case compilations

8/10/2019 Case Compilations

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028 LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF

APPEALS and THE MANILA INSURANCE CO., INC.,

respondents G.R. No. 131621. September 28, 1999

Topic: Limitation of Liability for Negligence

Quick Notes/Doctrine: The doctrine of limited liability

does not apply where there was negligence on the

part of the vessel owner or agent.

Facts: On November 19, 1984, Loadstar received on board its vessel M/V Cherokee the following goods for shipment:

1. 705 bales of lawanit hardwood

2. 27 boxes and crates of tilewood assemblies and others

3. 49 bundles of mouldings R & W (3) ApitongBolidenized

The goods, amounting to P6,067,178, were insured by Manila Insurance Co. The vessel is insured by Prudential

Guarantee and Assurance, Inc. On November 20, 1984, on its way to Manila from Agusan, the vessel sank off Limasawa

Island. MIC paid the consignee P6,075,000 for the value of the goods lost.

On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was dueto the fault and negligence of LOADSTAR and its employees. In its answer, LOADSTAR denied any liability for the loss of

the shippers goods and claimed that the sinking of its vessel was due to force majeure . PGAI, on the other hand, averred

that MIC had no cause of action against it, LOADSTAR being the party insured. MIC prayed that PGAI be ordered to

pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be deducted fro m MICs claim from

LOADSTAR.When PGAI paid Loadstar, it was dropped from the complaint. The trial court ruled against Loadstar, and this

was affirmed by the Court of Appeals.

In dismissing LOADSTARs appeal, the appellate court made the following observati ons:

1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a single shipper on that

fateful voyage. The court noted that the charter of the vessel was limited to the ship, but LOADSTAR retained control

over its crew.

2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be applied in determining the

rights and liabilities of the parties.

3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If it had been seaworthy,

it could have withstood the natural and inevitable action of the sea on 20 November 1984, when the condition of the sea

was moderate. The vessel sank, not because of force majeure , but because it was not seaworthy. LOADSTARS

allegation that the sin king was probably due to the convergence of the winds, as stated by a PAGASA expert, was not

duly proven at the trial. The limited liability rule, therefore, is not applicable considering that, in this case, there w as an

actual finding of negligence on the part of the carrier.

4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because said provisions bind only

the shipper/consignee and the carrier. When MIC paid the shipper for the goods insured, it was subrogated to the latters


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rights as against the carrier, LOADSTAR.

5) There was a clear breach of the contract of carriage when the shippers goods never reached their destination.

LOADSTARs defense of diligence of a good father of a family in the training and selection of its crew is unavailing

because this is not a proper or complete defense in culpa contractual .

6) Art. 361 (of the Code of Commerce) has been judicially construed to mean that when goods are delivered on

board a ship in good order and condition, and the shipowner delivers them to the shipper in bad order and condition, it

then devolves upon the shipowner to both allege and prove that the goods were damaged by reason of some fact which

legally exempts him from liability. Transportation of the merchandise at the risk and venture of t he shipper means that

the latter bears the risk of loss or deterioration of his goods arising from fortuitous events, force majeure , or the inherent

nature and defects of the goods, but not those caused by the presumed negligence or fault of the carrier, unless otherwise

proved.

Loadstar submits that the vessel was a private carrier because it was not issued a certificate of public convenience, it did

not have a regular trip or schedule nor a fixed route, and there was only "one shipper, one consignee for a special cargo."

In refutation, MIC argues that the issue as to the classification of the M/V "Cherokee" was not timely raised below; hence,it is barred by estoppel. While it is true that the vessel had on board only the cargo of wood products for delivery to one

consignee, it was also carrying passengers as part of its regular business. Moreover, the bills of lading in this case made

no mention of any charter party but only a statement that the vessel was a "general cargo carrier." Neither was there any

"special arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo. The singular fact that

the vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a private

carrier.

LOADSTAR argues that as a private carrier, it cannot be presumed to have been negligent, and the burden of proving

otherwise devolved upon MIC. It also maintains that the vessel was seaworthy, and that the loss was due to forcemajeure. LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as what

transpired in this case, is valid. Since the cargo was being shipped at "owners risk," LOADSTAR was not liable for any

loss or damage to the same. Finally, LOADSTAR avers that M ICs claim had already prescribed, the case having been

instituted beyond the period stated in the bills of lading for instituting the same suits based upon claims arising from

shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual of the right of action.

MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo was due to force

majeure, because the same concurred with LOADSTARs fault or negligence. Secondly, LOADSTAR did not raise the

issue of prescription in the court below; hence, the same must be deemed waived. Thirdly, the "limited liability" theory is

not applicable in the case at bar because LOADSTAR was at fault or negligent, and because it failed to maintain a

seaworthy vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is tantamount to negligence.

Issues:(1) Whether Loadstar was a common carrier or a private carrier

(2) Whether Loadstar exercised the degree of diligence required under the circumstances


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(3) Whether the stipulation that the goods are at the owners risk is valid

(4) Whether the action has prescribed

Held:(1) We hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public

convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic,

occasional, episodic or unscheduled. There was no charter party. The bills of lading failed to show any special

arrangement, but only a general provision to the effect that the M/V "Cherokee" was a "general cargo carrier." Further, the

bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental,

is not reason enough to convert the vessel from a common to a private carrier, especially where, as in this case, it was

shown that the vessel was also carrying passengers.

