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G.R. No. 146018. June 25, 2003] Inc. (now Cokaliong Shipping Lines), [petitioner]
for brevity, cargo consisting of one (1) carton of
EDGAR COKALIONG SHIPPING LINES, INC.,, Christmas dcor and two (2) sacks of plastic toys,
Petitioner, vs. UCPB GENERAL INSURANCE to be transported on board the M/V Tandag on
COMPANY, INC., respondent. its Voyage No. T-189 scheduled to depart from
Cebu City, on December 12, 1991, for Tandag,
The liability of a common carrier for the loss of Surigao del Sur. [Petitioner] issued Bill of Lading
goods may, by stipulation in the bill of lading, be No. 58, freight prepaid, covering the cargo.
limited to the value declared by the shipper. On Nestor Angelia was both the shipper and
the other hand, the liability of the insurer is consignee of the cargo valued, on the face
determined by the actual value covered by the thereof, in the amount of P6,500.00. Zosimo
insurance policy and the insurance premiums Mercado likewise delivered cargo to [petitioner],
paid therefor, and not necessarily by the value consisting of two (2) cartons of plastic toys and
declared in the bill of lading. Christmas decor, one (1) roll of floor mat and one
(1) bundle of various or assorted goods for
transportation thereof from Cebu City to Tandag,
The Case Surigao del Sur, on board the said vessel, and
said voyage. [Petitioner] issued Bill of Lading
Before the Court is a Petition for Review[1] under No. 59 covering the cargo which, on the face
Rule 45 of the Rules of Court, seeking to set aside thereof, was valued in the amount of P14,000.00.
the August 31, 2000 Decision[2] and the Under the Bill of Lading, Zosimo Mercado was
November 17, 2000 Resolution[3] of the Court of both the shipper and consignee of the cargo.
Appeals[4] (CA) in CA-GR SP No. 62751. The
dispositive part of the Decision reads: On December 12, 1991, Feliciana Legaspi insured
the cargo, covered by Bill of Lading No. 59,
IN THE LIGHT OF THE FOREGOING, the appeal is with the UCPB General Insurance Co., Inc.,
GRANTED. The Decision appealed from is [respondent] for brevity, for the amount of
REVERSED. [Petitioner] is hereby condemned to P100,000.00 against all risks under Open Policy
pay to [respondent] the total amount of No. 002/91/254 for which she was issued, by
P148,500.00, with interest thereon, at the rate of [respondent], Marine Risk Note No. 18409 on
6% per annum, from date of this Decision of the said date. She also insured the cargo covered by
Court. [Respondents] claim for attorneys fees [is] Bill of Lading No. 58, with [respondent], for the
DISMISSED. [Petitioners] counterclaims are amount of P50,000.00, under Open Policy No.
DISMISSED.[5] 002/91/254 on the basis of which [respondent]
issued Marine Risk Note No. 18410 on said
The assailed Resolution denied petitioners Motion date.
for Reconsideration.
When the vessel left port, it had thirty-four (34)
On the other hand, the disposition of the Regional passengers and assorted cargo on board,
Trial Courts[6] Decision,[7] which was later including the goods of Legaspi. After the vessel
reversed by the CA, states: had passed by the Mandaue-Mactan Bridge, fire
ensued in the engine room, and, despite earnest
WHEREFORE, premises considered, the case is efforts of the officers and crew of the vessel, the
hereby DISMISSED for lack of merit. fire engulfed and destroyed the entire vessel
resulting in the loss of the vessel and the cargoes
No cost.[8] therein. The Captain filed the required Marine
The Facts
Shortly thereafter, Feliciana Legaspi filed a claim,
with [respondent], for the value of the cargo
The facts of the case are summarized by the insured under Marine Risk Note No. 18409
appellate court in this wise: and covered by Bill of Lading No. 59. She
submitted, in support of her claim, a Receipt,
Sometime on December 11, 1991, Nestor Angelia dated December 11, 1991, purportedly signed by
delivered to the Edgar Cokaliong Shipping Lines, Zosimo Mercado, and Order Slips purportedly

signed by him for the goods he received from Feliciana Legaspi had executed Subrogation
Feliciana Legaspi valued in the amount of Receipts/Deeds in favor of [respondent] after
P110,056.00. [Respondent] approved the claim of paying to her the value of the cargo on account
Feliciana Legaspi and drew and issued UCPB of the Marine Risk Notes it issued in her favor
Check No. 612939, dated March 9, 1992, in the covering the cargo.
net amount of P99,000.00, in settlement of her
claim after which she executed a Subrogation In its Answer to the complaint, [petitioner]
Receipt/Deed, for said amount, in favor of alleged that: (a) [petitioner] was cleared by the
[respondent]. She also filed a claim for the value Board of Marine Inquiry of any negligence in the
of the cargo covered by Bill of Lading No. 58. burning of the vessel; (b) the complaint stated no
She submitted to [respondent] a Receipt, dated cause of action against [petitioner]; and (c) the
December 11, 1991 and Order Slips, shippers/consignee had already been paid the
purportedly signed by Nestor Angelia for the value of the goods as stated in the Bill of Lading
goods he received from Feliciana Legaspi valued and, hence, [petitioner] cannot be held liable for
at P60,338.00. [Respondent] approved her claim the loss of the cargo beyond the value thereof
and remitted to Feliciana Legaspi the net amount declared in the Bill of Lading.
of P49,500.00, after which she signed a
Subrogation Receipt/Deed, dated March 9, After [respondent] rested its case, [petitioner]
1992, in favor of [respondent]. prayed for and was allowed, by the Court a quo,
to take the depositions of Chester Cokaliong, the
On July 14, 1992, [respondent], as subrogee of Vice-President and Chief Operating Officer of
Feliciana Legaspi, filed a complaint anchored on [petitioner], and a resident of Cebu City, and of
torts against [petitioner], with the Regional Trial Noel Tanyu, an officer of the Equitable Banking
Court of Makati City, for the collection of the total Corporation, in Cebu City, and a resident of Cebu
principal amount of P148,500.00, which it paid to City, to be given before the Presiding Judge of
Feliciana Legaspi for the loss of the cargo, Branch 106 of the Regional Trial Court of Cebu
praying that judgment be rendered in its favor City. Chester Cokaliong and Noel Tanyu did
and against the [petitioner] as follows: testify, by way of deposition, before the Court
and declared inter alia, that: [petitioner] is a
WHEREFORE, it is respectfully prayed of this family corporation like the Chester Marketing,
Honorable Court that after due hearing, judgment Inc.; Nestor Angelia had been doing business
be rendered ordering [petitioner] to pay with [petitioner] and Chester Marketing, Inc., for
[respondent] the following. years, and incurred an account with Chester
Marketing, Inc. for his purchases from said
1. Actual damages in the amount of P148,500.00 corporation; [petitioner] did issue Bills of Lading
plus interest thereon at the legal rate from the Nos. 58 and 59 for the cargo described therein
time of filing of this complaint until fully paid; with Zosimo Mercado and Nestor Angelia as
shippers/consignees, respectively; the engine
2. Attorneys fees in the amount of P10,000.00; room of the M/V Tandag caught fire after it
and passed the Mandaue/Mactan Bridge resulting in
the total loss of the vessel and its cargo; an
investigation was conducted by the Board of
3. Cost of suit. Marine Inquiry of the Philippine Coast Guard
which rendered a Report, dated February 13,
[Respondent] further prays for such other reliefs 1992 absolving [petitioner] of any responsibility
and remedies as this Honorable Court may deem on account of the fire, which Report of the Board
just and equitable under the premises. was approved by the District Commander of the
Philippine Coast Guard; a few days after the
[Respondent] alleged, inter alia, in its complaint, sinking of the vessel, a representative of the
that the cargo subject of its complaint was Legaspi Marketing filed claims for the values of
delivered to, and received by, [petitioner] for the goods under Bills of Lading Nos. 58 and
transportation to Tandag, Surigao del Sur under 59 in behalf of the shippers/consignees, Nestor
Bill of Ladings, Annexes A and B of the Angelia and Zosimo Mercado; [petitioner] was
complaint; that the loss of the cargo was due to able to ascertain, from the shippers/consignees
the negligence of the [petitioner]; and that and the representative of the Legaspi Marketing

