1. Extraordinary diligence

Eastern Shipping v. IAC

Facts:This is a consolidation of three cases concerning the same instance filed by respondents Nisshin Fire and Marine Insurance, Dowa Fire and Marine Insurance and Development Insurance and Surety Corp. M/S ASIATICA, operated by petitioner Eastern Shipping loaded several articles that were insured by private respondents. Enroute from Japan to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respondent Insurers paid the corresponding marine insurance values to the concerned consignees and were thus subrogated unto the rights of the latter as the insured. Eastern denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under COGSA. Issues:1. Which law should govern the Civil Code provisions on common carriers or COGSA?

Held:1. Applicable law the law of the country to which the goods are to be transported governs the liability of the common carriers in case of their loss, destruction or deterioration. Hence, the Civil Code of the Philippines must govern but in matters not regulated by the said Code, the Code of Commerce and COGSA (being a special law) is suppletory to the provisions of the Code. 1. The civil code only exculpates a carrier if the loss is due to a fortuitous event. Fire may not be considered a natural disaster or calamity. It does not fall within the category of an act of God unless caused by lighting or by other natural disaster or calamity. As the peril is not comprehended within the exception, the common carrier shall be presumed to have been at fault, unless it has proved that extraordinary diligence has been observed. On the other hand, COGSA considers that the carriers are not liable for loss due to fire unless the latter is at fault.1. Both the TC and IAC found that there was ACTUAL FAULT of the carrier as shown by LACK OF DILIGENCE based on the fact that when the smoke was noticed, the fire was already big and must have been existing for 24 hrs and that the no regular inspection was made as to the condition of the cargoes. 1. Other matters:3. Liability of carrier was decreased to the set amount of COGSA to $500 per package3. Attorneys fees were decreased from35k to 5k for Development Insurance

DELSAN TRANSPORT vs. CA

FACTSCaltex engaged into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc.(Delsan), for a period of one year whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with private respondent, American Home Assurance Corporation (American Home)

The vessel sank in the early morning of August 15, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.

Subsequently, American Home paid Caltex the sum of Php 5,096,635.57 representing the insured value of the cargo. Exercising its right to subrogation under Article 2207 of the New Civil Code, the American Home demanded the Delsan the same amount it paid to Caltex.

Due to its failure to collect from Delsan despite prior demand, American Home filed a complaint with the RTC of Makati for collection of a sum of money.

The trial court dismissed the complaint against Delsan. It ruled that the vessel, MT Maysun, was seaworthy and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier from liability for the loss of its cargo.

The CA reversed. It gave credence to the weather report issued by PAGASA which stated that the waves were only .7 to 2 meters in height in the vicinity of the Panay Gulf at the day the ship sank, in contrast to the claim of the crew of the ship that the waves were 20 feet high.

Delsan contends the following1. Delsan theorized that when the American Home paid Caltex the value of its lost cargo, the act of American Home is equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, American Home was not legally liable to Caltex due to the latters breach of implied warranty under the marine insurance policy that the vessel was seaworthy. 2. Delsan avers that although chief officer had merely a 2nd officers license, he was qualified to act as the vessels chief officer. In fact, all the crew and officers of MTT Maysun were exonerated in the administrative investigation.

ISSUES

1. W/N the payment made by American Home to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. NO2. W/N the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action. NO

RULING

First Issue:

The payment made by American Home for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessels seaworthiness by American Home as to foreclose recourse against Delsan for any liability under its contractual obligation as a common carrier. The fact of payment grants American Home subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against Delsan, the common carrier.

From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove they observed extraordinary diligence.

In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, Delsan attributes the sinking of MT Maysun to fortuitous event or force majeure. Although the testimony of the captain and chief mate that there were strong winds and waves 20 feet high was effectively rebutted and belied by the weather report of PAGASA. Thus, as the CA correctly ruled, Delsans vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity where the said vessel sank.

Additionally, the exoneration of MT Maysuns officers and crew merely concern their respective administrative liabilities. It does not in any way operate to absolve Delsan the common carrier from its civil liability arising from its failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the determination of which properly belongs to the courts. In the case at bar, Delsan is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or negligence as common carrier occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.

