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1)

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF HEALTH, NATIONAL TRUCKING AND
FORWARDING CORPORATION (NTFC), and COOPERATIVE FOR AMERICAN RELIEF EVERYWHERE, INC.
(CARE Philippines) vs. LORENZO SHIPPING CORPORATION

G.R. No. 153563, [February 7, 2005], 491 PHIL 151-160)

Facts: On June 5, 1987, the Republic of the Philippines, through the Department of Health (DOH), and
the Cooperative for American Relief Everywhere, Inc. (CARE) signed an agreement wherein CARE
would acquire from the United States government donations of non-fat dried milk and other food
products. In turn, the Philippines would transport and distribute the donated commodities to the
intended beneficiaries in the country.

The government entered into a contract of carriage of goods with National Trucking and Forwarding
Corporation (NTFC). Thus, the latter shipped 4,868 bags of non-fat dried milk through herein Lorenzo
Shipping Corporation (LSC). The consignee named in the bills of lading issued by the LSC was
Abdurahman (NTFC’s branch supervisor in Zamboanga City).

On reaching the port of Zamboanga City, LSC's agent, Efren Ruste Shipping Agency, unloaded the
goods to NTFC’s warehouse. Before each delivery, Rogelio Rizada and Ismael Zamora, both delivery
checkers of Efren Ruste Shipping Agency, requested Abdurahman to surrender the original bills of
lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery,
Rogelio and Ismael asked Abdurahman to sign the delivery receipts. However, at times when
Abdurahman had to attend to other business before a delivery was completed, he instructed his
subordinates to sign the delivery receipts for him.

Notwithstanding the precautions taken, the NTFC allegedly did not receive the goods. Thus, NTFC filed
a formal claim for non-delivery of the goods shipped to LSC.

LSC explained that the cargo had already been delivered to NTFC’s supervisor. NTFC then decided to
investigate the loss of the goods. But before the investigation was over, Abdurahman Jama resigned
as branch supervisor of NTC.

NTFC filed an action for breach of contract of carriage LSC. The RTC and CA dismissed the complaint
of NTFC.

Issue: WON LSC is presumed at fault or negligent as common carrier for the loss or deterioration of the
goods?

Ruling: No. LSC exercised extra ordinary diligence. Although the original bills of lading remained with
NTFC, LSC's agents demanded from Abdurahman the certified true copies of the bills of lading. They
also asked the latter and in his absence, his designated subordinates, to sign the cargo delivery
receipts.

According to LSC, this practice is its standard operating procedure. This SOP finds support in Article 353
of the Code of Commerce which states that

“After the contract has been complied with, the bill of lading which the carrier has issued shall be
returned to him, and by virtue of the exchange of this title with the thing transported, the respective
obligations and actions shall be considered cancelled, . . .
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In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the
carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return of the bill of lading. “

Conformably with the aforecited provision, the surrender of the original bill of lading is not a condition
precedent for a common carrier to be discharged of its contractual obligation. If surrender of the
original bill of lading is not possible, acknowledgment of the delivery by signing the delivery receipt
suffices. This is what LSC did.

We also note that some delivery receipts were signed by Abdurahman's subordinates and not by
Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael testified that
Abdurahman was always present at the initial phase of each delivery, although on the few occasions
when Abdurahman could not stay to witness the complete delivery of the shipment, he authorized his
subordinates to sign the delivery receipts for him. This, to our mind, is sufficient and substantial
compliance with the requirements.

We further note that, strangely, NFTC made no effort to disapprove Abdurahman's resignation until
after the investigation and after he was cleared of any responsibility for the loss of the goods. With
Abdurahman outside of its reach, NFTC cannot now pass to LSC what could be Abdurahman's
negligence, if indeed he were responsible.

2)

G.R. No. 116940 June 11, 1997

The Phil. American Gen. Insurance Co., Inc.

vs Court of Appeals and Felman Shipping Lines

Ponente: Bellosillo

Facts:

July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by Felman,
7,500 cases of 1-liter Coca-Cola soft drink bottles to be transported to
Zamboanga City to Cebu. The shipment was insured with Philamgen.

July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a claim
with respondent Felman for recovery of damages. Felman denied thus prompted
cocacola to file an insurance claim with Philamgen. Philamgen later on claimed
its right of subrogation against Felman which disclaimed any liability for the
loss.

Philamgen alleged that the sinking and loss were due to the vessel's
unseaworthiness, that the vessel was improperly manned and its officers were
grossly negligent. Felman filed a motion to dismiss saying that there is no
right of subrogation in favor of Philamgen was transmitted by the shipper.
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RTC dismissed the complaint of Philamgen. CA set aside the dismissal and
remanded the case to the lower court for trial on the merits. Felman filed a
petition for certiorari but was denied.

RTC rendered judgment in favor of Felman. it ruled that the vessel was
seaworthy when it left the port of Zamboanga as evidenced by the certificate
issued by the Phil. Coast Guard and the ship owner’s surveyor. Thus, the loss
is due to a fortuitous event, in which, no liability should attach unless there
is stipulation or negligence.

On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo
for being top-heavy and the cocacola bottles were also improperly stored on
deck. Nonetheless, the CA denied the claim of Philamgen, saying that Philamgen
was not properly subrogated to the rights and interests of the shipper plus the
filing of notice of abandonment had absolved the ship owner from liability
under the limited liability rule.

Issues: (a) Whether the vessel was seaworthy, (b) whether limited liability
rule should apply and (c) whether Philamgen was properly subrogated to the
rights against Felman.

Ruling:

(a) The vessel was unseaworthy. The proximate cause thru the findings of the
Elite Adjusters, Inc., is the vessel's being top-heavy. Evidence shows that
days after the sinking coca-cola bottles were found near the vicinity of the
sinking which would mean that the bottles were in fact stowed on deck which the
vessel was not designed to carry substantial amount of cargo on deck. The
inordinate loading of cargo deck resulted in the decrease of the vessel's
metacentric height thus making it unstable.