that the cargo covered by Bill of Lading No. 59 cargo was caused by something other than its
was owned by Legaspi Marketing and consigned negligence in the upkeep, maintenance and
to Zosimo Mercado while that covered by Bill of operation of the vessel.[10]
Lading No. 58 was purchased by Nestor Angelia
from the Legaspi Marketing; that [petitioner] Petitioner had paid P14,000 to Legaspi Marketing
approved the claim of Legaspi Marketing for the for the cargo covered by Bill of Lading No. 59.
value of the cargo under Bill of Lading No. 59 The CA, however, held that the payment did not
and remitted to Legaspi Marketing the said extinguish petitioners obligation to respondent,
amount under Equitable Banking Corporation because there was no evidence that Feliciana
Check No. 20230486 dated August 12, 1992, in Legaspi (the insured) was the owner/proprietor of
the amount of P14,000.00 for which the Legaspi Marketing. The CA also pointed out the
representative of the Legaspi Marketing signed impropriety of treating the claim under Bill of
Voucher No. 4379, dated August 12, 1992, for the Lading No. 58 -- covering cargo valued therein at
said amount of P14,000.00 in full payment of P6,500 -- as a setoff against Nestor Angelias
claims under Bill of Lading No. 59; that account with Chester Enterprises, Inc.
[petitioner] approved the claim of Nestor Angelia
in the amount of P6,500.00 but that since the Finally, it ruled that respondent is not bound by
latter owed Chester Marketing, Inc., for some the valuation of the cargo under the Bills of
purchases, [petitioner] merely set off the amount Lading, x x x nor is the value of the cargo under
due to Nestor Angelia under Bill of Lading No. said Bills of Lading conclusive on the
58 against his account with Chester Marketing, [respondent]. This is so because, in the first
Inc.; [petitioner] lost/[misplaced] the original of place, the goods were insured with the
the check after it was received by Legaspi [respondent] for the total amount of P150,000.00,
Marketing, hence, the production of the microfilm which amount may be considered as the face
copy by Noel Tanyu of the Equitable Banking value of the goods.[11]
Corporation; [petitioner] never knew, before
settling with Legaspi Marketing and Nestor
Angelia that the cargo under both Bills of Hence this Petition.[12]
Lading were insured with [respondent], or that
Feliciana Legaspi filed claims for the value of the Issues
cargo with [respondent] and that the latter
approved the claims of Feliciana Legaspi and paid Petitioner raises for our consideration the
the total amount of P148,500.00 to her; following alleged errors of the CA:
[petitioner] came to know, for the first time, of
the payments by [respondent] of the claims of I. The Honorable Court of Appeals erred,
Feliciana Legaspi when it was served with the granting arguendo that petitioner is
summons and complaint, on October 8, 1992; liable, in holding that petitioners
after settling his claim, Nestor Angelia x x x liability should be based on the actual
executed the Release and Quitclaim, dated July insured value of the goods and not
2, 1993, and Affidavit, dated July 2, 1993 in from actual valuation declared by the
favor of [respondent]; hence, [petitioner] was shipper/consignee in the bill of lading.
absolved of any liability for the loss of the cargo II. The Court of Appeals erred in not affirming
covered by Bills of Lading Nos. 58 and 59; the findings of the Philippine Coast
and even if it was, its liability should not exceed Guard, as sustained by the trial court a
the value of the cargo as stated in the Bills of quo, holding that the cause of loss of
Lading. the aforesaid cargoes under Bill of
Lading Nos. 58 and 59 was due to
[Petitioner] did not anymore present any other force majeure and due diligence was
witnesses on its evidence-in-chief. x x x[9] [exercised] by petitioner prior to,
(Citations omitted) during and immediately after the fire
on [petitioners] vessel.
Ruling of the Court of Appeals III. The Court of Appeals erred in not holding
that respondent UCPB General
The CA held that petitioner had failed to prove Insurance has no cause of action
that the fire which consumed the vessel and its against the petitioner.[13]

In sum, the issues are: (1) Is petitioner liable for As the peril of fire is not comprehended within
the loss of the goods? (2) If it is liable, what is the the exceptions in Article 1734, supra, Article 1735
extent of its liability? of the Civil Code provides that in all cases other
than those mentioned in Article 1734, the
This Courts Ruling common carrier shall be presumed to have been
at fault or to have acted negligently, unless it
The Petition is partly meritorious. proves that it has observed the extraordinary
diligence required by law.
First Issue:
Where loss of cargo results from the failure of the
officers of a vessel to inspect their ship frequently
Liability for Loss so as to discover the existence of cracked parts,
that loss cannot be attributed to force majeure,
Petitioner argues that the cause of the loss of the but to the negligence of those officials.[16]
goods, subject of this case, was force majeure. It
adds that its exercise of due diligence was The law provides that a common carrier is
adequately proven by the findings of the presumed to have been negligent if it fails to
Philippine Coast Guard. prove that it exercised extraordinary vigilance
over the goods it transported. Ensuring the
We are not convinced. The uncontroverted seaworthiness of the vessel is the first step in
findings of the Philippine Coast Guard show that exercising the required vigilance. Petitioner did
the M/V Tandag sank due to a fire, which resulted not present sufficient evidence showing what
from a crack in the auxiliary engine fuel oil measures or acts it had undertaken to ensure the
service tank. Fuel spurted out of the crack and seaworthiness of the vessel. It failed to show
dripped to the heating exhaust manifold, causing when the last inspection and care of the auxiliary
the ship to burst into flames. The crack was engine fuel oil service tank was made, what the
located on the side of the fuel oil tank, which had normal practice was for its maintenance, or some
a mere two-inch gap from the engine room other evidence to establish that it had exercised
walling, thus precluding constant inspection and extraordinary diligence. It merely stated that
care by the crew. constant inspection and care were not possible,
and that the last time the vessel was dry-docked
Having originated from an unchecked crack in the was in November 1990. Necessarily, in
fuel oil service tank, the fire could not have been accordance with Article 1735[17] of the Civil
caused by force majeure. Broadly speaking, force Code, we hold petitioner responsible for the loss
majeure generally applies to a natural accident, of the goods covered by Bills of Lading Nos. 58
such as that caused by a lightning, an and 59.
earthquake, a tempest or a public enemy.[14]
Hence, fire is not considered a natural disaster or Second Issue:
calamity. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court,[15] we explained: Extent of Liability

x x x. This must be so as it arises almost Respondent contends that petitioners liability

invariably from some act of man or by human should be based on the actual insured value of
means. It does not fall within the category of an the goods, subject of this case. On the other
act of God unless caused by lighting or by other hand, petitioner claims that its liability should be
natural disaster or calamity. It may even be limited to the value declared by the
caused by the actual fault or privity of the carrier. shipper/consignee in the Bill of Lading.

Article 1680 of the Civil Code, which considers The records[18] show that the Bills of Lading
fire as an extraordinary fortuitous event refers to covering the lost goods contain the stipulation
leases or rural lands where a reduction of the rent that in case of claim for loss or for damage to the
is allowed when more than one-half of the fruits shipped merchandise or property, [t]he liability of
have been lost due to such event, considering the common carrier x x x shall not exceed the
that the law adopts a protective policy towards value of the goods as appearing in the bill of

lading.[19] The attempt by respondent to make option of avoiding accrual of liability limitation by
light of this stipulation is unconvincing. As it had the simple and surely far from onerous expedient
the consignees copies of the Bills of Lading,[20] it of declaring the nature and value of the shipment
could have easily produced those copies, instead in the bill of lading.
of relying on mere allegations and suppositions.
However, it presented mere photocopies thereof Pursuant to the afore-quoted provisions of law, it
to disprove petitioners evidence showing the is required that the stipulation limiting the
existence of the above stipulation. common carriers liability for loss must be
reasonable and just under the circumstances, and
A stipulation that limits liability is valid[21] as has been freely and fairly agreed upon.
long as it is not against public policy. In Everett
Steamship Corporation v. Court of Appeals,[22] The bill of lading subject of the present
the Court stated: controversy specifically provides, among others:

A stipulation in the bill of lading limiting the 18. All claims for which the carrier may be liable
common carriers liability for loss or destruction of shall be adjusted and settled on the basis of the
a cargo to a certain sum, unless the shipper or shippers net invoice cost plus freight and
owner declares a greater value, is sanctioned by insurance premiums, if paid, and in no event shall
law, particularly Articles 1749 and 1750 of the the carrier be liable for any loss of possible profits
Civil Code which provides: or any consequential loss.