Second Issue:

It is the view of the SC that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of American Home as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.

Philippine Charter Insurance Corp. vs. Unknown OwnerPHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THE VESSEL M/V NATIONAL HONOR, NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC.[G.R. No. 161833. July 8, 2005]

FACTS:

Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a shipment on board the vessel M/V National Honor, represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP).

The M/V National Honor arrived at the Manila International Container Terminal (MICT). The International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew the contents of the crate. The following day, the vessel started discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a winch man from the ICTSI, exclusive arrastre operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the hatches, checked the cargo and found it in apparent good condition. Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was fastened on the mid-portion of the crate. In Dauzs experience, this was a normal procedure. As the crate was being hoisted from the vessels hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessels twin deck, sending all its contents crashing down hard, resulting in extensive damage to the shipment.

PCIC paid the damage, and as subrogee, filed a case against M/V National Honor, NSCP and ICTSI. Both RTC and CA dismissed the complaint.

ISSUE:Whether or not the presumption of negligence is applicable in the instant case.

HELD:

No. We agree with the contention of the petitioner that common carriers, from the nature of their business and for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. he Court has defined extraordinary diligence in the vigilance over the goods as follows:

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

The common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person entitled to receive them. When the goods shipped are either lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence.

However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of the following causes:

1. Flood, storm, earthquake, lightning or other natural disaster or calamity;2. Act of the public enemy in war, whether international or civil;3. Act or omission of the shipper or owner of the goods;4. The character of the goods or defects in the packing or in the containers;5. Order or act of competent public authority.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier for the loss or damage to the cargo is a closed list. To exculpate itself from liability for the loss/damage to the cargo under any of the causes, the common carrier is burdened to prove any of the a fore cited causes claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent.

Defect is the want or absence of something necessary for completeness or perfection; a lack or absence of something essential to completeness; a deficiency in something essential to the proper use for the purpose for which a thing is to be used. On the other hand, inferior means of poor quality, mediocre, or second rate. A thing may be of inferior quality but not necessarily defective. In other words, defectiveness is not synonymous with inferiority.

x x x

In the present case, the trial court declared that based on the record, the loss of the shipment was caused by the negligence of the petitioner as the shipper:

The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and the total destruction of its contents were not imputable to any fault or negligence on the part of said defendant in handling the unloading of the cargoes from the carrying vessel, but was due solely to the inherent defect and weakness of the materials used in the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side by side underneath or on the flooring of the crate to support the weight of its contents. x x x

Saludo Jr. v. CAFacts:Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois. Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment of the remains from Chicago to the Philippines. Pomierski brought the remains to Continental Mortuary Air Services (CMAS) at the Chicago Airport which made the necessary arrangements such as flights, transfers, etc. CMAS booked the shipment with PAL thru the carriers agent Air Care International. PAL Airway Bill Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board Trans World Airline (TWA) and from San Francisco to Manila on board PAL.Salvacion (one of the petitioners), upon arrival at San Francisco, went to the TWA to inquire about her mothers remains. But she was told they did not know anything about it. She then called Pomierski that her mothers remains were not at the West Coast terminal. Pomierski immediately called CMAS which informed that the remains were on a plane to Mexico City, that there were two bodies at the terminal, and somehow they were switched. CMAS called and told Pomierski that they were sending the remains back to California via Texas.Petitioners filed a complaint against TWA and PAL fir the misshipment and delay in the delay of the cargo containing the remains of the late Crispina Saludo. Petitioners alleged that private respondents received the casketed remains of Crispina on October 26, 1976, as evidenced by the issuance of PAL Airway Bill by Air Care and from said date, private respondents were charged with the responsibility to exercise extraordinary diligence so much so that the alleged switching of the caskets on October 27, 1976, or one day after the private respondents received the cargo, the latter must necessarily be liable.Issues:Whether or not there was delivery of the cargo upon mere issuance of the airway billWhether or not the delay in the delivery of the casketed remains of petitioners mother was due to the fault of respondent airline companiesHeld: NO to both, but TWA was held to pay petitioners nominal damages of P40,000 for its violation of the degree of diligence required by law to be exercised by every common carrierOrdinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence.In other words, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti. Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.As already demonstrated, the facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on October 28, 1976 and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby, private respondents cannot be held liable.The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. This result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts.Echoing the findings of the trial court, the respondent court correctly declared that In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: "The carrier does not obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route of the shipment without any liability therefor", our Supreme Court ruled that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).There is no showing by plaintiffs that such a special or specific contract had been entered into between them and the defendant airline companies.And this special contract for prompt delivery should call the attention of the carrier to the circumstances surrounding the case and the approximate amount of damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no such contract entered into in the instant case.A common carrier undertaking to transport property has the implicit duty to carry and deliver it within reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such neglect of duty. As found by the trial court, the delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private respondents, a conclusion concurred in by respondent court and which we are not inclined to disturb.