(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for
the negligent acts of the captain in the care of the goods. This liability
however can be limited through abandonment of the vessel, its equipment and
freightage. Nonetheless, there are exceptions wherein the ship agent could
still be held answerable despite the abandonment, as where the loss or injury
was due to the fault of the ship owner and the captain. The international rule
is that the right of abandonment of vessels, as legal limitation of liability,
does not apply to cases where the injury was occasioned by the fault of the
ship owner. Felman was negligent, it cannot therefore escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to

the assurer that the vessel is seaworthy and such warranty is as much a term of
the contract as if expressly written on the face of the policy. However, the
implied warranty of seaworthiness can be excluded by terms in writing in the
policy of the clearest language. The marine policy issued by Philamgen to
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cocacola has dispensed that the "seaworthiness of the vessel as between the
assured and the underwriters in hereby admitted."

The result of the admission of seaworthiness by Philamgen may mean two things:
(1) the warranty of seaworthiness is fulfilled and (2) the risk of
unseaworthiness is assumed by the insurance company. This waiver clause would
mean that Philamgen has accepted the risk of unseaworthiness, therefore
Philamgen is liable.

On the matter of subrogation, it is provided that;

Art. 2207. If the plaintiff's property has been insured, and he has
received indemnity from the insurance company for the injury or loss arising
out of the wrong or breach of contract complained of, the insurance company
shall be subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing the loss or injury.

Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent
upon, nor does it grow out of any privity of contract or upon payment by the
insurance company of the insurance claim. It accrues simply upon payment by the
insurance company of the insurance claim.

Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines,

Inc., gave the former the right to bring an action as subrogee against FELMAN.
Having failed to rebut the presumption of fault, the liability of FELMAN for
the loss of the 7,500 cases of 1-liter Coca-Cola soft drink bottles is
inevitable.

WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered

to pay petitioner PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.

3)

Compania Maritima vs CA Case Digest

Compania Maritima vs Court of Appeals and Vicente Concepcion

(162 SCRA 685)

Facts: Vicente Concepcion is doing business under the name of Consolidated Construction. Being a Manila based
contractor, Concepcion had to ship his construction equipment to Cagayan de Oro. On August 28, 1964, Concepcion
shipped 1 unit pay loader, 4 units of 6x6 Roe trucks, and 2 pieces of water tanks. The aforementioned equipment was
loaded aboard the MV Cebu, which left Manila on August 30, 1964 and arrived at Cagayan de Oro on September 1,
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1964. The Reo trucks and water tanks were safely unloaded however the pay loader suffered damage while being
unloaded. The damaged pay loader was taken to the petitioner’s compound in Cagayan de Oro.

Consolidated Construction thru Vicente Concepcion wrote Compania Maritima to demand a replacement of the
broken pay loader and also asked for damages. Unable to get a response, Concepcion sent another demand letter.
Petitioner meanwhile, sent the damaged payloader to Manila, it was weighed at San Miguel Corporation, where it was
found that the payloader actually weighed 7.5 tons and not 2.5 tons as declared in its bill of lading. Due to this,
petitioner denied the claim for damages of Consolidated Construction. Consolidated then filed an action for damages
against petitioner with the Court of First Instance of Manila. The Court of First Instance dismissed the complaint
stating that the proximate cause of the fall of the payloader which caused its damage was the act or omission of
Vicente Concepcion for misrepresenting the weight of the payloader as 2.5 tons instead of its true weight of 7.5 tons.
On appeal, the Court of Appeals, reversed the decision of the Court of First Instance and ordered the plaintiff to pay
Concepcion damages. Hence this petition.

Issue: Whether or not the act of respondent Concepcion of misdeclaring the true weight of the payloader the
proximate and only cause of the damage of the payloader?

Held: No, Compania Maritima is liable for the damage to the payloader. The General rule under Articles 1735 and
1752 of the Civil Code is that common carriers are presumed to be at fault or to have acted negligently in case the
goods transported by them are lost, destroyed, or had deteriorated. To overcome the presumption of liability for the
loss destruction or deterioration common carriers must prove that they have exercised extraordinary diligence as
required by Article 1733 of the Civil Code.

Extraordinary Diligence in the vigilance over the goods tendered for shipment requires the common carrier to know
and follow the required precaution fro avoiding damage or destruction of the goods entrusted to it for safe carriage
and delivery. It requires common carriers to render service with the greatest skill and foresight and to use all
reasonable means to ascertain the nature and characteristics of goods tendered for shipment and to exercise due
care in the handling and stowage including such methods as their nature requires.

The Supreme Court further held that the weight in a bill of lading are prima facie evidence of the amount received and
the fact that the weighing was done by another will not relieve the common carrier where it accepted such weight and
entered it in on the bill of lading. The common carrier can protect themselves against mistakes in the bill of lading as
to weight by exercising extraordinary diligence before issuing such.

4)

LU DO & LU YM CORPORATION vs I. V. BINAMIRA

G.R. No. L-9840 April 22, 1957

FACTS:

On April 4, 1954, plaintiff filed an action in the Court of First Instance of Cebu against defendant to recover the sum of
P324.63 as value of certain missing shipment, P150 as actual and compensatory damages, and P600 as moral and
pecuniary damages. After trial, the court rendered judgment ordering defendant to pay plaintiff the sum of P216.84, with
legal interest. On appeal, the Court of Appeals affirmed the judgment, hence the present petition for review.

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.
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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.

ISSUE:

WON CA erred in its decision holding 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?

RULING:

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")

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2. . . . The responsibility of the Carrier in any capacity shall altogether cease and the goods shall be considered to
be delivered and at their own risk and expense in every respect when taken into the custody of customs or other
authorities. The Carrier shall not be required to give any notification of disposition of the goods. . . . (Emphasis
ours.)

(Paragraph 12, Exhibit "1")

3. Any provisions herein to the contrary notwithstanding, goods may be . . . by Carrier at ship's tackle . . . and
delivery beyond ship's tackle shall been tirely at the option of the Carrier and solely at the expense of the shipper
or consignee.

(Paragraph 22, Exhibit "1")

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

Wherefore, the decision appealed from is reversed, without pronouncement as to costs.