Art. 1749. A stipulation that the common carriers The carrier shall not be liable for any loss of or
liability is limited to the value of the goods any damage to or in any connection with, goods
appearing in the bill of lading, unless the shipper in an amount exceeding One Hundred Thousand
or owner declares a greater value, is binding. Yen in Japanese Currency (100,000.00) or its
equivalent in any other currency per package or
Art. 1750. A contract fixing the sum that may be customary freight unit (whichever is least) unless
recovered by the owner or shipper for the loss, the value of the goods higher than this amount is
destruction, or deterioration of the goods is valid, declared in writing by the shipper before receipt
if it is reasonable and just under the of the goods by the carrier and inserted in the Bill
circumstances, and has been freely and fairly of Lading and extra freight is paid as required.
agreed upon.
The above stipulations are, to our mind,
Such limited-liability clause has also been reasonable and just. In the bill of lading, the
consistently upheld by this Court in a number of carrier made it clear that its liability would only
cases. Thus, in Sea-Land Service, Inc. vs. be up to One Hundred Thousand (Y100,000.00)
Intermediate Appellate Court, we ruled: Yen. However, the shipper, Maruman Trading,
had the option to declare a higher valuation if the
It seems clear that even if said section 4 (5) of value of its cargo was higher than the limited
the Carriage of Goods by Sea Act did not exist, liability of the carrier. Considering that the
the validity and binding effect of the liability shipper did not declare a higher valuation, it had
limitation clause in the bill of lading here are itself to blame for not complying with the
nevertheless fully sustainable on the basis alone stipulations. (Italics supplied)
of the cited Civil Code Provisions. That said
stipulation is just and reasonable is arguable from In the present case, the stipulation limiting
the fact that it echoes Art. 1750 itself in providing petitioners liability is not contrary to public policy.
a limit to liability only if a greater value is not In fact, its just and reasonable character is
declared for the shipment in the bill of lading. To evident. The shippers/consignees may recover
hold otherwise would amount to questioning the the full value of the goods by the simple
justness and fairness of the law itself, and this expedient of declaring the true value of the
the private respondent does not pretend to do. shipment in the Bill of Lading. Other than the
But over and above that consideration, the just payment of a higher freight, there was nothing to
and reasonable character of such stipulation is stop them from placing the actual value of the
implicit in it giving the shipper or owner the goods therein. In fact, they committed fraud

against the common carrier by deliberately We find no cogent reason to disturb the CAs
undervaluing the goods in their Bill of Lading, finding that Feliciana Legaspi was the owner of
thus depriving the carrier of its proper and just the goods covered by Bills of Lading Nos. 58 and
transport fare. 59. Undoubtedly, the goods were merely
consigned to Nestor Angelia and Zosimo
Concededly, the purpose of the limiting Mercado, respectively; thus, Feliciana Legaspi or
stipulation in the Bill of Lading is to protect the her subrogee (respondent) was entitled to the
common carrier. Such stipulation obliges the goods or, in case of loss, to compensation
shipper/consignee to notify the common carrier of therefor. There is no evidence showing that
the amount that the latter may be liable for in petitioner paid her for the loss of those goods. It
case of loss of the goods. The common carrier does not even claim to have paid her.
can then take appropriate measures -- getting
insurance, if needed, to cover or protect itself. On the other hand, Legaspi Marketing filed with
This precaution on the part of the carrier is petitioner a claim for the lost goods under Bill of
reasonable and prudent. Hence, a Lading No. 59, for which the latter subsequently
shipper/consignee that undervalues the real paid P14,000. But nothing in the records
worth of the goods it seeks to transport does not convincingly shows that the former was the
only violate a valid contractual stipulation, but owner of the goods. Respondent was, however,
commits a fraudulent act when it seeks to make able to prove that it was Feliciana Legaspi who
the common carrier liable for more than the owned those goods, and who was thus entitled to
amount it declared in the bill of lading. payment for their loss. Hence, the claim for the
goods under Bill of Lading No. 59 cannot be
Indeed, Zosimo Mercado and Nestor Angelia deemed to have been extinguished, because
misled petitioner by undervaluing the goods in payment was made to a person who was not
their respective Bills of Lading. Hence, petitioner entitled thereto.
was exposed to a risk that was deliberately
hidden from it, and from which it could not With regard to the claim for the goods that were
protect itself. covered by Bill of Lading No. 58 and valued at
P6,500, the parties have not convinced us to
It is well to point out that, for assuming a higher disturb the findings of the CA that compensation
risk (the alleged actual value of the goods) the could not validly take place. Thus, we uphold the
insurance company was paid the correct higher appellate courts ruling on this point.
premium by Feliciana Legaspi; while petitioner
was paid a fee lower than what it was entitled to WHEREFORE, the Petition is hereby PARTIALLY
for transporting the goods that had been GRANTED. The assailed Decision is MODIFIED in
deliberately undervalued by the shippers in the the sense that petitioner is ORDERED to pay
Bill of Lading. Between the two of them, the respondent the sums of P14,000 and P6,500,
insurer should bear the loss in excess of the value which represent the value of the goods stated in
declared in the Bills of Lading. This is the just and Bills of Lading Nos. 59 and 58, respectively. No
equitable solution. costs.

In Aboitiz Shipping Corporation v. Court of SO ORDERED.

Appeals,[23] the description of the nature and
the value of the goods shipped were declared and
reflected in the bill of lading, like in the present
case. The Court therein considered this
declaration as the basis of the carriers liability
and ordered payment based on such amount.
Following this ruling, petitioner should not be held
liable for more than what was declared by the
shippers/consignees as the value of the goods in
the bills of lading.

G.R. No. 75118 August 31, 1987

SEA-LAND SERVICE, INC., Petitioner, vs.

PAULINO CUE, doing business under the
name and style of "SEN HIAP HING,"
Respondents.chanrobles virtual law library

The main issue here is whether or not the

consignee of seaborne freight is bound by
stipulations in the covering bill of lading limiting
to a fixed amount the liability of the carrier for
loss or damage to the cargo where its value is not
declared in the bill.chanroblesvirtualawlibrary
chanrobles virtual law library