(2) The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or agent.

LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite

knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as force

majeure, inasmuch as the wind condition in the area where it sank was determined to be moderate. Since it was remiss in

the performance of its duties, LOADSTAR cannot hide behind the "limited liability" doctrine to escape responsibility for the

loss of the vessel and its cargo.

(3) Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and

all liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation

of such liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless

the shipper declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority,

the first and second kinds of stipulations are invalid as being contrary to public policy, but the third is valid andenforceable. Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was subrogated

to all the rights which the latter has against the common carrier, LOADSTAR.

(4) MICs cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code nor the

Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)

which provides for a one-year period of limitation on claims for loss of, or damage to, cargoes sustained during transit

may be applied suppletorily to the case at bar. This one-year prescriptive period also applies to the insurer of the goods.

In this case, the period for filing the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year

period is null and void; it must, accordingly, be struck down.

Dispositive Rule: WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the

Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED

Relation/Pertinent Law/Notes

1. Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business ofcarrying or transporting passengers or goods or both, by land, water, or air for compensation, offering theirservices to the public.


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2. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessarycertificate of public convenience, would be offensive to sound public policy; that would be to reward privaterespondent precisely for failing to comply with applicable statutory requirements. The business of a commoncarrier impinges directly and intimately upon the safety and well being and property of those members of thegeneral community who happen to deal with such carrier. The law imposes duties and liabilities upon commoncarriers for the safety and protection of those who utilize their services and the law cannot allow a common carrierto render such duties and liabilities merely facultative by simply failing to obtain the necessary permits andauthorizations.

3. MICs cause of action had not yet prescribed at the time it was con cerned. Inasmuch as neither the Civil Code

nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by Sea Act(COGSA) which provides for a one-year period of limitation on claims for loss of, or damage to, cargoessustained during transit may be applied suppletorily to the case at bar. This one-year prescriptive period alsoapplies to the insurer of the good. In this case, the period for filing the action for recovery has not yet elapsed.Moreover, a stipulation reducing the one-year period is null and void; it must, accordingly, be struck down.


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029 VALENZUELA HARDWOOD AND INDUSTRIAL

SUPPLY INC. , petitioner,

vs.

COURT OF APPEALS AND SEVEN BROTHERS

SHIPPING CORPORATION, respondents.

[G.R. No. 102316 June 30, 1997]

TOPIC : Limitation of Liability for Negligence

PONENTE : PANGANIBAN, J.

AUTHOR : CA Lofranco

NOTES:

Validity of the stipulation in a charter party that "(o)wners

shall not be responsible for loss, split, short-landing,

breakages and any kind of damages to the cargo."

Petition for Review assailing the Decision of Respondent

Court of Appeals which REVERSED and SET ASIDE the

judgment of the RTC in so far as the liability of the Seven

Brothers Shipping Corporation to the plaintiff is concerned.Petition is DENIED.

FACTS:

1. On 16 January 1984, plaintiff Valenzuela Hardwood and Industrial Supply, Inc. (Valenzuela) entered into an agreementwith the defendant Seven Brothers Shipping Corporation (Shipping Corp.) whereby the latter undertook to load onboard its vessel M/V Seven Ambassador (Vessel) the former's lauan round logs numbering 940 at the port ofMaconacon, Isabela for shipment to Manila.

2. On 20 January 1984, Valenzuela insured the logs against loss and/or damage with defendant South Sea Surety andInsurance Co., Inc. (Surety Company) for P2 million and the latter issued its Marine Cargo Insurance Policy forP2million on said date.

3. On 24 January 1984, the Valenzuela gave the check in payment of the premium on the insurance policy to Mr. VictorioChua (authorized agent).

4. In the meantime, the said Vessel sank on 25 January 1984 resulting in the loss of the Valenzuela's insured logs.5. On 30 January 1984, a check for P5,625.00 to cover payment of the premium and documentary stamps due on the

policy was tendered due to the insurer but was not accepted. Instead, the Insurance Company cancelled the insurancepolicy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 ofthe Insurance Code.

6. On 2 February 1984, Valenzuela demanded from the Insurance Company the payment of the proceeds of the policybut the latter denied liability under the policy. Valenzuela likewise filed a formal claim with defendant Shipping Corp. forthe value of the lost logs but the latter denied the claim.

RTC

7. After due hearing and trial, the court a quo rendered judgment in favor of Valenzuela and against defendants (ShippingCorp. and the Surety Company).a) The non-liability clause of the Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is

void for being contrary to public policy invoking article 1745 of the New Civil Code.Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to

public policy:

(1) That the goods are transported at the risk of the owner or shipper;(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;(3) That the common carrier need not observe any diligence in the custody of the goods;(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or

of a man of ordinary prudence in the vigilance over the movables transported;(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or

irresistible threat, violence or force, is dispensed with or diminished;(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account

of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract ofcarriage.

b) Defendant-appellant Shipping Corporation liable in the alternative and ordering/directing it to pay Valenzuela theamount of P2 million pesos representing the value of the logs plus legal interest from date of demand until fullypaid.