5)

Asian Terminals, Inc. v. Daehan Fire and Marine Insurance Co., LTD
4 February 2010, Nachura

Facts:
Doosan Corp shipped26 boxes of printed aluminum sheets to Manila and consigned to Access International. The goods
were insured by Daehan. Upon arrival in Manila, the containerized van was discharged and unloaded in apparent good
condition as no survey and exceptions were noted in the Equipment Interchange Receipt (EIR) issued by Asian Terminals,
Inc. (ATI), an arrastre operator. The container van was stored in the container yard of the port. Access requested ATI and
the licensed customs broker, Ms. Lazo, a joint survey of the shipment at the place of storage but no inspection was
conducted.

Thereafter, Ms. Lazo withdrew and ATI released the shipment and delivered to Access’ warehouse. The shipment was then
inspected and it was discovered that 12 boxes were missing and only 14 remained. Access filed a claim against Lazo and
ATI for the amount of the missing shipment. Both refused payment. Access sought indemnification from Daehan and the
latter paid accordingly. Daehan was subsequently subrogated to all the rights of Access.

Daehan filed a claim against the ship owner, the shipper, Lazo and ATI. The complaint against the ship owner and shipper
was subsequently dismissed. Lazo and ATI were held jointly liable up to the CA. Only ATI brought the case to the SC.

Issue: WON ATI is liable for the loss of goods

Held/Ratio: YES
The relationship, therefore, between the consignee and the arrastre operator must be examined. This relationship is akin
to that existing between the consignee and/or the owner of the shipped goods and the common carrier, or that between a
depositor and a warehouseman. In the performance of its obligations, an arrastre operator should observe the same
degree of diligence as that required of a common carrier and a warehouseman.

Being the custodian of the goods discharged from a vessel, an arrastre operator’s duty is to take good care of the goods
and to turn them over to the party entitled to their possession. In a claim for loss filed by the consignee or in the insurer,
the burden of proof to show compliance with the obligation to deliver the goods to the appropriate party devolves upon
the arrastre operator. Since the safekeeping of the goods is its responsibility, it must prove that the losses were not due to
its negligence or that of its employees.
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To prove the exercise of diligence in handling the subject cargoes, ATI must do more than merely show the possibility that
some other party could be responsible for the loss or the damage. It must prove that it exercised due care in the handling
thereof. ATI failed to do this.

6)

Samar Mining Co., Inc. V. Nordeutcher Lloyd, Et. Al.(1984)

G.R. No. L-28673 October 23, 1984
Lessons Applicable: Bill of Lading (Transportation)

Laws Applicable: Article 1736, Article 1738,Article 1884,Article 1889,Article 1892,Article 1909

FACTS:

 Samar Mining Company, Inc. imported1 crate of welded wedge wire sieves shipped
through Nordeutscher Lloyd
 Bill of Lading No. 18:
 transshipped at port of discharge: davao
 Section 1, paragraph 3 of Bill of Lading No. 18
 The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter
ship's tackle to be loaded or after the goods leave ship's tackle to be discharged, transshipped or forwarded ...
 Section 11:
 Whenever the carrier or m aster may deem it advisable or in any case where the goods are
placed at carrier's disposal at or consigned to a point where the ship does not expect to load or
discharge, the carrier or master may, without notice, forward the whole or any part of the
goods before or after loading at the original port of shipment, ... This carrier, in making
arrangements for any transshipping or forwarding vessels or means of transportation not
operated by this carrier shall be considered solely the forwarding agent of the shipper and
without any other responsibility whatsoever even though the freight for the whole transport
has been collected by him. ... Pending or during forwarding or transshipping the carrier may
store the goods ashore or afloat solely as agent of the shipper and at risk and expense of the
goods and the carrier shall not be liable for detention nor responsible for the acts, neglect,
delay or failure to act of anyone to whom the goods are entrusted or delivered for storage,
handling or any service incidental thereto
 When the goods arrived in the port of Davao, it was delivered in good order and condition to the
bonded warehouse of AMCYL but it was not delivered and received by Samar Mining Company,
Inc.
 Samar filed a claim against Nordeutscher and C.F. Sharp who brought in AMCYL as third party
defendant
 RTC: favored Samar
 Nordeutscher and C.F. Sharp laible but may enforce judgment against AMCYL
ISSUE: W/N the stipulations in bills of lading exempting the carrier from liability for loss or damage
to the goods when the same are not in its actual custody is valid
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HELD: YES. Reversed

 Article 1736. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them, without prejudice to the provisions of article 1738. -
applicable
 Article 1738. The extraordinary liability of the common carrier continues to be operative even
during the time the goods are stored in a warehouse of the carrier at the place of destination, until
the consignee has been advised of the arrival of the goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose of them. - no applicable since article contemplates
a situation where the goods had already reached their place of destination and are stored in
the warehouse of the carrier
 Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable
for the damages which, through his non-performance, the principal may suffer.
 Article 1889. The agent shall be liable for damages if, there being a conflict between his
interests and those of the principal, he should prefer his own.
 Article 1892. The agent may appoint a substitute if the principal has not prohibited him
from doing so; but he shall be responsible for the acts of the substitute:

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

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

 Article 1909. The agent is responsible not only for fraud, but also for negligence which
shall be judged with more or less rigor by the courts, according to whether the agency was or
was not for a compensation.
 The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the
Philippines. Neither is there any showing of notorious incompetence or insolvency on the part of AMCYT, which acted
as appellant's substitute in storing the goods awaiting transshipment

7)

HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION

G.R. No. L-25599

April 4, 1968

FACTS: “Consorcio Pesquero del Peru of South America” shipped freight pre-paid at Peru, jute bags of Peruvian fish meal
through SS Crowborough, covered by clean bills of lading. The cargo, consigned to San Miguel Brewery, Inc., now San
Miguel Corporation, and insured by Home Insurance Company arrived in Manila and was discharged into the lighters of
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Luzon Stevedoring Company. When the cargo was delivered to consignee San Miguel Brewery Inc., there were shortages
causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and the American
Steamship Agencies (shipowner), owner and operator of SS Crowborough.

Because the others denied liability, Home Insurance Company paid SMBI the insurance value of the loss, as full settlement
of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and American Steamship
Agencies, Home Insurance Company, as subrogee to the consignee, filed against them before the CFI of Manila a
complaint for recovery of the payment paid with legal interest, plus attorney’s fees.

In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the same quantity and
quality that it had received the same from the carrier.