The factual antecedents, for the most part, are

not in dispute.chanroblesvirtualawlibrary
chanrobles virtual law library

On or about January 8, 1981, Sea-Land Service,

Inc. (Sea-Land for brevity), a foreign shipping and
forwarding company licensed to do business in
the Philippines, received from Seaborne Trading
Company in Oakland, California a shipment
consigned to Sen Hiap Hing the business name
used by Paulino Cue in the wholesale and retail
trade which he operated out of an establishment

located on Borromeo and Plaridel Streets, Cebu forth, it can be held liable for the loss of the
City.chanroblesvirtualawlibrary chanrobles virtual shipment in any amount beyond the limit of
law library US$600.00 per package stipulated in the bill of
lading.chanroblesvirtualawlibrary chanrobles
The shipper not having declared the value of the virtual law library
shipment, no value was indicated in the bill of
lading. The bill described the shipment only as "8 To begin with, there is no question of the right, in
CTNS on 2 SKIDS-FILES. 1Based on volume principle, of a consignee in a bill of lading to
measurements Sea-land charged the shipper the recover from the carrier or shipper for loss of, or
total amount of US$209.28 2 for freight age and damage to, goods being transported under said
other charges. The shipment was loaded on bill ,although that document may have been - as
board the MS Patriot, a vessel owned and in practice it oftentimes is - drawn up only by the
operated by Sea-Land, for discharge at the Port consignor and the carrier without the intervention
Of Cebu.chanroblesvirtualawlibrary chanrobles of the consignee. In Mendoza vs. Philippine Air
virtual law library Lines, Inc. 11 the Court delved at some length into
the reasons behind this when, upon a claim made
The shipment arrived in Manila on February 12, by the consignee of a motion picture film shipped
1981, and there discharged in Container No. by air that he was never a party to the contract
310996 into the custody of the arrastre of transportation and was a complete stranger
contractor and the customs and port authorities. 3 thereto, it said:
Sometime between February 13 and 16, 1981,
after the shipment had been transferred, along But appellant now contends that he is not suing
with other cargoes to Container No. 40158 near on a breach of contract but on a tort as provided
Warehouse 3 at Pier 3 in South Harbor, Manila, for in Art. 1902 of the Civil Code. We are a little
awaiting trans-shipment to Cebu, it was stolen by perplexed as to this new theory of the appellant.
pilferers and has never been recovered. 4 First, he insists that the articles of the Code of
chanrobles virtual law library Commerce should be applied: that he invokes the
provisions of aid Code governing the obligations
On March 10, 1981, Paulino Cue, the consignee, of a common carrier to make prompt delivery of
made formal claim upon Sea-Land for the value of goods given to it under a contract of
the lost shipment allegedly amounting to transportation. Later, as already said, he says
P179,643.48. 5 Sea-Land offered to settle for that he was never a party to the contract of
US$4,000.00, or its then Philippine peso transportation and was a complete stranger to it,
equivalent of P30,600.00. asserting that said and that he is now suing on a tort or a violation of
amount represented its maximum liability for the his rights as a stranger (culpa aquiliana) If he
loss of the shipment under the package limitation does not invoke the contract of carriage entered
clause in the covering bill of lading. 6 Cue rejected into with the defendant company, then he would
the offer and thereafter brought suit for damages hardly have any leg to stand on. His right to
against Sea-Land in the then Court of First prompt delivery of the can of film at the Phil. Air
Instance of Cebu, Branch X. 7 Said Court, after Port stems and is derived from the contract of
trial, rendered judgment in favor of Cue, carriage under which contract, the PAL undertook
sentencing Sea-Land to pay him P186,048.00 to carry the can of film safely and to deliver it to
representing the Philippine currency value of the him promptly. Take away or ignore that contract
lost cargo, P55,814.00 for unrealized profit with and the obligation to carry and to deliver and
one (1%) percent monthly interest from the filing right to prompt delivery disappear. Common
of the complaint until fully paid, P25,000.00 for carriers are not obligated by law to carry and to
attorney's fees and P2,000.00 as litigation deliver merchandise, and persons are not vested
expenses. 8 chanrobles virtual law library with the right to prompt delivery, unless such
common carriers previously assume the
Sea-Land appealed to the Intermediate Appellate obligation. Said rights and obligations are created
Court. 9 That Court however affirmed the decision by a specific contract entered into by the parties.
of the Trial Court xxx in all its parts ... . 10 Sea- In the present case, the findings of the trial court
Land thereupon filed the present petition for which as already stated, are accepted by the
review which, as already stated, poses the parties and which we must accept are to the
question of whether, upon the facts above set effect that the LVN Pictures Inc. and Jose

Mendoza on one side, and the defendant Here, the contract of carriage between the LVN
company on the other, entered into a contract of Pictures Inc. and the defendant carrier contains
transportation (p. 29, Rec. on Appeal). One the stipulations of delivery to Mendoza as
interpretation of said finding is that the LVN consignee. His demand for the delivery of the can
Pictures Inc. through previous agreement with of film to him at the Phil Air Port may be regarded
Mendoza acted as the latter's agent. When he as a notice of his acceptance of the stipulation of
negotiated with the LVN Pictures Inc. to rent the the delivery in his favor contained in the contract
film "Himala ng Birhen" and show it during the of carriage and delivery. In this case he also
Naga town fiesta, he most probably authorized made himself a party to the contract, or at least
and enjoined the Picture Company to ship the film has come to court to enforce it. His cause of
for him on the PAL on September 17th. Another action must necessarily be founded on its breach.
interpretation is that even if the LVN Pictures Inc.
as consignor of its own initiative, and acting Since the liability of a common carrier for loss of
independently of Mendoza for the time being, or damage to goods transported by it under a
made Mendoza as consignee, a stranger to the contract of carriage is governed by the laws of
contract if that is possible, nevertheless when he, the country of destination 12 and the goods in
Mendoza appeared at the Phil Air Port armed with question were shipped from the United States to
the copy of the Air Way Bill (Exh. 1) demanding the Philippines, the liability of petitioner Sea-Land
the delivery of the shipment to him, he thereby to the respondent consignee is governed
made himself a party to the contract of primarily by the Civil Code, and as ordained by
transportation. The very citation made by the said Code, suppletorily, in all matters not
appellant in his memorandum supports this view. determined thereby, by the Code of Commerce
Speaking of the possibility of a conflict between and special laws. 13 One of these suppletory
the order of the shipper on the one hand and the special laws is the Carriage of Goods by Sea Act,
order of the consignee on the other, as when the U.S. Public Act No. 521 which was made
shipper orders the shipping company to return or applicable to all contracts for the carriage of
retain the goods shipped while the consignee goods by sea to and from Philippine ports in
demands their delivery, Malagarriga in his book foreign trade by Commonwealth Act No. 65,
Codigo de Comercio Comentado, Vol. 1, p. 400, approved on October 22, 1936. Sec. 4(5) of said
citing a decision of the Argentina Court of Act in part reads:
Appeals on commercial matters, cited by
Tolentino in Vol. II of his book entitled (5) Neither the carrier nor the ship shall in any
"Commentaries and Jurisprudence on the event be or become liable for any loss or damage
Commercial Laws of the Philippines" p. 209, says to or in connection with the transportation of
that the right of the shipper to countermand the goods in an amount exceeding $500 per package
shipment terminates when the consignee or lawful money of the United States, or in case of
legitimate holder of the bill of lading appears with goods not shipped in packages, per customary
such big of lading before the carrier and makes freight unit, or the equivalent of that sum in other
himself a party to the contract. Prior to that time currency, unless the nature and value of such
he is a stranger to the goods have been declared by the shipper before
contract.chanroblesvirtualawlibrary chanrobles shipment and inserted in the bill of lading. This
virtual law library declaration, if embodied in the bill of lading, shall
be prima facie evidence, but shall not be
Still another view of this phase of the case is that conclusive on the
contemplated in Art. 1257, paragraph 2, of the carrier.chanroblesvirtualawlibrary chanrobles
old Civil Code (now Art, 1311, second paragraph) virtual law library
which reads thus:
By agreement between the carrier, master, or
Should the contract contain any stipulation in agent of the carrier, and the shipper another
favor of a third person, he may demand its maximum amount than that mentioned in this
fulfillment provided he has given notice of his paragraph may be fixed: Provided, That such
acceptance to the person bound before the maximum shall not be less than the figure above
stipulation has been revoked. named. In no event shall the carrier be liable for
more than the amount of damage actually

sustained.chanroblesvirtualawlibrary chanrobles ART. 1749 A stipulation that the common carrier's