CA

8. The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of the Surety Company, but modified


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it by holding that the Shipping Company was not liable for the lost cargo.Ratio:

a) It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability incase of loss.

b) The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability ofthe shipping corporation. The provisions on common carriers should not be applied where the carrier is not actingas such but as a private carrier.

c) Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a specialperson only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability even

for the negligence of its agent is valid ( Hom e Insu rance Company , Inc. vs . Am erican Steamsh ip Agenc ies,Inc. , 23 SCRA 24).

d) The Shipping Corporation should not therefore be held liable for the loss of the logs.9. Surety Company and Valenzuela filed separate petitions for review.10. Petition of Surety Company was denied. The Court found no reason to reverse the factual findings of the trial court and

the Court of Appeals that Chua was indeed an authorized agent of South Sea when he received Valenzuela's premiumpayment for the marine cargo insurance policy which was thus binding on the insurer.

11. The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the CA Decision whichexempted Seven Brothers from any liability for the lost cargo.

12. Valenzuelas contentions: a) The stipulation is void for being contrary to Articles 586 and 587 of the Code of Commerce 14 and Articles 1170

and 1173 of the Civil Code.b) The rule in Home Insurance is not applicable to the present case because it "covers only a stipulation exempting a

private carrier from liability for the negligence of his agent, but it does not apply to a stipulation exempting a privatecarrier like private respondent from the negligence of his employee or servant which is the situation in this case."

ISSUE(S) :WoN the stipulation in the charter party executed between the petitioner and the private respondent exempting

the latter from liability for the loss of petitioner's logs arising from the negligence of its (Shipping Corp.s) captain is valid.

HELD : YES. In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely

on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence

of the ship captain.

Dispositive: WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible

error on the part of Respondent Court. The assailed Decision is AFFIRMED.

RATIO :

Stipulation is VALID.

It is undisputed that private respondent had acted as a private carrier in transporting petitioner's lauan logs. Thus, Article

1745 and other Civil Code provisions on common carriers which were cited by Valenzuela may not be applied unless

expressly stipulated by the parties in their charter party.

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the

charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the

ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the

parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of

private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely

stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common

carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common


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carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private

carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or

remove the protection given by law in contracts involving common carriers.

Home Insurance Co. vs. American Steamship Agencies, Inc is applicableto the case at bar.

In that case, the trial court similarly nullified a stipulation identical to that involved in the present case for being contrary to

public policy based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce. Consequently, the trial

court held the shipowner liable for damages resulting for the partial loss of the cargo. This Court reversed the trial court

and laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and doctrine:

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 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 thecarrier 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 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 this case of a ship

totally chartered for the used of a single party .

Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a contract of

transportation with common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres

to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the common carrier.

Thus, the law on common carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoicesor other documents over which the riding public has no understanding or, worse, no choice. Compared to the general

public, a charterer in a contract of private carriage is not similarly situated. It can and in fact it usually does enter into

a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carrier's

obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a

charterer, in exchange for convenience and economy, may opt to set aside the protection of the law on common carriers.

When the charterer decides to exercise this option, he takes a normal business risk.

The case Home Insurance specifically dealt with "the liability of the shipowner for acts or negligence of its captain and

crew" and a charter party stipulation which "exempts the owner of the vessel from any loss or damage or delay arisingfrom any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner

onboard, for whose acts the owner would ordinarily be liable except for said paragraph." Undoubtedly, Home Insurance is

applicable to the case at bar.

CASE LAW/ DOCTRINE :

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the


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charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the

ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the

parties and the same is not contrary to law, morals, good customs, public order, or public policy.

DISSENTING/CONCURRING OPINION(S) :


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030 Planters Products Inc v CA

G.R. No. 101503 September 15, 1993

TOPIC : Limitation of Liability for Negligence

PONENTE : Belosillo, J.

AUTHOR :

NOTES:

FACTS:

1. On 17 May 1974, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter was

entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan.

2. Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A.,

9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo

vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Alaska, USA to La

Union, Philippines.

3. Before loading the fertilizer aboard the vessel, four (4) of her holdswere all inspected and found fit by inspected by the

charterer's representative to take a load of urea in bulk

3. After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel

hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatchesremained closed and tightly sealed throughout the entire voyage.

4. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the

consignee's warehouse located some fifty (50) meters from the wharf. Midway to the warehouse, the trucks were made to

pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the

cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable,

raining occasionally while the discharge was in progress

5. After PPI unloaded the cargo, a survey report by a private marine and cargo surveyor hired by PPI to determine the

"outturn" of the cargo shipped, by taking draft readings of the vessel revealed a shortage in the cargo of 106.726 M/T and

that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt.6. PPI filed an action for damages with the CFI. The defendant carrier argued that the strict public policy governing

common carriers does not apply to them because they have become private carriers by reason of the provisions of the

charter-party. CFI ruled in favor of PPI.

7. CA reversed the CFI and absolved the carrier from liability for the value of the cargo that was lost or damaged. Relying

on the 1968 case of Home Insurance Co . v . American Steamship Agencies, Inc ., it ruled that the cargo vessel M/V "Sun

Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of the time charterer-

party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find

application in the case at bar.

8. PPI theorizes that the Home Insurance case has no bearing on the present controversy because the issue raisedtherein is the validity of a stipulation in the charter-party delimiting the liability of the shipowner for loss or damage to

goods cause by want of due deligence on its part or that of its manager to make the vessel seaworthy in all respects, and

not whether the presumption of negligence provided under the Civil Code applies only to common carriers and not to

private carriers. PPI further argues that since the possession and control of the vessel remain with the shipowner, absent

any stipulation to the contrary, such shipowner should be made liable for the negligence of the captain and crew. In fine,

PPI faults the appellate court in not applying the presumption of negligence against respondent carrier, and instead

shifting the onus probandi on the shipper to show want of due diligence on the part of the carrier, when he was not even at


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hand to witness what transpired during the entire voyage.