The CFI, after trial, absolved Luzon Stevedoring Corporation, having found the latter to have merely delivered what it
received from the carrier in the same condition and quality, and ordered American Steamship Agencies to pay Home
Insurance Company the amount demanded with legal interest plus attorney’s fees.

Disagreeing with such judgment, American Steamship Agencies appealed directly to Us.

ISSUE: Is the stipulation in the charter party of the owner’s non-liability valid so as to absolve the American Steamship
Agencies from liability for loss?

HELD: The judgment appealed from is hereby reversed and appellant is absolved from liability to plaintiff.

YES

The bills of lading, covering the shipment of Peruvian fish meal provide at the back thereof that the bills of lading shall be
governed by and subject to the terms and conditions of the charter party, if any, otherwise, the bills of lading prevail over
all the agreements. On the bills are stamped “Freight prepaid as per charter party. Subject to all terms, conditions and
exceptions of charter party dated London, Dec. 13, 1962.”

Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the goods caused by
personal want of due diligence on its part or its manager to make the vessel in all respects seaworthy and to secure that
she be properly manned, equipped and supplied or by the personal act or default of the owner or its manager. Said
paragraph, however, exempts the owner of the vessel from any loss or damage or delay arising from any other source,
even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose
acts the owner would ordinarily be liable except for said paragraph..

The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence,
a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As
 11

a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy,
and is deemed valid.

Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier
is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss
due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such
policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a single
party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in
fact and legal contemplation merely a receipt and a document of title not a contract, for the contract is the charter party.
The consignee may not claim ignorance of said charter party because the bills of lading expressly referred to the same.
Accordingly, the consignees under the bills of lading must likewise abide by the terms of the charter party. And as stated,
recovery cannot be had thereunder, for loss or damage to the cargo, against the shipowners, unless the same is due to
personal acts or negligence of said owner or its manager, as distinguished from its other agents or employees. In this case,
no such personal act or negligence has been proved.

8)

CITADEL LINES INC. vs. COURT OF APPEALS and MANILA WINE MERCHANTS INC.
G.R. No. 88092, April 25, 1990, J. Regalado

I. Facts
Petitioner Citadel Lines, Inc. (carrier) is the general agent of the vessel Cardigan Bay/Strait Enterprise.
Respondent Manila Wine Merchants, Inc. (consignee) is the importer of the subject shipment of Dunhill
cigarettes from England. On March 17, 1979, the vessel loaded on board at England 180 Filbrite cartons of
mixed British manufactured cigarettes. The shipment arrived at the Port of Manila Pier in container vans
received by E. Razon Inc (arrastre). Due to lack of space, the representatives of the carrier kept the
cigarettes in containers, padlocked and sealed. The next morning, the head checker of the carrier discovered
that 90 cases of imported British manufactured cigarettes were missing.
The consignee sought to recover from the carrier the market value of the missing cargoes in the
amount of Php 315,000 but the carrier argued that the arrastre operator should be held liable as the incident
occurred in an area absolutely under the control of the latter. The trial court and the appellate court
adjudged the carrier as the party liable for the loss of cargoes. Hence, the present recourse by Citadel.

II. Issues
1. Whether the loss occurred while the cargo in question was in the custody of Citadel Lines

2. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the
consignee

III. Ruling
1. Yes. On the basis of the evidence presented, further bolstered by the testimonies of Citadel’s Claims
Manager and Head Checker, the subject cargo which was placed in a container van, padlocked and sealed by
the representative of the carrier was still in its possession and control when the loss occurred, there having
been no formal turnover of the cargo to the arrastre. Considering, therefore, that the subject shipment was
lost while it was still in the custody of herein petitioner carrier, and considering further that it failed to prove
that the loss was occasioned by an excepted cause, the inescapable conclusion is that the carrier was
negligent and should be held liable therefor.
 12

2. Yes. Basic is the rule, long since enshrined as a statutory provision, that a stipulation limiting the liability of
the carrier to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding. Further, 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. The consignee itself admitted in its
memorandum that the value of the goods shipped does not appear in the bills of lading. Hence, the
stipulation on the carrier's limited liability applies. Petitioner was ordered to pay respondent the sum of
US$4,465.60.

9)

LRTA V. Navidad (2003)

G.R. No. 145804 February 6, 2003

Lessons Applicable: Actionable Document (transportation)

Laws Cited: Art. 1755,Art. 1756,Art. 1759,Art. 1763

FACTS:

 October 14, 1993, 7:30 p.m. : Drunk Nicanor Navidad (Nicanor) entered the EDSA LRT station
after purchasing a “token”.
 While Nicanor was standing at the platform near the LRT tracks, the guard Junelito Escartin
approached him.
 Due to misunderstanding, they had a fist fight
 Nicanor fell on the tracks and killed instantaneously upon being hit by a moving train operated by
Rodolfo Roman
 December 8, 1994: The widow of Nicanor, along with her children, filed a complaint for damages
against Escartin, Roman, LRTA, Metro Transit Org. Inc. and Prudent (agency of security guards) for
the death of her husband.
 LRTA and Roman filed a counter-claim against Nicanor and a cross-claim against Escartin and
Prudent
 Prudent: denied liability – averred that it had exercised due diligence in the selection and
surpervision of its security guards
 LRTA and Roman: presented evidence
 Prudent and Escartin: demurrer contending that Navidad had failed to prove that Escartin was
negligent in his assigned task
 RTC: In favour of widow and against Prudent and Escartin, complaint against LRT and Roman were
dismissed for lack of merit
 CA: reversed by exonerating Prudent and held LRTA and Roman liable

ISSUE: W/N LRTA and Roman should be liable according to the contract of carriage

HELD: NO. Affirmed with Modification: (a) nominal damages is DELETED (CANNOT co-exist w/
compensatory damages) (b) Roman is absolved.
 13

 Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty off exercising utmost diligence in ensuring the
safety of passengers
 Civil Code:
 Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances
 Art. 1756. In case of death or injuries to passengers, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove that they observed extraordinary diligence
as prescribed in articles 1733 and 1755
 Art. 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful acts of the former’s employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers

This liability of the common carriers does NOT cease upon proof that they

Exercised all the diligence of a good father of a family in the selection and

supervision of their employees

 Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the
wilful acts or negligence of other passengers or of strangers, if the common carrier’s employees
through the exercise of the diligence of a good father of a family could have prevented or stopped
the act or omission.
 Carriers presumed to be at fault or been negligent and by simple proof of injury, the passenger is
relieaved of the duty to still establish the fault or negligence of the carrier or of its employees and
the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force
majeure
 Where it hires its own employees or avail itself of the services of an outsider or an independent
firm to undertake the task, the common carrier is NOT relieved of its responsibilities under the
contract of carriage
 GR: Prudent can be liable only for tort under Art. 2176 and related provisions in conjunction with
Art. 2180 of the Civil Code. (Tort may arise even under a contract, where tort [quasi-delict liability]
is that which breaches the contract)
 EX: if employer’s liability is negligence or fault on the part of the employee, employer can be made
liable on the basis of the presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and supervision of its employees.
 EX to the EX: Upon showing due diligence in the selection and supervision of the employee
 Factual finding of the CA: NO link bet. Prudent and the death of Nicanor for the reason that the
negligence of Escartin was NOT proven
 NO showing that Roman himself is guilty of any culpable act or omission, he must also be absolved
from liability
 Contractual tie bet. LRT and Nicanor is NOT itself a juridical relation bet. Nicanor and Roman
 Roman can be liable only for his own fault or negligence

10)

Singapore vs. Fernandez G.R. No. 142305 December 10, 2003 SINGAPORE AIRLINES LIMITED, petitioner,
 14

vs.

ANDION FERNANDEZ, respondent.

Facts:

 Andion Fernandez is an acclaimed soprano here in the Philippines and abroad. At the time of the incident, an airline
passage ticket was purchased from petitioner Singapore Airlines which would transport her to Manila from Frankfurt,
Germany.

 the respondent telephoned her mother to inform the latter that she missed the connecting flight. The respondent was able
to contact a family friend who picked her up from the airport for her overnight stay in Singapore.

 As a result of this incident, the respondent’s performance before the Royal Family of Malaysia was below par. Because of
the rude and unkind treatment she received from the petitioner’s personnel in Singapore, the respondent was engulfed with
fear, anxiety, humiliation and embarrassment causing her to suffer mental fatigue and skin rashes. She was thereby
compelled to seek immediate medical attention upon her return to Manila for "acute urticaria."

 RTC rendered a decision with the following dispositive portion: ACCORDINGLY and as prayed for, defendant Singapore
Airlines is ordered to pay herein plaintiff Andion H. Fernandez.

 The petitioner appealed the decision to the Court of Appeals. CA promulgated the assailed decision finding no reversible
error in the appealed decision of the trial court.

 Forthwith, the petitioner filed the instant petition for review.

Issue:

 common carrier was at fault or was negligent. All that is necessary to prove is the existence of the contract and the fact of
its nonperformance by the carrier.

 When a passenger contracts for a specific flight, he has a purpose in making that choice which must be respected. This
choice, once exercised, must not be impaired by a breach on the part of the airline without the latter incurring any liability.25
For petitioner’s failure to bring the respondent to her destination, as scheduled, we find the petitioner clearly liable for the
breach of its contract of carriage with the respondent.

 Bad faith means a breach of known duty through some motive of interest or ill will. Self-enrichment or fraternal interest,
and not personal ill will, may well have been the motive; but it is malice nevertheless.

 Article 2232 of the Civil Code provides that in a contractual or quasi-contractual relationship, exemplary damages may be
awarded only if the defendant had acted in a "wanton, fraudulent, reckless, oppressive or malevolent manner." In this case,
petitioner’s employees acted in a wanton, oppressive or malevolent manner.

11)

Dangwa Transportation Co. Inc. V. CA Et Al. (1991)

G.R. No. 95582 October 7, 1991

Lessons Applicable: Actionable Document (Transportation)

Laws Applicable: Art. 1733, Art. 1755

FACTS:

 May 13, 1985: Theodore M. Lardizabal was driving a passenger bus belonging to Dangwa
Transportation Co. Inc. (Dangwa)
 The bus was at full stop bet. Bunkhouses 53 and 54 when Pedro alighted
 Pedro Cudiamat fell from the platform of the bus when it suddenly accelerated forward
 Pedro was ran over by the rear right tires of the vehicle
 15

 Theodore first brought his other passengers and cargo to their respective destinations before
bringing Pedro to Lepanto Hospital where he expired
 Private respondents filed a complaint for damages against Dangwa for the death of Pedro Cudiamat
 Dangwa: observed and continued to observe the extraordinary diligence required in the operation
of the co. and the supervision of the employees even as they are not absolute insurers of the public
at large
 RTC: in favour of Dangwa holding Pedrito as negligent and his negligence was the cause of his
death but still ordered to pay in equity P 10,000 to the heirs of Pedrito
 CA: reversed and ordered to pay Pedrito indemnity, moral damages, actual and compensatory
damages and cost of the suit

ISSUE: W/N Dangwa should be held liable for the negligence of its driver Theodore

HELD: YES. CA affirmed.

 A public utility once it stops, is in effect making a continuous offer to bus riders (EVEN when
moving as long as it is still slow in motion)
 Duty of the driver: do NOT make acts that would have the effect of increasing peril to a passenger
while he is attempting to board the same
 Premature acceleration of the bus in this case = breach of duty
 Stepping and standing on the platform of the bus is already considered a passenger and is entitled
all the rights and protection pertaining to such a contractual relation
 Duty extends to boarding and alighting
 GR: By contract of carriage, the carrier assumes the express obligation to transport the passenger
to his destination safely and observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger is right away attributable to
the fault or negligence of the carrier
 EX: carrier to prove that it has exercised extraordinary diligence as prescribed in Art. 1733 and
1755 of the Civil Code
 Failure to immediately bring Pedrito to the hospital despite his serious condition = patent and
incontrovertible proof of their negligence
 Hospital was in Bunk 56
 1st proceeded to Bunk 70 to allow a passenger (who later called the family of Pedrito on his own
will) to alight and deliver a refrigerator
 In tort, actual damages is based on net earnings

12)

ABOITIZ SHIPPING V. CA (G.R. NO. 84458)

Facts:

Anacleto Viana boarded the vessel M/V Antonia owned by petitioner Aboitiz Shipping Corp at the port at San Jose,
Occidental Mindoro, bound for Manila. The vessel arrived at Pier 4, North Harbor, Manila and was taken over by Pioneer
Stevedoring for the latter to unload the cargoes from the said vessel pursuant to their Memorandum of Agreement. An
hour after the passengers and Viana had disembarked the vessel the crane operator began its unloading operation. While
the crane was being operated, Viana who had already disembarked the vessel remembered that some of his cargoes were
still loaded there. He went back and while he was pointing to the crew where his cargoes were, the crane hit him pinning
him between the side of the vessel and the crane resulting to his death. A complaint for damages was filed against
 16

petitioner for breach of contract of carriage. Petitioner contends that Viana ceased to be a passenger when he
disembarked the vessel and that consequently his presence there was no longer reasonable. CA affirmed the trial court’s
order holding Aboitiz liable. Hence the petition.