virtual law library liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper
Clause 22, first paragraph, of the long form bill of or owner declares a greater value, is
lading customarily issued by Sea-Land to its binding.chanroblesvirtualawlibrary chanrobles
shipping clients 14 is a virtual copy of the first virtual law library
paragraph of the foregoing provision. It says:
ART. 1750. A contract fixing the sum that may be
22. VALUATION. In the event of any loss, damage recovered by the owner or shipper for the loss,
or delay to or in connection with goods exceeding destruction, or deterioration of the goods is valid,
in actual value $500 per package, lawful money if it is reasonable and just under the
of the United States, or in case of goods not circumstances, and has been fairly and freely
shipped in packages, per customary freight unit, agreed upon.
the value of the goods shall be deemed to be
$500 per package or per customary freight unit, Nothing contained in section 4(5) of the Carriage
as the case may be, and the carrier's liability, if of Goods by Sea Act already quoted is repugnant
any, shall be determined on the basis of a value to or inconsistent with any of the just-cited
of $500 per package or customary freight unit, provisions of the Civil Code. Said section merely
unless the nature and a higher value shall be gives more flesh and greater specificity to the
declared by the shipper in writing before rather general terms of Article 1749 (without
shipment and inserted in this Bill of Lading. doing any violence to the plain intent thereof)
and of Article 1750, to give effect to just
And in its second paragraph, the bill states: agreements limiting carriers' liability for loss or
damage which are freely and fairly entered.
If a value higher than $500 shag have been
declared in writing by the shipper upon delivery It seems clear that even if said section 4(5) of the
to the carrier and inserted in this bill of lading Carriage of Goods by Sea Act did not exist, the
and extra freight paid, if required and in such validity and binding effect of the liability
case if the actual value of the goods per package limitation clause in the bill of lading here are
or per customary freight unit shall exceed such nevertheless fully sustainable on the basis alone
declared value, the value shall nevertheless be of the cited Civil Code provisions. That said
deemed to be declared value and the carrier's stipulation is just and reasonable is arguable from
liability, if any, shall not exceed the declared the fact that it echoes Art. 1750 itself in providing
value and any partial loss or damage shall be a limit to liability only if a greater value is not
adjusted pro rata on the basis of such declared declared for the shipment in the bill of lading. To
value. hold otherwise would amount to questioning the
justice and fairness of that law itself, and this the
Since, as already pointed out, Article 1766 of the private respondent does not pretend to do. But
Civil Code expressly subjects the rights and over and above that consideration, the lust and
obligations of common carriers to the provisions reasonable character of such stipulation is
of the Code of Commerce and of special laws in implicit in it giving the shipper or owner the
matters not regulated by said (Civil) Code, the option of avoiding acrrual of liability limitation by
Court fails to fathom the reason or justification for the simple and surely far from onerous expedient
the Appellate Court's pronouncement in its of declaring the nature and value of the shipment
appealed Decision that the Carriage of Goods by in the bill of lading. And since the shipper here
Sea Act " ... has no application whatsoever in this has not been heard to complaint of having been
case. 15 Not only is there nothing in the Civil Code "rushed," imposed upon or deceived in any
which absolutely prohibits agreements between significant way into agreeing to ship the cargo
shipper and carrier limiting the latter's liability for under a bill of lading carrying such a stipulation -
loss of or damage to cargo shipped under in fact, it does not appear that said party has
contracts of carriage; it is also quite clear that been heard from at all insofar as this dispute is
said Code in fact has agreements of such concerned - there is simply no ground for
character in contemplation in providing, in its assuming that its agreement thereto was not as
Articles 1749 and 1750, that: the law would require, freely and fairly sought

and given.chanroblesvirtualawlibrary chanrobles contemplated or provided for herein, may at port

virtual law library of discharge or any other place whatsoever
transship or forward the goods or any part
The private respondent had no direct part or thereof by any means at the risk and expense of
intervention in the execution of the contract of the goods and at any time, whether before or
carriage between the shipper and the carrier as after loading on the ship named herein and by
set forth in the bill of lading in question. As any route, whether within or outside the scope of
pointed out in Mendoza vs. PAL, supra, the right the voyage or beyond the port of discharge or
of a party in the same situation as respondent destination of the goods and without notice to the
here, to recover for loss of a shipment consigned shipper or consignee. The carrier or master may
to him under a bill of lading drawn up only by and delay such transshipping or forwarding for any
between the shipper and the carrier, springs from reason, including but not limited to awaiting a
either a relation of agency that may exist vessel or other means of transportation whether
between him and the shipper or consignor, or his by the carrier or others.
status as a stranger in whose favor some
stipulation is made in said contract, and who Said provision obviates the necessity to offer any
becomes a party thereto when he demands other justification for offloading the shipment in
fulfillment of that stipulation, in this case the question in Manila for transshipment to Cebu
delivery of the goods or cargo shipped. In neither City, the port of destination stipulated in the bill
capacity can he assert personally, in bar to any of lading. Nonetheless, the Court takes note of
provision of the bill of lading, the alleged Sea-Land's explanation that it only directly serves
circumstance that fair and free agreement to the Port of Manila from abroad in the usual course
such provision was vitiated by its being in such of voyage of its carriers, hence its maintenance of
fine print as to be hardly readable. arrangements with a local forwarder. Aboitiz and
Parenthetically, it may be observed that in one Company, for delivery of its imported cargo to the
comparatively recent case 16 where this Court agreed final point of destination within the
found that a similar package limitation clause Philippines, such arrangements not being
was "(printed in the smallest type on the back of prohibited, but in fact recognized, by law. 18
the bill of lading, it nonetheless ruled that the chanrobles virtual law library
consignee was bound thereby on the strength of
authority holding that such provisions on liability Furthermore, this Court has also ruled 19 that the
limitation are as much a part of a bill of lading as Carriage of Goods by Sea Act is applicable up to
though physically in it and as though placed the final port of destination and that the fact that
therein by agreement of the transshipment was made on an interisland vessel
parties.chanroblesvirtualawlibrary chanrobles did not remove the contract of carriage of goods
virtual law library from the operation of said
Act.chanroblesvirtualawlibrary chanrobles virtual
There can, therefore, be no doubt or equivocation law library
about the validity and enforceability of freely-
agreed-upon stipulations in a contract of carriage Private respondent also contends that the
or bill of lading limiting the liability of the carrier aforecited Clauses 22 and 13 of the bill of lading
to an agreed valuation unless the shipper relied upon by petitioner Sea Land form no part
declares a higher value and inserts it into said of the short-form bill of lading attached to his
contract or bill. This pro position, moreover, rests complaint before the Trial Court and appear only
upon an almost uniform weight of authority. 17 in the long form of that document which, he
claims. SeaLand offered (as its Exhibit 2) as an
The issue of alleged deviation is also settled by unused blank form with no entries or signatures
Clause 13 of the bill of lading which expressly therein. He, however, admitted in the Trial Court
authorizes trans-shipment of the goods at any that several times in the past shipments had
point in the voyage in these terms: been delivered to him through Sea-Land, 20 from
which the assumption may fairly follow that by
13. THROUGH CARGO AND TRANSSHIPMENT. The the time of the consignment now in question, he
carrier or master, in the exercise of its or his was already reasonably apprised of the usual
discretion and although transshipment or terms covering contracts of carriage with said
forwarding of the goods may not have been

petitioner.chanroblesvirtualawlibrary chanrobles WHEREFORE, the Decision of the Intermediate