ISSUE(S) : whether the shipowner in the instant case was able to prove that he had exercised that degree of diligence

required of him under the law.

HELD :

Yes. The court agrees with the respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the

risk of loss or damage. More so, with a variable weather condition prevalent during its unloading, as was the case at bar.

This is a risk the shipper or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved the

inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its

packaging which further contributed to the loss. On the other hand, no proof was adduced by the petitioner showing that

the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

RATIO :

Home Insurance Co. vs. American Steamship Agencies, Inc is not applicable to the case at bar.

It is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party

exempting the shipowners from liability for loss due to the negligence of its agent, and not the effects of a special charter

on common carriers. At any rate, the rule in the United States that a ship chartered by a single shipper to carry special

cargo is not a common carrier, does not find application in our jurisdiction, for we have observed that the growing concern

for safety in the transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of

admiralty laws, more particularly, the rules governing common carriers.

Respondent carrier has sufficiently overcome, by clear and convincing proof, the pr im a f acie presumption of

negligence.

The master of the carrying vessel, Captain Lee Tae Bo testified that before the fertilizer was loaded, the four (4) hatches of

the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship's holds, the

steel pontoon hatches were closed and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins

which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight

of the steel covers made it impossible for a person to open without the use of the ship's boom.

The period during which private respondent was to observe the degree of diligence required of it as a public carrier began

from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed

scrutiny by the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee,

but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard

"GENCON" time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge

of the cargo was to be done by the charterer, free from all risk and expense to the carrier. Moreover, a shipowner is liable

for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him,

and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the

employ of the latter.


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The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds

during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed,

making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or

contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the

dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo

surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in

their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel

and segregated from the rest of the cargo.



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031 Belgian Overseas Chartering and Shipping

vs. First Insurance Co., Inc.

[G.R. No. 123133; June 5, 2003]

TOPIC : Limitation of Liability of Negligence

AUTHOR : Drei Mauricio

NATURE OF THE CASE: Petition for Review under Rule 45

assailing that the July 1998 and May 2000 Resolution of the CA

which REVERSED and SET ASIDE the decision of the RTC.

FACTS:

1. In June 1990, CMC Trading A.G. (herein after called CMC Trading ) shipped on board the MN Anangel Sky 242coils of various Prime Cold Rolled Steel sheets from Hamburg, Germany to Manila consigned to the PhilippineSteel Trading Corporation (hereinafter called Philippine Steel ).

2. In July 1990, upon arrival of MN Anangel Sky in Manila, 4 coils were found to be in bad order and unfit for itsintended purpose. In effect, Philippine Steel declared the same as total loss.

3. Despite receipt of the formal demand, CMC Trading refused to pay Philippine Steel which prompted the latter torecover from its insurer, First Insurance Co (hereinafter called First Insurance ). First Insurance paid P506,086.50representing the damage/loss of the 4 coils.

CMC Trading assails: (1) that they exercised due diligence and foresight required by law to prevent anydamage/loss to said shipment; (2) that the damage/loss was due to the pre-shipment damages, to theinherent nature, vice or defect of the goods, or the perils, danger and accidents of the sea, or toinsufficiency of packing thereof, or to the act or omission of the shipper of the goods or theirrepresentatives; and (3) that their liability, if any, should not exceed the limitations of liability as provided inthe bill of lading and other pertinent laws.

4. RTC: dismissed the Complaint because respondent failed to prove its claims with the quantum of proof required bylaw. It also debunked petitioners counter -claim because the respondents suit was not manifested frivolous orprimarily intended to harass them.

5. CA: reversed the TC and affirmed the award of attorneys fees. Petitioners were liable for the loss of the damage of the goods shipped, because they had failed to

overcome the presumption of negligence imposed on common carriers. Petitioners claim that the loss or the deteriorarion of the goods was due to pre -shipment damage was

inadequately proven. CA further opined that the notation metal envelopes rus t stained and slightlydented placed on the Bill of Lading had not been the proximate cause of the damage to the 4 coils.

As to the extent of the petitioners liability the package limitation under Carrier of Goods by Sea Act(hereinafter referred as COGSA ) was not applicable because the words L/C No. 90/02447 indicated thata higher valuation of the cargo had been declared by the shipper.

ISSUE(S) :

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

HELD :

1. NO. The petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by areview of the records and more so by the evidence adduced by respondent. Petitioners failed to prove that theyobserved the extraordinary diligence and precaution which the law requires a common carrier to know and tofollow, to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.

2. YES. The facts reveal that the cargo was discharge on July 31, 1990 while the Complaint was filed byrespondenton July 25, 1991 within the one-year prescriptive period.

3. YES.RATIO :

Proof of Negligence It is a well-settled rule that common carriers, from the nature of their business and for reasons of


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public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the

passengers they transport. Thus, common carriers are required to render service with the greatest skill and foresight and

to use all reasonable means to ascertain the nature and characteristics of the goods tendered for shipment, and to

exercise due care in the handling and stowage, including such methods as their nature requires.

Responsibility of common carriers last from the time the goods are unconditionally placed in the possession of and

received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the

person who has a right to receive them.