Issue:

Whether or not petitioner is still responsible as a carrier to Viana after the latter had already disembarked the vessel.

Ruling: YES.

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

The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or
near the petitioner’s vessel. We believe there exists such a justifiable cause. When the accident occurred, the victim was in
the act of unloading his cargoes, which he had every right to do, from petitioner’s vessel. As earlier stated, a carrier is duty
bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their
baggage.

Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at
the time of his tragic death.

13) Article 1174 of the Civil Code defines a fortuitous event as that which could not be
foreseen, or which, though foreseen, was inevitable. Whether an act of god[16] or an
act of man,[17] to constitute a fortuitous event, it must be shown that: a) the cause
of the unforeseen and unexpected occurrence or of the failure of the obligor to comply
with its obligations was independent of human will; b) it was impossible to foresee the
event or, if it could have been foreseen, to avoid it; c) the occurrence rendered it
impossible for the obligor to fulfill its obligations in a normal manner; and d) said
obligor was free from any participation in the aggravation of the injury or loss.[18 ] If
the negligence or fault of the obligor coincided with the occurrence of the fortuitous
event, and caused the loss or damage or the aggravation thereof, the fortuitous event
cannot shield the obligor from liability for his negligence.[19] [ 1 8 ] Real v. Belo, G.R.
No. 146224, January 26, 2007, 513 SCRA 111, 124.

REAL VS BELO

G.R. NO. 146224 ; JANUARY 26, 2007

Appeals; Pleadings and Practice; Procedural Rules and Technicalities; The rule is explicit in its mandate that the legible
duplicate originals or true copies of the judgment or final orders of both lower courts must be certified correct by the
Clerk of Court, unless the petitioner could show that the Clerk of Court was officially on leave and the Administrative
Officer was officially designated as officer-in-charge.— In the present case, petitioner’s submission of copies of the RTC
Decision and Order certified as correct by the Administrative Officer IV of the RTC is insufficient compliance with the
requirements of the rule. Petitioner failed to show that the Clerk of Court was officially on leave and the Administrative
Officer was officially designated as officer-in-charge. The rule is explicit in its mandate that the legible duplicate originals
or true copies of the judgments or final orders of both lower courts must be certified correct by the Clerk of Court.
 17

Same; Same; There is ample jurisprudence holding that the subsequent and substantial compliance of a party may call
for the relaxation of the rules of procedure; When the Court of Appeals dismisses a petition outright and the petitioner
files a motion for the reconsideration of such dismissal, appending thereto the requisite pleadings, documents or
order/resolution, this would constitute substantial compliance with the Revised Rules of Court.— Nonetheless, a strict
application of the rule in this case is not called for. This Court has ruled against the dismissal of appeals based solely on
technicalities in several cases, especially when the appellant had substantially complied with the formal requirements.
There is ample jurisprudence holding that the subsequent and substantial compliance of a party may call for the relaxation
of the rules of procedure. When the CA dismisses a petition outright and the petitioner files a motion for the
reconsideration of such dismissal, appending thereto the requisite pleadings, documents or order/resolution, this would
constitute substantial compliance with the Revised Rules of Court.

Same; Same; There is no compelling need to attach the position papers of the parties where the Decisions of the MeTC
and RTC already stated their respective arguments.—On the necessity of attaching position papers and affidavits of
witnesses, Section 2 of Rule 42 of the Revised Rules of Court requires attachments if these would support the allegations
of the petition. In the present case, there was no compelling need to attach the position papers of the parties since the
Decisions of the MeTC and RTC already stated their respective arguments. As to the affidavits, the Court notes that they
were presented by the respondent as part of the testimony of his witness Fire Investigator Pinca and therefore would not
support the allegations of the petitioner.

Same; Same; What should guide judicial action is that a party litigant is given the fullest opportunity to establish the
merits of his action or defense rather than for him to lose life, honor or property on mere technicalities.—Truly, in
dismissing the petition for review, the CA had committed grave abuse of discretion amounting to lack of jurisdiction in
putting a premium on technicalities at the expense of a just resolution of the case. The Court’s pronouncement in Republic
of the Philippines v. Court of Appeals, 292 SCRA 243 (1998), is worth echoing: “cases should be determined on the merits,
after full opportunity to all parties for ventilation of their causes and defenses, rather than on technicality or some
procedural imperfections. In that way, the ends of justice would be better served.” Thus, what should guide judicial action
is that a party litigant is given the fullest opportunity to establish the merits of his action or defense rather than for him to
lose life, honor or property on mere technicalities.

Torts; Quasi-Delicts; Negligence; Fortuitous Events; Elements; A party’s theory of fortuitous event is unavailing where
the circumstances show that the fire originated from leaking fumes from the LPG stove and tank installed at a party’s
fastfood stall and her employees failed to prevent the fire from spreading and destroying the other fastfood stalls.—
Jurisprudence defines the elements of a “fortuitous event” as follows: (a) the cause of the unforeseen and unexpected
occurrence must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor. 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. In other words,
there must be an entire exclusion of human agency from the cause of injury or loss. It is established by evidence that the
fire originated from leaking fumes from the LPG stove and tank installed at petitioner’s fastfood stall and her employees
failed to prevent the fire from spreading and destroying the other fastfood stalls, including respondent’s fastfood stall.
Such circumstances do not support petitioner’s theory of fortuitous event.