virtual law library Appellate Court complained of is reversed and set
aside. The stipulation in the questioned bill of
At any rate, as observed earlier, it has already lading limiting Sea-Land's liability for loss of or
been held that the provisions of the Carriage of damage to the shipment covered by said bill to
Goods by Sea Act on package limitation [sec 4(5) US$500.00 per package is held valid and binding
of the Act hereinabove referred to] are as much a on private respondent. There being no question
part of a bill of lading as though actually placed of the fact that said shipment consisted of eight
therein by agreement of the parties. 21 (8) cartons or packages, for the loss of which Sea-
chanrobles virtual law library Land is therefore liable in the aggregate amount
of US$4,000.00, it is the judgment of the Court
Private respondent, by making claim for loss on that said petitioner discharge that obligation by
the basis of the bill of lading, to all intents and paying private respondent the sum of
purposes accepted said bill. Having done so, he - P32,000.00, the equivalent in Philippine currency
of US$4,000.00 at the conversion rate of P8.00 to
$1.00. Costs against private
... becomes bound by all stipulations contained respondent.chanroblesvirtualawlibrary chanrobles
therein whether on the front or the back thereof. virtual law library
Respondent cannot elude its provisions simply
because they prejudice him and take advantage
of those that are beneficial. Secondly, the fact SO ORDERED.
that respondent shipped his goods on board the
ship of petitioner and paid the corresponding
freight thereon shows that he impliedly accepted Case Digest:
the bill of lading which was issued in connection Sea-Land Service, Inc. v. Intermediate Appellate
with the shipment in question, and so it may be Court153 SCRA 552
said that the same is finding upon him as if it had Facts:
been actually signed by him or by any other Sea-Land, a foreign shipping and
person in his behalf. ... 22. forwarding company licensed to do business in
the Philippines,received from Sea-borne
There is one final consideration. The private Trading Company in California, a shipment
respondent admits 23 that as early as on April 22, consigned to Sen Hiap Hing, thebusiness
1981, Sea-Land had offered to settle his claim for name used by Cue. The shipper not having
US$4,000.00, the limit of said carrier's liability for declared the value of the shipment , no value
loss of the shipment under the bill of lading. This wasindicated in the bill of lading. The shipment
Court having reached the conclusion that said was discharged in Manila, and while awaiting
sum is all that is justly due said respondent, it transshipmentto Cebu, the cargo was stolen and
does not appear just or equitable that Sea-Land, never recovered.The trial court sentenced
which offered that amount in good faith as early Sea-Land to pay Cue P186,048 representing
as six years ago, should, by being made to pay at the Philippine currencyvalue of the lost
the current conversion rate of the dollar to the cargo, P55, 814 for unrealized profit and
peso, bear for its own account all of the increase P25,000 for attorney’s fees. CA affirmed
in said rate since the time of the offer of thetrial court’s decision.
settlement. The decision of the Regional Trial
Court awarding the private respondent Issue:
P186,048.00 as the peso value of the lost Whether or not Sea-Land is liable to pay
shipment is clearly based on a conversion rate of Cue.
P8.00 to US$1.00, said respondent having
claimed a dollar value of $23,256.00 for said Held:
shipment. 24 All circumstances considered, it is There is no question of the right of a
just and fair that Sea-Land's dollar obligation be consignee in a bill of lading to recover from
convertible at the same the carrier or shipper for loss of, or damage to,
rate.chanroblesvirtualawlibrary chanrobles virtual goods being transported under said bill, although
law library that document mayhave been drawn up only by
the consignor and the carrier without the
intervention of the consignee.Since the liability

of a common carrier for loss of or damage to G.R. No. 143133 June 5, 2002
goods transported by it under acontract of
carriage os governed by the laws of the country BELGIAN OVERSEAS CHARTERING AND
of destination and the goods in question SHIPPING N.V. and JARDINE DAVIES
wereshipped from the United States to the TRANSPORT SERVICES, INC., petitioners,
Philippines, the liability of Sea-Land has Cue is vs.
governed primarilyby the Civil Code, and as PHILIPPINE FIRST INSURANCE CO., INC.,
ordained by the said Code, supplementary, in all respondents.
matters not cluttered thereby,by the Code of
Commerce and special laws. One of these PANGANIBAN, J.:
supplementary special laws is the Carriage
of goods by Sea Act (COGSA), made
applicable to all contracts for the carriage Proof of the delivery of goods in good order to a
by sea to and from thePhilippines Ports in common carrier and of their arrival in bad order
Foreign Trade by Comm. Act. 65.Even if Section at their destination constitutes prima facie fault
4(5) of COGSA did not list the validity and or negligence on the part of the carrier. If no
binding effect of the liability limitationclause adequate explanation is given as to how the loss,
in the bill of lading here are fully substantial the destruction or the deterioration of the goods
on the basis alone of Article 1749 and 1750 happened, the carrier shall be held liable
of theCivil Code. The justices of such therefor.
stipulation is implicit in its giving the owner
or shipper the option of avoiding accrual of Statement of the Case
liability limitation by the simple expedient of
declaring the value of the shipment in thebill of Before us is a Petition for Review under Rule 45
lading.The stipulation in the bill of lading of the Rules of Court, assailing the July 15, 1998
limiting the liability of Sea-Land for loss or Decision1 and the May 2, 2000 Resolution2 of the
damages to theshipment covered by said Court of Appeals3 (CA) in CA-GR CV No. 53571.
rule to US$500 per package unless the The decretal portion of the Decision reads as
shipper declares the value of theshipment follows:
and pays additional charges is valid and binding
on Cue. "WHEREFORE, in the light of the foregoing
disquisition, the decision appealed from is hereby
REVERSED and SET ASIDE. Defendants-appellees
are ORDERED to jointly and severally pay
plaintiffs-appellants the following:

'1) FOUR Hundred Fifty One Thousand Twenty-

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

'2) Attorney's fees amounting to 20% of the

claim; and

'3) Costs of suit.'"4

The assailed Resolution denied petitioner's

Motion for Reconsideration.

The CA reversed the Decision of the Regional

Trial Court (RTC) of Makati City (Branch 134),
which had disposed as follows:

"WHEREFORE, in view of the foregoing, judgment The RTC dismissed the Complaint because
is hereby rendered, dismissing the complaint, as respondent had failed to prove its claims with the
well as defendant's counterclaim."5 quantum of proof required by law.7

It likewise debunked petitioners' counterclaim,

because respondent's suit was not manifestly
The Facts frivolous or primarily intended to harass them.8

The factual antecedents of the case are Ruling of the Court of Appeals
summarized by the Court of Appeals in this wise:
In reversing the trial court, the CA ruled that
"On June 13, 1990, CMC Trading A.G. shipped on petitioners were liable for the loss or the damage
board the M/V 'Anangel Sky' at Hamburg, of the goods shipped, because they had failed to
Germany 242 coils of various Prime Cold Rolled overcome the presumption of negligence
Steel sheets for transportation to Manila imposed on common carriers.
consigned to the Philippine Steel Trading
Corporation. On July 28, 1990, M/V Anangel Sky The CA further held as inadequately proven
arrived at the port of Manila and, within the petitioners' claim that the loss or the
subsequent days, discharged the subject cargo. deterioration of the goods was due to pre-
Four (4) coils were found to be in bad order B.O. shipment damage.9 It likewise opined that the
Tally sheet No. 154974. Finding the four (4) coils notation "metal envelopes rust stained and
in their damaged state to be unfit for the slightly dented" placed on the Bill of Lading had
intended purpose, the consignee Philippine Steel not been the proximate cause of the damage to
Trading Corporation declared the same as total the four (4) coils.10
As to the extent of petitioners' liability, the CA
"Despite receipt of a formal demand, defendants- held that the package limitation under COGSA
appellees refused to submit to the consignee's was not applicable, because the words "L/C No.
claim. Consequently, plaintiff-appellant paid the 90/02447" indicated that a higher valuation of the
consignee five hundred six thousand eighty six & cargo had been declared by the shipper. The CA,
50/100 pesos (P506,086.50), and was subrogated however, affirmed the award of attorney's fees.
to the latter's rights and causes of action against
defendants-appellees. Subsequently, plaintiff- Hence, this Petition.11
appellant instituted this complaint for recovery of
the amount paid by them, to the consignee as Issues
In their Memorandum, petitioners raise the
"Impugning the propriety of the suit against following issues for the Court's consideration:
them, defendants-appellees imputed that the
damage and/or loss was due to pre-shipment
damage, to the inherent nature, vice or defect of I. "Whether or not plaintiff by
the goods, or to perils, danger and accidents of presenting only one witness who
the sea, or to insufficiency of packing thereof, or has never seen the subject
to the act or omission of the shipper of the goods shipment and whose testimony
or their representatives. In addition thereto, is purely hearsay is sufficient to
defendants-appellees argued that their liability, if pave the way for the applicability
there be any, should not exceed the limitations of of Article 1735 of the Civil Code;
liability provided for in the bill of lading and other II. "Whether or not the
pertinent laws. Finally, defendants-appellees consignee/plaintiff filed the
averred that, in any event, they exercised due required notice of loss within the
diligence and foresight required by law to prevent time required by law;
any damage/loss to said shipment."6 III. "Whether or not a notation in the
bill of lading at the time of loading
Ruling of the Trial Court is sufficient to show pre-shipment

