, P5,000.00 for temperate
damages, P10,000.00 for exemplary damages, and P25,000.00 for
attorney's fees, and the costs. 1
84
TRANSPO B
Both parties appealed to the Court of Appeals. CATHAY assailed the
conclusion of the trial court that it was accountable for breach of
contract and questioned the non-application by the court of the Warsaw
Convention as well as the excessive damages awarded on the basis of
its finding that respondent Alcantara was rudely treated by petitioner's
employees during the time that his luggage could not be found. For his
part, respondent Alcantara assigned as error the failure of the trial court
to grant the full amount of damages sought in his complaint.
On 11 November 1981, respondent Court of Appeals rendered its
decision affirming the findings of fact of the trial court but modifying its
award by increasing the moral damages to P80,000.00, exemplary
damages to P20,000.00 and temperate or moderate damages to
P10,000.00. The award of P25,000.00 for attorney's fees was
maintained.
The same grounds raised by petitioner in the Court of Appeals are
reiterated before Us. CATHAY contends that: (1) the Court of Appeals
erred in holding petitioner liable to respondent Alcantara for moral,
exemplary and temperate damages as well as attorney's fees; and, (2)
the Court of Appeals erred in failing to apply the Warsaw Convention
on the liability of a carrier to its passengers.
On its first assigned error, CATHAY argues that although it failed to
transport respondent Alcantara's luggage on time, the one-day delay
was not made in bad faith so as to justify moral, exemplary and
temperate damages. It submits that the conclusion of respondent
appellate court that private respondent was treated rudely and
arrogantly when he sought assistance from CATHAY's employees has
no factual basis, hence, the award of moral damages has no leg to
stand on.
Petitioner's first assigned error involves findings of fact which are not
reviewable by this Court. 2 At any rate, it is not impressed with merit.
Petitioner breached its contract of carriage with private respondent
when it failed to deliver his luggage at the designated place and time, it
being the obligation of a common carrier to carry its passengers and
their luggage safely to their destination, which includes the duty not to
delay their transportation, 3 and the evidence shows that petitioner
acted fraudulently or in bad faith.
Moral damages predicated upon a breach of contract of carriage may
only be recoverable in instances where the mishap results in death of
a passenger, 4 or where the carrier is guilty of fraud or bad faith. 5
In the case at bar, both the trial court and the appellate court found that
CATHAY was grossly negligent and reckless when it failed to deliver
the luggage of petitioner at the appointed place and time. We agree.
CATHAY alleges that as a result of mechanical trouble, all pieces of
luggage on board the first aircraft bound for Jakarta were unloaded and
transferred to the second aircraft which departed an hour and a half
later. Yet, as the Court of Appeals noted, petitioner was not even aware
that it left behind private respondent's luggage until its attention was
called by the Hongkong Customs authorities. More, bad faith or
otherwise improper conduct may be attributed to the employees of
petitioner. While the mere failure of CATHAY to deliver respondent's
luggage at the agreed place and time did not ipso facto amount to willful
misconduct since the luggage was eventually delivered to private
respondent, albeit belatedly, 6 We are persuaded that the employees
of CATHAY acted in bad faith. We refer to the deposition of Romulo
Palma, Commercial Attache of the Philippine Embassy at Jakarta, who
was with respondent Alcantara when the latter sought assistance from
the employees of CATHAY. This deposition was the basis of the
findings of the lower courts when both awarded moral damages to
private respondent. Hereunder is part of Palma's testimony
"Q: What did Mr. Alcantara say, if any?
A. Mr. Alcantara was of course . . . . I could understand his position.
He was furious for the experience because probably he was thinking
he was going to meet the Director-General the following day and, well,
he was with no change of proper clothes and so, I would say, he was
not happy about the situation.
Q: What did Mr. Alcantara say?
A: He was trying to press the fellow to make the report and if
possible make the delivery of his baggage as soon as possible.
85
TRANSPO B
Q: And what did the agent or duty officer say, if any?
A: The duty officer, of course, answered back saying 'What can we
do, the baggage is missing. I cannot do anything.' something like it.
'Anyhow you can buy anything you need, charged to Cathay Pacific.'
Q: What was the demeanor or comportment of the duty officer of
Cathay Pacific when he said to Mr. Alcantara 'You can buy anything
chargeable to Cathay Pacific'?
A: If I had to look at it objectively, the duty officer would like to
dismiss the affair as soon as possible by saying indifferently 'Don't
worry. It can be found.'" 7
Indeed, the aforequoted testimony shows that the language and
conduct of petitioner's representative towards respondent Alcantara
was discourteous or arbitrary to justify the grant of moral damages. The
CATHAY representative was not only indifferent and impatient; he was
also rude and insulting. He simply advised Alcantara to buy anything
he wanted. But even that was not sincere because the representative
knew that the passenger was limited only to $20.00 which, certainly,
was not enough to purchase comfortable clothings appropriate for an
executive conference. Considering that Alcantara was not only a
revenue passenger but even paid for a first class airline
accommodation and accompanied at the time by the Commercial
Attache of the Philippine Embassy who was assisting him in his
problem, petitioner or its agents should have been more courteous and
accommodating to private respondent, instead of giving him a curt
reply, "What can we do, the baggage is missing. I cannot do anything .
. . Anyhow, you can buy anything you need, charged to Cathay Pacific."
CATHAY's employees should have been more solicitous to a
passenger in distress and assuaged his anxieties and apprehensions.
To compound matters, CATHAY refused to have the luggage of
Alcantara delivered to him at his hotel; instead, he was required to pick
it up himself and an official of the Philippine Embassy. Under the
circumstances, it is evident that petitioner was remiss in its duty to
provide proper and adequate assistance to a paying passenger, more
so one with first class accommodation.
Where in breaching the contract of carriage the defendant airline is not
shown to have acted fraudulently or in bad faith, liability for damages is
limited to the natural and probable consequences of the breach of
obligation which the parties had foreseen or could have reasonably
foreseen. In that case, such liability does not include moral and
exemplary damages. 8 Conversely, if the defendant airline is shown to
have acted fraudulently or in bad faith, the award of moral and
exemplary damages is proper.
However, respondent Alcantara is not entitled to temperate damages,
contrary to the ruling of the court a quo, in the absence of any showing
that he sustained some pecuniary loss. 9 It cannot be gainsaid that
respondent's luggage was ultimately delivered to him without serious
or appreciable damage.
As regards its second assigned error, petitioner airline contends that
the extent of its liability for breach of contract should be limited
absolutely to that set forth in the Warsaw Convention. We do not agree.
As We have repeatedly held, although the Warsaw Convention has the
force and effect of law in this country, being a treaty commitment
assumed by the Philippine government, said convention does not
operate as an exclusive enumeration of the instances for declaring a
carrier liable for breach of contract of carriage or as an absolute limit of
the extent of that liability. 10 The Warsaw Convention declares the
carrier liable for damages in the enumerated cases and under certain
limitations. 11 However, it must not be construed to preclude the
operation of the Civil Code and other pertinent laws. It does not
regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, 12
especially if wilfull misconduct on the part of the carrier's employees is
found or established, which is clearly the case before Us. For, the
Warsaw Convention itself provides in Art. 25 that
"(1) The carrier shall not be entitled to avail himself of the provisions
of this convention which exclude or limit his liability, if the damage is
caused by his wilfull misconduct or by such default on his part as, in
accordance with the law of the court to which the case is submitted, is
considered to be equivalent to wilfull misconduct."
86
TRANSPO B