Same; Same; Same; Same; Evidence; Bare allegations, unsubstantiated by evidence, are not equivalent to proof.—
Petitioner’s bare allegation is far from sufficient proof for the Court to rule in her favor. It is basic in the rule of evidence
that bare allegations, unsubstantiated by evidence, are not equivalent to proof. In short, mere allegations are not
evidence.

Same; Same; Same; Whenever an employee’s negligence causes damage or injury to another, there instantly arises a
presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection (culpa in
eligiendo) or supervision (culpa in vigilando) of its employees.—Whenever an employee’s negligence causes damage or
injury to another, there instantly arises a presumption juris tantum that the employer failed to exercise diligentissimi
patris families in the selection (culpa in eligiendo) or supervision (culpa in vigilando) of its employees. To avoid liability for
 18

a quasi-delict committed by his employee, an employer must overcome the presumption by presenting convincing proof
that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee.

Appeals; Pleadings and Practice; It is well-settled that a party who does not appeal from the decision may not obtain
any affirmative relief from the appellate court other than what he has obtained from the lower court, if any, whose
decision is brought up on appeal; Exceptions.—As to the award of temperate damages, the increase in the amount
thereof by the RTC is improper. The RTC could no longer examine the amounts awarded by the MeTC since respondent did
not appeal from the Decision of the MeTC. It is well-settled that a party who does not appeal from the decision may not
obtain any affirmative relief from the appellate court other than what he has obtained from the lower court, if any, whose
decision is brought up on appeal. While there are exceptions to this rule, such as if they involve (1) errors affecting the
lower court’s jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors, none apply here.

14)

MAERSK LINE, vs. CA - CASTILLO,

G.R. No. 94761 May 17, 1993

FACTS:

Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its
general agent Compania General de Tabacos de Filipinas.

Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the
manutacture of pharmaceutical products.

On November 12, 1976, private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly, Inc.'s) agent in
the Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The
capsules were placed in six (6) drums of 100,000 capsules each valued at US $1,668.71.

Through a Memorandum of Shipment (Exh. "B"; AC GR CV No.10340, Folder of Exhibits, pp. 5-6), the shipper Eli Lilly, Inc.
of Puerto Rico advised private respondent as consignee that the 600,000 empty gelatin capsules in six (6) drums of
100,000 capsules each, were already shipped on board MV "Anders Maerskline" under Voyage No. 7703 for shipment to
the Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3,
1977.

For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then
transported back Oakland, Califorilia. The goods finally arrived in the Philippines on June 10, 1977 or after two (2) months
from the date specified in the memorandum. As a consequence, private respondent as consignee refused to take delivery
of the goods on account of its failure to arrive on time.

Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an action before the
court a quo for rescission of contract with damages against petitioner and Eli Lilly, Inc. as defendants.

Denying that it committed breach of contract, petitioner alleged in its that answer that the subject shipment was
transported in accordance with the provisions of the covering bill of lading and that its liability under the law on
transportation of good attaches only in case of loss, destruction or deterioration of the goods as provided for in Article
1734 of Civil Code (Rollo, p. 16).

Defendant Eli Lilly, Inc., on the other hand, filed its answer with compulsory and cross-claim. In its cross-claim, it alleged
that the delay in the arrival of the the subject merchandise was due solely to the gross negligence of petitioner Maersk
Line.

The issues having been joined, private respondent moved for the dismissal of the complaint against Eli Lilly, Inc.on the
ground that the evidence on record shows that the delay in the delivery of the shipment was attributable solely to
petitioner.
 19

Acting on private respondent's motion, the trial court dismissed the complaint against Eli Lilly, Inc. Correspondingly, the
latter withdraw its cross-claim against petitioner in a joint motion dated December 3, 1979.

After trial held between respondent and petitioner, the court a quo rendered judgment dated January 8, 1982 in favor of
respondent Castillo, believing and holding that there was a breach of performance of their obligation by the defendant
Maersk Line consisting of their negligence to ship the 6 drums of empty Gelatin Capsules which under their own
memorandum shipment would arrive in the Philippines on April 3, 1977 which under Art. 1170 of the New Civil Code, they
stood liable for damages.

Hence the petition.

ISSUE:

WON CA erred in its decision entitling respondent Castillo to damages resulting from delay in the delivery of the shipment
in the absence in the bill of lading of a stipulation on the period of delivery.

RULING:

Respondent court, erred in declaring that the trial court based petitioner's liability on the cross-claim of Eli Lilly, Inc. As
borne out by the record, the trial court anchored its decision on petitioner's delay or negligence to deliver the six (6)
drums of gelatin capsules within a reasonable time on the basis of which petitioner was held liable for damages under
Article 1170 of the New Civil Code which provides that those who in the performance of their obligations are guilty of
fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages.

Nonetheless, petitioner maintains that it cannot be held for damages for the alleged delay in the delivery of the 600,000
empty gelatin capsules since it acted in good faith and there was no special contract under which the carrier undertook to
deliver the shipment on or before a specific date (Rollo, p. 103).

On the other hand, private respondent claims that during the period before the specified date of arrival of the goods, he
had made several commitments and contract of adhesion. Therefore, petitioner can be held liable for the damages
suffered by private respondent for the cancellation of the contracts he entered into.

We have carefully reviewed the decisions of respondent court and the trial court and both of them show that, in finding
petitioner liable for damages for the delay in the delivery of goods, reliance was made on the rule that contracts of
adhesion are void. Added to this, the lower court stated that the exemption against liability for delay is against public
policy and is thus, void. Besides, private respondent's action is anchored on Article 1170 of the New Civil Code and not
under the law on Admiralty (AC-GR CV No. 10340, Rollo, p. 14).

The bill of lading covering the subject shipment among others, reads:

6. GENERAL

(1) The Carrier does not undertake that the goods shall arive at the port of discharge or the place of
delivery at any particular time or to meet any particular market or use and save as is provided in clause 4
the Carrier shall in no circumstances be liable for any direct, indirect or consequential loss or damage
caused by delay. If the Carrier should nevertheless be held legally liable for any such direct or indirect or
consequential loss or damage caused by delay, such liability shall in no event exceed the freight paid for
the transport covered by this Bill of Lading. (Exh. "1-A"; AC-G.R. CV No. 10340, Folder of Exhibits, p. 41)

It is not disputed that the aforequoted provision at the back of the bill of lading, in fine print, is a contract of adhesion.
Generally, contracts of adhesion are considered void since almost all the provisions of these types of contracts are
prepared and drafted only by one party, usually the carrier (Sweet Lines v. Teves, 83 SCRA 361 [1978]). The only
participation left of the other party in such a contract is the affixing of his signature thereto, hence the term "Adhesion"
(BPI Credit Corporation v. Court of Appeals, 204 SCRA 601 [1991]; Angeles v. Calasanz, 135 SCRA 323 [1985]).