Given this high degree of diligence required of the common carriers, as a general rule they are presumed to have been at

fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they

exercised extraordinary diligence in transporting the goods. In order to avoid the responsibility for any loss or damage,

therefore, they have the burden of proving that they observed such diligence.

The presumption of negligence will not arise, if the loss is due to any of the following causes***:

1. Floods, storm, earthquake, lightning, or other natural disaster or calamity;2. An act of the public enemy in war (international or civil);3. An act or omission of the shipper or owner of the goods;4. The character of the goods or defects in the packing or the container; or 5. An order or act of competent public authority.

***this is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then

the carrier is liable therefor.

Mere proof of delivery in the goods in good order to a common carrier and of their arrival in bad order at their destination

constitutes prima facie case of fault or negligence against the carrier.

The petitioners in this case failed to rebut the prima facie presumption of negligence based on records as follows, as

confirmed by RupertoEsmerio the head checker of BM Santos Checkers Agency:

1. In the Bill of Lading petitioners received subject shipment in good order and condition in Germany.2. Before unloading, in the Inspection Report the steel bands broken, the metal envelopes rust-stained and heavily

buckled, and the contents thereof exposed and rusty. This was prepared and signed by both parties.3. In the Bad Order Tally Sheet 4 coils were in bad order and condition. A request of bad order survey was made

and said goods were presumed loss or damage.4. In the Certificate of Analysis based on the sample submitted and tested, the steel sheets found in bad order

were wet with fresh water.5. In a Letter (addressed to Philippine Steel) it was admitted that they were aware of the condition of the 4 coils

found in bad order and condition.

In this case, while it is true that the metal envelopes rust stained and slightly dented were noted on the Bill of Lading,

there is no showing that petitioners exercised due diligence to forestall or lessen the loss. They have been in the service

for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would

eventually deteriorate when no properly stored. The master of the vessel and his crew should have undertaken

precautionary measures to avoid possible deterioration of the cargo, but none of these measures were taken.


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Not ice o f Loss Petitioners assail that pursuant to Sec. 3 (6) of the COGSA, respondent should have filed its Notice of

Loss within 3 days from delivery. However, the SC is not persuaded.

The Court provides that COGSA provides that the notice of claim need not be given if the state of goods, at the time of

their receipt, has been the subject of a joint inspection or survey. First, as provided earlier, prior to the unloading of the

cargo, and Inspection Report as to the condition of the goods was prepared and signed by the representatives of both

parties. Second , a failure to file notice of claim within three days will not bar recovery if it is nonetheless filed within one

year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal

holder of the bill of lading.

Moreover in Loadst ar Shipping Co . , Inc. v. Court of A ppeals it was held that a claim is not barred prescription as long

as the one-year period has not lapsed.

Package Limit at ion Respondent argues that Sec. 4 (5) of the COGSA is inapplicable because the value of the subject

shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit

or L/C No. 90/02447 in the said Bill of Lading.

The Bill of Lading serves 2 functions: (1) receipt for the goods shipped, and (2) contract by which three parties, namely the

shipper, carrier, and the consignee, undertake specific responsibilities and assume stipulated obligations. Acceptance of

the bill of lading by the shipper and the consignee with full knowledge of its contents, gives rise to the presumption that it

constituted a perfected and binding contract.

If a bill of lading limits to a certain sum the common carriers liability for loss or destruction of a cargo, unless the shi pper or

owner declares a greater value is sanctioned by law. Provided the following conditions must be satisfied: (1) the contract is

reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties. Therationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.

The Court further qualifies that the Civil Code does not limit the liability of the common carrier to a fixed amount per

package. In all matters not covered by the Civil Code pertaining to the right and obligations of common carriers shall be

governed by the Code of Commerce and special Law. Thus, COGSA shall only apply suppletory to the provisions of the

Civil Code.

In this case, there was no stipulation in the bill of lading limiting the carriers liability. Neither did the sh ipper declare a

higher valuation of the goods to be shipped. In fact, a notation in the bill of lading which indicated the amount of the lettercredit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value o fthe goods as

required by the bill. Such notation was made for the purpose of facilitating the convenience of the shipper and the bank

processing the letter of credit. Moreover, in the Kung Hua Paper Produc ts vs . Cour t o f Appea ls , it held that a bill of

lading was a separate from the other letter of credit arrangements.

Based on the aforementioned principles, the petitioners liability should be computed based on the USD 500 per package

and not the per ton metric price declared in the letter of credit. In the Eastern Shipping Lines, Inc. vs . Court of Appeals


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a package has been held to be each unit shipped in the container supplied by the carriers and the number of such units is

disclosed in the shipping documents.

Therefore, the units are indeed subject to the USD 500 limitation per package and the petitioners total liability has the total

amount USD 2,000 (excluding interests etc.).


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032 Belgian Overseas Chartering and Shipping vs. First Insurance Co., Inc.

[G.R. No. 123133; June 5, 2003]

TOPIC : Limitation of Liability of Negligence

AUTHOR : Drei Mauricio

NOTES:

NATURE OF THE CASE: Petition for Review under Rule 45 assailing that the July 1998 and May 2000 Resolution of the

CA which REVERSED and SET ASIDE the decision of the RTC.

FACTS:

6. In June 1990, CMC Trading A.G. (herein after called CMC Trading ) shipped on board the MN Anangel Sky 242coils of various Prime Cold Rolled Steel sheets from Hamburg, Germany to Manila consigned to the PhilippineSteel Trading Corporation (hereinafter called Philippine Steel ).