(2) Similarly the carrier shall not be entitled to avail himself of the
said provisions, if the damage is caused under the same circumstances
by any agent of the carrier acting within the scope of his employment."

When petitioner airline misplaced respondent's luggage and failed to

deliver it to its passenger at the appointed place and time, some special
species of injury must have been caused to him. For sure, the latter
underwent profound distress and anxiety, and the fear of losing the
opportunity to fulfill the purpose of his trip. In fact, for want of
appropriate clothings for the occasion brought about by the delay of the
arrival of his luggage, to his embarrassment and consternation
respondent Alcantara had to seek postponement of his pre-arranged
conference with the Director General of Trade of the host country.

In one case, 13 this Court observed that a traveller would naturally

suffer mental anguish, anxiety and shock when he finds that his
luggage did not travel with him and he finds himself in a foreign land
without any article of clothing other than what he has on.

Thus, respondent is entitled to moral and exemplary damages. We

however find the award by the Court of Appeals of P80,000.00 for moral
damages excessive, hence, We reduce the amount to P30,000.00. The
exemplary damages of P20,000.00 being reasonable is maintained, as
well as the attorney's fees of P25,000.00 considering that petitioner's
act or omission has compelled Alcantara to litigate with third persons or
to incur expenses to protect his interest. 14

WHEREFORE, the assailed decision of respondent Court of Appeals is

AFFIRMED with the exception of the award of temperate damages of
P10,000.00 which is deleted, while the award of moral damages of
P80,000.00 is reduced to P30,000.00. The award of P20,000.00 for
exemplary damages is maintained as reasonable together with the
attorney's fees of P25,000.00. The moral and exemplary damages shall
earn interest at the legal rate from 1 March 1976 when the complaint
was filed until full payment.

SO ORDERED.

87