Nonetheless, settled is the rule that bills of lading are contracts not entirely prohibited (Ong Yiu v. Court of Appeals, et al.,
91 SCRA 223 [1979]; Servando, et al. v. Philippine Steam Navigation Co., 117 SCRA 832 [1982]). One who adheres to the
contract is in reality free to reject it in its entirety; if he adheres, he gives his consent (Magellan Manufacturing Marketing
Corporation v. Court of Appeals, et al., 201 SCRA 102 [1991]).
 20

In Magellan, (supra), we ruled:

It is a long standing jurisprudential rule that a bill of lading operates both as a receipt and as contract to
transport and deliver the same a therein stipulated. As a contract, it names the parties, which includes the
consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and
obligations assumed by the parties. Being a contract, it is the law between the parties who are bound by
its terms and conditions provided that these are not contrary to law, morals, good customs, public order
and public policy. A bill of lading usually becomes effective upon its delivery to and acceptance by the
shipper. It is presumed that the stipulations of the bill were, in the absence of fraud, concealment or
improper conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the
bill or not. (Emphasis supplied)

However, the aforequoted ruling applies only if such contracts will not create an absurd situation as in the case at bar. The
questioned provision in the subject bill of lading has the effect of practically leaving the date of arrival of the subject
shipment on the sole determination and will of the carrier.

While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not
vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a
given date or time (Mendoza v. Philippine Air Lines, Inc., 90 Phil. 836 [1952]), delivery of shipment or cargo should at least
be made within a reasonable time.

In Saludo, Jr. v. Court of Appeals (207 SCRA 498 [1992]) this Court held:

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a
carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to
convey goods, the law implies a contract that they shall be delivered at destination within a reasonable
time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express
contract to transport and deliver properly within a specified time, it is bound to fulfill its contract and is
liable for any delay, no matter from what cause it may have arisen. This result logically follows from the
well-settled rule that where the law creates a duty or charge, and the default in himself, and has no
remedy over, then his own contract creates a duty or charge upon himself, he is bound to make it good
notwithstanding any accident or delay by inevitable necessity because he might have provided against it
by contract. Whether or not there has been such an undertaking on the part of the carrier is to be
determined from the circumstances surrounding the case and by application of the ordinary rules for the
interpretation of contracts.

An examination of the subject bill of lading (Exh. "1"; AC GR CV No. 10340, Folder of Exhibits, p. 41) shows that the subject
shipment was estimated to arrive in Manila on April 3, 1977. While there was no special contract entered into by the
parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific
date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises no need to
execute another contract for the purpose as it would be a mere superfluity.

In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2) months and seven (7)
days falls was beyond the realm of reasonableness. Described as gelatin capsules for use in pharmaceutical products,
subject shipment was delivered to, and left in, the possession and custody of petitioner-carrier for transport to Manila via
Oakland, California. But through petitioner's negligence was mishipped to Richmond, Virginia. Petitioner's insitence that it
cannot be held liable for the delay finds no merit.

Petition maintains that the award of actual, moral and exemplary dames and attorney's fees are not valid since there are
no factual findings or legal bases stated in the text of the trial court's decision to support the award thereof.

Indeed, it is settled that actual and compensataory damages requires substantial proof (Capco v. Macasaet. 189 SCRA 561
[1990]). In the case at bar, private respondent was able to sufficiently prove through an invoice (Exh. 'A-1'), certification
from the issuer of the letter of credit (Exh.'A-2') and the Memorandum of Shipment (Exh. "B"), the amount he paid as
costs of the credit line for the subject goods. Therefore, respondent court acted correctly in affirming the award of eleven
thousand six hundred eighty pesos and ninety seven centavos (P11,680.97) as costs of said credit line.

As to the propriety of the award of moral damages, Article 2220 of the Civil Code provides that moral damages may be
awarded in "breaches of contract where the defendant acted fraudulently or in bad faith" (Pan American World Airways v.
Intermediate Appellate Court, 186 SCRA 687 [1990]).
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In the case before us, we that the only evidence presented by petitioner was the testimony of Mr. Rolando Ramirez, a
claims manager of its agent Compania General de Tabacos de Filipinas, who merely testified on Exhs. '1' to '5' (AC-GR CV
No. 10340, p. 2) and nothing else. Petitioner never even bothered to explain the course for the delay, i.e. more than two
(2) months, in the delivery of subject shipment. Under the circumstances of the case, we hold that petitioner is liable for
breach of contract of carriage through gross negligence amounting to bad faith. Thus, the award of moral damages if
therefore proper in this case.

In line with this pronouncement, we hold that exemplary damages may be awarded to the private respondent. In
contracts, exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppresive or
malevolent manner. There was gross negligence on the part of the petitioner in mishiping the subject goods destined for
Manila but was inexplicably shipped to Richmond, Virginia, U.S.A. Gross carelessness or negligence contitutes wanton
misconduct, hence, exemplary damages may be awarded to the aggrieved party (Radio Communication of the Phils., Inc.
v. Court of Appeals, 195 SCRA 147 [1991]).

Although attorney's fees are generally not recoverable, a party can be held liable for such if exemplary damages are
awarded (Artice 2208, New Civil Code). In the case at bar, we hold that private respondent is entitled to reasonable
attorney`s fees since petitioner acted with gross negligence amounting to bad faith.

However, we find item 4 in the dispositive portion of respondent court`s decision which awarded thirty (30) percent of the
total damages awarded except item 3 regarding attorney`s fees and litigation expenses in favor of private respondent, to
be unconsionable, the same should be deleted.

WHEREFORE, with the modification regarding the deletion of item 4 of respondent court`s decision, the appealed decision
is is hereby AFFIRMED in all respects.