7. In July 1990, upon arrival of MN Anangel Sky in Manila, 4 coils were found to be in bad order and unfit for itsintended purpose. In effect, Philippine Steel declared the same as total loss.

8. Despite receipt of the formal demand, CMC Trading refused to pay Philippine Steel which prompted the latter torecover from its insurer, First Insurance Co (hereinafter called First Insurance ). First Insurance paid P506,086.50representing the damage/loss of the 4 coils.

CMC Trading assails: (1) that they exercised due diligence and foresight required by law to prevent any

damage/loss to said shipment; (2) that the damage/loss was due to the pre-shipment damages, to theinherent nature, vice or defect of the goods, or the perils, danger and accidents of the sea, or toinsufficiency of packing thereof, or to the act or omission of the shipper of the goods or theirrepresentatives; and (3) that their liability, if any, should not exceed the limitations of liability as providedin the bill of lading and other pertinent laws.

9. RTC: dismissed the Complaint because respondent failed to prove its claims with the quantum of proof requiredby law. It also debunked petitioners counter -claim because the respondents suit was not manifested frivolous orprimarily intended to harass them.

10. CA: reversed the TC and affirmed the award of attorneys fees. Petitioners were liable for the loss of the damage of the goods shipped, because they had failed to

overcome the presumption of negligence imposed on common carriers. Petitioners claim that the loss or the deteriorarion of the goods was due to pre -shipment damage was

inadequately proven. CA further opined that the notation metal envelopes rust stained and slightly

dented placed on the Bill of Lading had not been the proximate cause of the damage to the 4 coils. As to the extent of the petitioners liability the package limitation under Carrier of Goods by Sea Act(hereinafter referred as COGSA ) was not applicable because the words L/C No. 90/02447 indicate d thata higher valuation of the cargo had been declared by the shipper.

ISSUE(S) :

4. Whether petitioners have overcome the presumption of negligence of a common carrier.5. Whether the notice of loss was timely filed.6. Whether the package limitation of liability is applicable.

HELD :

4. NO. The petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by areview of the records and more so by the evidence adduced by respondent. Petitioners failed to prove that theyobserved the extraordinary diligence and precaution which the law requires a common carrier to know and tofollow, to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.

5. YES. The facts reveal that the cargo was discharge on July 31, 1990 while the Complaint was filed by respondenton July 25, 1991 within the one-year prescriptive period.

6. YES.RATIO :

Proof of Negligence It is a well-settled rule that common carriers, from the nature of their business and for reasons of

public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the

passengers they transport. Thus, common carriers are required to render service with the greatest skill and foresight and

to use all reasonable means to as certain the nature and characteristics of the goods tendered for shipment, and to

exercise due care in the handling and stowage, including such methods as their nature requires.


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Responsibility of common carriers last from the time the goods are unconditionally placed in the possession of and

received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the

person who has a right to receive them.

Given this high degree of diligence required of the common carriers, as a general rule they are presumed to have been at

fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they

exercised extraordinary diligence in transporting the goods. In order to avoid the responsibility for any loss or damage,

therefore, they have the burden of proving that they observed such diligence.

The presumption of negligence will not arise, if the loss is due to any of the following causes***:

6. Floods, storm, earthquake, lightning, or other natural disaster or calamity;7. An act of the public enemy in war (international or civil);8. An act or omission of the shipper or owner of the goods;9. The character of the goods or defects in the packing or the container; or 10. An order or act of competent public authority.

***this is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, thenthe carrier is liable therefor.

Mere proof of delivery in the goods in good order to a common carrier and of their arrival in bad order at their destination

constitutes prima facie case of fault or negligence against the carrier.

The petitioners in this case failed to rebut the prima facie presumption of negligence based on records as follows, as

confirmed by Ruperto Esmerio the head checker of BM Santos Checkers Agency:

6. In the Bill of Lading petitioners received subject shipment in good order and condition in Germany.7. Before unloading, in the Inspection Report the steel bands broken, the metal envelopes rust-stained and heavily

buckled, and the contents thereof exposed and rusty. This was prepared and signed by both parties.8. In the Bad Order Tally Sheet 4 coils were in bad order and condition. A request of bad order survey was made

and said goods were presumed loss or damage.9. In the Certificate of Analysis based on the sample submitted and tested, the steel sheets found in bad order

were wet with fresh water.10. In a Letter (addressed to Philippine Steel) it was admitted that they were aware of the condition of the 4 coils

found in bad order and condition.

In this case, while it is true that the metal envelopes rust stained and slightly dented were noted on the Bill of Lading

there is no showing that petitioners exercised due diligence to forestall or lessen the loss. They have been in the service

for several years, the master of the vessel should have known at the outset that metal envelopes in the said state would

eventually deteriorate when no properly stored. The master of the vessel and his crew should have undertaken

precautionary measures to avoid possible deterioration of the cargo, but none of these measures were taken.

Not ice o f Loss Petitioners assail that pursuant to Sec. 3 (6) of the COGSA, respondent should have filed its Notice of

Loss within 3 days from delivery. However, the SC is not persuaded.