damage and to exempt herein contract of transportation with common carriers.16

defendants from liability; Even if it wants to, it cannot submit its own
IV. "Whether or not the "PACKAGE stipulations for their approval.17 Hence, it merely
LIMITATION" of liability under adheres to the agreement prepared by them.
Section 4 (5) of COGSA is
applicable to the case at bar."12 Owing to this high degree of diligence required of
them, common carriers, as a general rule, are
In sum, the issues boil down to three: presumed to have been at fault or negligent if the
goods they transported deteriorated or got lost or
1. Whether petitioners have overcome the destroyed.18 That is, unless they prove that they
presumption of negligence of a common carrier exercised extraordinary diligence in transporting
the goods.19 In order to avoid responsibility for
any loss or damage, therefore, they have the
2. Whether the notice of loss was timely filed burden of proving that they observed such
3. Whether the package limitation of liability is
applicable However, the presumption of fault or negligence
will not arise21 if the loss is due to any of the
This Court's Ruling following causes: (1) flood, storm, earthquake,
lightning, or other natural disaster or calamity;
The Petition is partly meritorious. (2) an act of the public enemy in war, whether
international or civil; (3) an act or omission of the
First Issue: shipper or owner of the goods; (4) the character
of the goods or defects in the packing or the
Proof of Negligence container; or (5) an order or act of competent
public authority.22 This is a closed list. If the cause
of destruction, loss or deterioration is other than
Petitioners contend that the presumption of fault the enumerated circumstances, then the carrier
imposed on common carriers should not be is liable therefor.23
applied on the basis of the lone testimony offered
by private respondent. The contention is
untenable. Corollary to the foregoing, mere proof of delivery
of the goods in good order to a common carrier
and of their arrival in bad order at their
Well-settled is the rule that common carriers, destination constitutes a prima facie case of fault
from the nature of their business and for reasons or negligence against the carrier. If no adequate
of public policy, are bound to observe explanation is given as to how the deterioration,
extraordinary diligence and vigilance with respect the loss or the destruction of the goods
to the safety of the goods and the passengers happened, the transporter shall be held
they transport.13 Thus, common carriers are responsible.24
required to render service with the greatest skill
and foresight and "to use all reason[a]ble means
to ascertain the nature and characteristics of the That petitioners failed to rebut the prima facie
goods tendered for shipment, and to exercise due presumption of negligence is revealed in the case
care in the handling and stowage, including such at bar by a review of the records and more so by
methods as their nature requires."14 The the evidence adduced by respondent.25
extraordinary responsibility lasts from the time
the goods are unconditionally placed in the First, as stated in the Bill of Lading, petitioners
possession of and received for transportation by received the subject shipment in good order and
the carrier until they are delivered, actually or condition in Hamburg, Germany.26
constructively, to the consignee or to the person
who has a right to receive them.15 Second, prior to the unloading of the cargo, an
Inspection Report27 prepared and signed by
This strict requirement is justified by the fact representatives of both parties showed the steel
that, without a hand or a voice in the preparation bands broken, the metal envelopes rust-stained
of such contract, the riding public enters into a

and heavily buckled, and the contents thereof Q. And, on or about that date, do you recall
exposed and rusty. having attended the discharging and inspection
of cold steel sheets in coil on board the MV/AN
Third, Bad Order Tally Sheet No. 15497928 issued ANGEL SKY?
by Jardine Davies Transport Services, Inc., stated
that the four coils were in bad order and A. Yes, sir, I was there.
condition. Normally, a request for a bad order
survey is made in case there is an apparent or a Q. Based on your inspection since you were
presumed loss or damage.29 also present at that time, will you inform this
Honorable Court the condition or the appearance
Fourth, the Certificate of Analysis30 stated that, of the bad order cargoes that were unloaded from
based on the sample submitted and tested, the the MV/ANANGEL SKY?
steel sheets found in bad order were wet with
fresh water. ATTY. MACAMAY:

Fifth, petitioners -- in a letter31 addressed to the Objection, Your Honor, I think the document itself
Philippine Steel Coating Corporation and dated reflects the condition of the cold steel sheets and
October 12, 1990 -- admitted that they were the best evidence is the document itself, Your
aware of the condition of the four coils found in Honor that shows the condition of the steel
bad order and condition. sheets.

These facts were confirmed by Ruperto Esmerio, COURT:

head checker of BM Santos Checkers Agency.
Pertinent portions of his testimony are reproduce Let the witness answer.
A. The scrap of the cargoes is broken already
"Q. Mr. Esmerio, you mentioned that you are and the rope is loosen and the cargoes are dent
a Head Checker. Will you inform the Honorable on the sides."32
Court with what company you are connected?
All these conclusively prove the fact of shipment
A. BM Santos Checkers Agency, sir. in good order and condition and the consequent
damage to the four coils while in the possession
Q. How is BM Santos checkers Agency related of petitioner,33 who notably failed to explain
or connected with defendant Jardine Davies why.34
Transport Services?
Further, petitioners failed to prove that they
A. It is the company who contracts the observed the extraordinary diligence and
checkers, sir. precaution which the law requires a common
carrier to know and to follow to avoid damage to
Q. You mentioned that you are a Head or destruction of the goods entrusted to it for safe
Checker, will you inform this Honorable Court carriage and delivery.35
your duties and responsibilities?
True, the words "metal envelopes rust stained
A. I am the representative of BM Santos on and slightly dented" were noted on the Bill of
board the vessel, sir, to supervise the discharge Lading; however, there is no showing that
of cargoes. petitioners exercised due diligence to forestall or
lessen the loss.36 Having been in the service for
Q. On or about August 1, 1990, were you still several years, the master of the vessel should
connected or employed with BM Santos as a Head have known at the outset that metal envelopes in
Checker? the said state would eventually deteriorate when
not properly stored while in transit.37 Equipped
A. Yes, sir. with the proper knowledge of the nature of steel
sheets in coils and of the proper way of

transporting them, the master of the vessel and We are not persuaded. First, the above-cited
his crew should have undertaken precautionary provision of COGSA provides that the notice of
measures to avoid possible deterioration of the claim need not be given if the state of the goods,
cargo. But none of these measures was taken. 38 at the time of their receipt, has been the subject
Having failed to discharge the burden of proving of a joint inspection or survey. As stated earlier,
that they have exercised the extraordinary prior to unloading the cargo, an Inspection
diligence required by law, petitioners cannot Report46 as to the condition of the goods was
escape liability for the damage to the four coils.39 prepared and signed by representatives of both
In their attempt to escape liability, petitioners
further contend that they are exempted from Second, as stated in the same provision, a failure
liability under Article 1734(4) of the Civil Code. to file a notice of claim within three days will not
They cite the notation "metal envelopes rust bar recovery if it is nonetheless filed within one
stained and slightly dented" printed on the Bill of year.48 This one-year prescriptive period also
Lading as evidence that the character of the applies to the shipper, the consignee, the insurer
goods or defect in the packing or the containers of the goods or any legal holder of the bill of
was the proximate cause of the damage. We are lading.49
not convinced.
In Loadstar Shipping Co., Inc, v. Court of
From the evidence on record, it cannot be Appeals,50 we ruled that a claim is not barred by
reasonably concluded that the damage to the prescription as long as the one-year period has
four coils was due to the condition noted on the not lapsed. Thus, in the words of the ponente,
Bill of Lading.40 The aforecited exception refers to Chief Justice Hilario G. Davide Jr.:
cases when goods are lost or damaged while in
transit as a result of the natural decay of "Inasmuch as the neither the Civil Code nor the
perishable goods or the fermentation or Code of Commerce states a specific prescriptive
evaporation of substances liable therefor, the period on the matter, the Carriage of Goods by
necessary and natural wear of goods in transport, Sea Act (COGSA)--which provides for a one-year
defects in packages in which they are shipped, or period of limitation on claims for loss of, or
the natural propensities of animals.41 None of damage to, cargoes sustained during transit--may
these is present in the instant case. be applied suppletorily to the case at bar."