The Court provides that COGSA provides that the notice of claim need not be given if the state of goods, at the time of


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their receipt, has been the subject of a joint inspection or survey. First, as provided earlier, prior to the unloading of the

cargo, and Inspection Report as to the condition of the goods was prepared and signed by the representatives of both

parties. Second , a failure to file notice of claim within three days will not bar recovery if it is nonetheless filed within one

year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal

holder of the bill of lading.

Moreover in Loads tar Shipping Co . , Inc. v. Court of A ppeals it was held that a claim is not barred prescription as long

as the one-year period has not lapsed.

Package Lim itat ion Respondent argues that Sec. 4 (5) of the COGSA is inapplicable because the value of the subject

shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of

Credit or L/C No. 90/02447 in the said Bill of Lading.

The Bill of Lading serves 2 functions: (1) receipt for the goods shipped, and (2) contract by which three parties, namely

the shipper, carrier, and the consignee, undertake specific responsibilities and assume stipulated obligations. Acceptance

of the bill of lading by the shipper and the consignee with full knowledge of its contents, gives rise to the presumption thatit constituted a perfected and binding contract.

If a bill of lading limits to a certain sum the common carriers liability for loss or destruction of a cargo, unless the shi pper

or owner declares a greater value is sanctioned by law. Provided the following conditions must be satisfied: (1) the

contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties.

The rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.

The Court further qualifies that the Civil Code does not limit the liability of the common carrier to a fixed amount per

package. In all matters not covered by the Civil Code pertaining to the right and obligations of common carriers shall begoverned by the Code of Commerce and special Law. Thus, COGSA shall only apply suppletory to the provisions of the

Civil Code.

In this case, there was no stipulation in the bill of lading limiting the carriers liability. Neither did the shipper declar e a

higher valuation of the goods to be shipped. In fact, a notation in the bill of lading which indicated the amount of the letter

credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value o fthe goods as

required by the bill. Such notation was made for the purpose of facilitating the convenience of the shipper and the bank

processing the letter of credit. Moreover, in the Kung Hua Paper Produc ts vs . Cour t o f Appea ls , it held that a bill of

lading was a separate from the other letter of credit arrangements.

Based on the aforementioned principles, the petitioners liability should be computed based on the USD 500 per package

and not the per ton metric price declared in the letter of credit. In the Eastern Shippin g Lines, Inc. vs . Court of

Appeals , a package has been held to be each unit shipped in the container supplied by the carriers and the number of

such units is disclosed in the shipping documents.

Therefore, the units are indeed subject to the USD 500 limitation per package and the petitioners total liability has the


19/24

total amount USD 2,000 (excluding interests etc.).




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033 American President Lines (APL) v Klepper

GR L-15671

Nov. 29, 1960

J. Angelo Bautista

Facts:

1. Richard Klepper shipped his personal and household effects inside a life van from Yokohama, Japan to here inthe PH.1.1 he had it shipped on board the SS President Cleveland1.2 date of shipment: Feb. 17, 1955

2. SS Cleveland arrived in Manila on Feb. 22, 19552.1 while the life van was being unloaded by the gantry crane, the contents spilled and were scattered.2.2 The crane was being operated by the Delgado Brothers, Inc.2.3 A survey was made and the damages were determined at P 6,729.50

3. Klepper filed a case against the shipping company APL and against Delgado Bros. Inc.3.1 for the damages + P500 sentimental value + P1,000 attys fees.

4. RTC: in favour of Klepper4.1 APL pays Klepper, then Delgado Bros., Inc. pays APL by way of reimbursement

5. Both APL and Delgado Bros., Inc. filed appealed to the CA.6. CA: decision of RTC affirmed in toto.

6.1 CA: The party primarily liable to plaintiff is appellant American President Lines, Ltd., the carrier whose duty it

was to deliver the cargo in good order to the consignee.

7. Hence, this petition for review by APL.7.1 APL contends that although it is liable, it is limited only to the amount of $500.00 because of the stipulation in

the Bill of Lading and because of Sec. 4(5) of CA No. 65 (Carriage of Goods by Sea Act)

Issue:

Whether or not APL is liable for the whole amount of the loss?

Held: No.

Ratio:

1. Philippine Laws apply in this case (hence CA No. 65 suppletorily applies).

1.1 Article 1753 of the Civil Code provides that the law of the country to which the goods are to be transportedshall govern the liability of the common carrier in case of loss, destruction or deterioration.

1.2 This means the law of the Philippines, or the Civil Code. Under Article 1766, "In all matters not regulated bythis Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and byspecial laws," and in the Civil Code there are provisions that govern said rights and obligations (Articles 1736,1737 and 1738).

1.3 Therefore, although Section 4 (5) of the Carriage of Goods by Sea Act states that the carrier shall not beliable in an amount exceeding $500.00 per package unless the value of the goods had been declared by theshipper and inserted in the bill of lading, said section is merely suppletory to the provisions of the Civil Code.

2. Respondent is estopped already (because they signed the bill of lading)


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2.1 we cannot but take note of the following clause printed in red ink that appears on the very face of the bill oflading: "IN ACCEPTING THIS BILL OF LADING the shipper, consignee and owner of the goods agree to bebound by all its stipulations, exceptions, and conditions whether written, printed, or stamped on the front orback hereof, any local customs or privileges to the contrary notwithstanding." This clause is very revealing.

2.2 It says that a shipper or consignee who accepts the bill of lading becomes bound by all stipulations containedtherein whether on the front or back thereof.

2.3 Respondent cannot elude its provisions simply because they prejudice him and take advantage of those thatare beneficial.

2.4 The fact that respondent shipped his goods on board the ship of petitioner and paid the corresponding freightthereon shows that he impliedly accepted the bill of lading which was issued in connection with the shipmentin question, and so it may be said that the same is binding upon him as if it has been actually signed by himor by any other person in his behalf. This is more so where respondent is both the shipper and the consigneeof the goods in question.

2.5 There is a stipulation in the bill of lading limiting the liability of the carrier if the true values of the goods are notdeclared in the bill of lading.2.5.1 17. In case of any loss or damage to or in connection with goods exceeding in actual value $500

lawful money of the United States, per package, . . . the value of the goods shall be deemed to be$500 per package . . . on which basis the freight is adjusted and the Carriers liability, if any, shall bedetermined on the basis of a value of $500 per package . . . or pro rata in case of partial loss ordamage, unless the nature of the goods and a valuation higher than $500 shall have been declared inwriting by the shipper upon delivery to the Carrier and inserted in this bill of lading and extra freight

paid if required and in such case if the actual value of the goods per package . . . shall exceed suchdec lared value, the value shall nevertheless be deemed to be the declared value and the Carriersliability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted

pro rata on the basis of such declared value."


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EDGAR COKALIONG SHIPPING LINES, INC., petitioner,

vs. UCPB GENERAL INSURANCE COMPANY, INC.,

respondent.

TOPIC : Limitation of liability for negligence

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

PONENTE : Panganiban, J.

AUTHOR : twinkle

NOTES: (if applicable)

FACTS:

1. December 11, 1991 - Nestor Angelia (both the shipper and consignee of the cargo valued, on the face thereof, inthe amount of P6,500.00) delivered to the Edgar Cokaliong Shipping Lines, Inc. [pet] cargo (one carton ofChristmas dcor and 2sacks of plastic toys) to be transported on board the M/V Tandag on from Cebu City, onDecember 12, 1991, to Tandag, Surigao del Sur.

2. P issued Bill of Lading No. 58, freight prepaid, covering the cargo.3. Zosimo Mercado likewise delivered cargo to P, 2 cartons of plastic toys and Christmas decor, 1roll of floor mat and

1bundle of various or assorted goods for transportation. P issued Bill of Lading No. 59 covering the cargo valuedP14,000.00. Zosimo Mercado was both the shipper and consignee of the cargo.

4. On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPBGeneral Insurance Co., Inc., [resp] for P100,000.00 against all risks and Bill of Lading No. 58, for P50,000.00.

5. The vessel left port with 34passengers and assorted cargo on board, including goods of Legaspi. After the vesselhad passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of theofficers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vesseland the cargoes therein. The Captain filed the required Marine Protest.

6. Feliciana Legaspi filed a claim, with R submitting a Receipt, dated December 11, 1991, purportedly signed byZosimo Mercado, and Order Slips purportedly signed by him for the goods he received from Feliciana Legaspivalued P110,056.00, and also for bill of lading 58.

7. R approved the claim of Feliciana Legaspi and drew and issued UCPB Check No. 612939, dated March 9, 1992,in the net amount of P99,000.00. R also approved her claim for bill of lading 58 (P49,500.00). In settlement of herclaim after which she executed a Subrogation Receipt/Deed, for said amount, in favor of R.

8. On July 14, 1992, R, as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], withthe RTC Makati for the collection of the total principal amount of P148,500.00, which it paid to Feliciana Legaspifor the loss of the cargo.

9. RTC: For ResCA: For Res

ISSUE(S) : (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability? HELD : Pet partly meritorious.

1) YES. P did not present any evidence to prove the sea worthiness of the vessel2) Only to the amount stated in the Bill of Lading

RATIO :

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


23/24

As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735 of the Civil Code

provides that in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to

have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence

required by law.

Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to

discover the existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of

those officials.[16]

The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised

extraordinary vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in

exercising the required vigilance. Petitioner did not present sufficient evidence showing what measures or

acts it had undertaken to ensure the seaworthiness of the vessel . It failed to show when the last

inspection and care of the auxiliary engine fuel oil service tank was made, what the normal practice was

for its maintenance, or some other evidence to establish that it had exercised extraordinary diligence.

merely stated that constant inspection and care were not possible, and that the last time the vessel was dry-docked was in November 1990. Necessarily, in accordance with Article 1735[17] of the Civil Code, we hold

petitioner responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.

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

Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or

deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and

fairly agreed upon.

In the present case, the stipulation limiting petitioners liability is not contrary to public policy. In fact, its

just and reasonable character is evident . The shippers/consignees may recover the full value of the goods by

the simple expedient of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a

higher freight, there was nothing to stop them from placing the actual value of the goods therein. In fact, they

committed fraud against the common carrier by deliberately undervaluing the goods in their Bill of Lading, thus

depriving the carrier of its proper and just transport fare.

Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier.

Such stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter may be

liable for in case of loss of the goods. The common carrier can then take appropriate measures -- getting

insurance, if needed, to cover or protect itself. This precaution on the part of the carrier is reasonable and prudent.

Hence, a shipper/consignee that undervalues the real worth of the goods it seeks to transport does not only violate

a valid contractual stipulation, but commits a fraudulent act when it seeks to make the common carrier liable for

more than the amount it declared in the bill of lading.


The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value


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declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the

insurance policy and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.


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