Further, even if the fact of improper packing was In the present case, the cargo was discharged on
known to the carrier or its crew or was apparent July 31, 1990, while the Complaint51 was filed by
upon ordinary observation, it is not relieved of respondent on July 25, 1991, within the one-year
liability for loss or injury resulting therefrom, once prescriptive period.
it accepts the goods notwithstanding such
condition.42 Thus, petitioners have not Third Issue:
successfully proven the application of any of the
aforecited exceptions in the present case.43
Package Limitation
Second Issue:
Assuming arguendo they are liable for
respondent's claims, petitioners contend that
Notice of Loss their liability should be limited to US$500 per
package as provided in the Bill of Lading and by
Petitioners claim that pursuant to Section 3, Section 4(5)52 of COGSA.53
paragraph 6 of the Carriage of Goods by Sea Act44
(COGSA), respondent should have filed its Notice On the other hand, respondent argues that
of Loss within three days from delivery. They Section 4(5) of COGSA is inapplicable, because
assert that the cargo was discharged on July 31, the value of the subject shipment was declared
1990, but that respondent filed its Notice of Claim by petitioners beforehand, as evidenced by the
only on September 18, 1990.45 reference to and the insertion of the Letter of
Credit or "L/C No. 90/02447" in the said Bill of

A bill of lading serves two functions. First, it is a Second, in Keng Hua Paper Products v. Court of
receipt for the goods shipped.53 Second, it is a Appeals,69 we held that a bill of lading was
contract by which three parties -- namely, the separate from the Other Letter of Credit
shipper, the carrier, and the consignee -- arrangements. We ruled thus:
undertake specific responsibilities and assume
stipulated obligations.56 In a nutshell, the "(T)he contract of carriage, as stipulated in the
acceptance of the bill of lading by the shipper bill of lading in the present case, must be treated
and the consignee, with full knowledge of its independently of the contract of sale between the
contents, gives rise to the presumption that it seller and the buyer, and the contract of issuance
constituted a perfected and binding contract.57 of a letter of credit between the amount of goods
described in the commercial invoice in the
Further, a stipulation in the bill of lading limiting contract of sale and the amount allowed in the
to a certain sum the common carrier's liability for letter of credit will not affect the validity and
loss or destruction of a cargo -- unless the shipper enforceability of the contract of carriage as
or owner declares a greater value58 -- is embodied in the bill of lading. As the bank cannot
sanctioned by law.59 There are, however, two be expected to look beyond the documents
conditions to be satisfied: (1) the contract is presented to it by the seller pursuant to the letter
reasonable and just under the circumstances, and of credit, neither can the carrier be expected to
(2) it has been fairly and freely agreed upon by go beyond the representations of the shipper in
the parties.60 The rationale for this rule is to bind the bill of lading and to verify their accuracy vis-
the shippers by their agreement to the value à-vis the commercial invoice and the letter of
(maximum valuation) of their goods.61 credit. Thus, the discrepancy between the
amount of goods indicated in the invoice and the
It is to be noted, however, that the Civil Code amount in the bill of lading cannot negate
does not limit the liability of the common carrier petitioner's obligation to private respondent
to a fixed amount per package.62 In all matters arising from the contract of transportation."70
not regulated by the Civil Code, the right and the
obligations of common carriers shall be governed In the light of the foregoing, petitioners' liability
by the Code of Commerce and special laws.63 should be computed based on US$500 per
Thus, the COGSA, which is suppletory to the package and not on the per metric ton price
provisions of the Civil Code, supplements the declared in the Letter of Credit.71 In Eastern
latter by establishing a statutory provision Shipping Lines, Inc. v. Intermediate Appellate
limiting the carrier's liability in the absence of a Court,72 we explained the meaning of packages:
shipper's declaration of a higher value in the bill
of lading.64 The provisions on limited liability are "When what would ordinarily be considered
as much a part of the bill of lading as though packages are shipped in a container supplied by
physically in it and as though placed there by the carrier and the number of such units is
agreement of the parties.65 disclosed in the shipping documents, each of
those units and not the container constitutes the
In the case before us, there was no stipulation in 'package' referred to in the liability limitation
the Bill of Lading66 limiting the carrier's liability. provision of Carriage of Goods by Sea Act."
Neither did the shipper declare a higher valuation
of the goods to be shipped. This fact Considering, therefore, the ruling in Eastern
notwithstanding, the insertion of the words "L/C Shipping Lines and the fact that the Bill of Lading
No. 90/02447 cannot be the basis for petitioners' clearly disclosed the contents of the containers,
liability. the number of units, as well as the nature of the
steel sheets, the four damaged coils should be
First, a notation in the Bill of Lading which considered as the shipping unit subject to the
indicated the amount of the Letter of Credit US$500 limitation.1âwphi1.nêt
obtained by the shipper for the importation of
steel sheets did not effect a declaration of the WHEREFORE, the Petition is partly granted and
value of the goods as required by the bill. 67 That the assailed Decision MODIFIED. Petitioners'
notation was made only for the convenience of liability is reduced to US$2,000 plus interest at
the shipper and the bank processing the Letter of the legal rate of six percent from the time of the

filing of the Complaint on July 25, 1991 until the the trial court. This premise draws us to conclude
finality of this Decision, and 12 percent thereafter that the delivery of the cargoes to GPC as
until fully paid. No pronouncement as to costs. buyer/importer which, conformably with Art. 1736
had, other than the consignee, the right to
SO ORDERED. receive them was proper.

The real issue is whether respondents are

liable to petitioner for releasing the goods to GPC
without the bills of lading or bank guarantee.
From the testimony of petitioner, we gather that
he has been transacting with GPC as
buyer/importer for around two (2) or three (3)
years already. When mangoes and watermelons
are in season, his shipment to GPC using the
facilities of respondents is twice or thrice a week.
Macam vs. CA
The goods are released to GPC. It has been the
practice of petitioner to request the shipping lines
Petitioner Macam exported watermelons
to immediately release perishable cargoes such
and mangoes to Hong Kong, Great Prospect
as watermelons and fresh mangoes through
Companyis the consignee. The bill of lading
telephone calls by himself or his "people." In
stated that one of the bill must be presented by
transactions covered by a letter of credit, bank
the Pakistan Bank asconsignee and GPC as the
guarantee is normally required by the shipping
notify party. Upon arrival in Hong Kong, the
lines prior to releasing the goods. But for buyers
shipment was delivered by thecarrier directly to
using telegraphic transfers, petitioner dispenses
GPC and not to Pakistan Bank and without
with the bank guarantee because the goods are
surrendering the bill of lading.
already fully paid. In his several years of business
relationship with GPC and respondents, there was
not a single instance when the bill of lading was
Whether or not there was a valid delivery.
first presented before the release of the cargoes.
The extraordinary responsibility of
common carriers last until actual or constructive
delivery of thecargo to the consignee or his
agent. Pakistan was indicted as consignee and
GPC was the notify party.However, in the export
invoice, GPC was clearly named as buyer or
importer. Petitioner referred to GPCas such in his
demand letter to respondent and his complaint
before the court. This premise brings
intoconclusion that the deliveries of the cargo to
GPC as buyer or importer is in conformity with
Art. 1736 of the Civil Code. Therefore, there was
a valid delivery.

The extraordinary responsibility of the

common carriers lasts until actual or constructive
delivery of the cargoes to the consignee or to the
person who has a right to receive them.
PAKISTAN BANK was indicated in the bills of
lading as consignee whereas GPC was the notify
party. However, in the export invoices GPC was
clearly named as buyer/importer. Petitioner also
referred to GPC as such in his demand letter to
respondent WALLEM and in his complaint before