LORENZO SHIPPING vs. BJ MATHEL

FACTS

Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. Respondent BJ Marthel International, Inc. is an importer and distributor of different brands of engines and spare parts.

Respondent supplied petitioner with spare parts for the latter's marine engines. According to the quotation it sent, deliveries of such items are within 2 months after receipt of firm order. Petitioner thereafter issued to respondent Purchase Order No. 13839 for the procurement of one set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express. The purchase order was co-signed by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo, respondents sales manager.

Instead of paying the 25% down payment (indicated in the purchase order) for the first cylinder liner, petitioner issued in favor of respondent ten postdated checks. The checks were supposed to represent the full payment of the aforementioned cylinder liner.

Subsequently, petitioner issued Purchase Order No. 14011, for another unit of cylinder liner. This purchase order stated the term of payment to be "25% upon delivery, balance payable in 5 bi-monthly equal installments." Like the first purchase order, the second purchase order did not state the date of the cylinder liner's delivery.

On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January 1990, however, the same was dishonored by the drawee bank due to insufficiency of funds. The remaining nine postdated checks were eventually returned by respondent to petitioner.

Petitioner claimed that it replaced said check with a good one, the proceeds of which were applied to its other obligation to respondent. For its part, respondent insisted that it returned said postdated check to petitioner.

On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in Manila. The sales invoices evidencing the delivery of the cylinder liners both contain the notation "subject to verification" under which the signature of petitioner's warehouseman, appeared.

Respondent sent a Statement of Account and respondent's vice-president sent a demand letter dated to petitioner requiring the latter to pay. Petitioner sent the former a letter offering to pay only P150,000 for the cylinder liners. In said letter, petitioner claimed that as the cylinder liners were delivered late and due to the scrapping of the M/V Dadiangas Express, it (petitioner) would have to sell the cylinder liners in Singapore and pay the balance from the proceeds of said sale.

Respondent filed an action for sum of money and damages before the RTC. Prior to the filing of a responsive pleading, respondent filed an amended complaint with preliminary attachment. The amendments also pertained to the issuance by petitioner of the postdated checks and the amounts of damages claimed.

The RTC granted respondent's prayer for the issuance of a preliminary attachment. Petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment attaching thereto a counter-bond which the RTC allowed.

Petitioner afterwards filed its Answer alleging therein that time was of the essence in the delivery of the cylinder liners and that the delivery on 20 April 1990 of said items was late as respondent committed to deliver said items "within two (2) months after receipt of firm order."

Respondent filed a Second Amended Complaint with Preliminary Attachment which dealt solely with the number of postdated checks issued by petitioner as full payment for the first cylinder liner it ordered from respondent. (In the first amended complaint, only nine postdated checks were involved, in its second amended complaint, there were ten postdated checks).

Petitioner filed a Motion alleging therein that the cylinder liners run the risk of obsolescence and deterioration to the prejudice of the parties to this case. Thus, petitioner prayed that it be allowed to sell the cylinder liners at the best possible price and to place the proceeds of said sale in escrow. This motion was granted.The RTC dismissed the complaint which ordered the plaintiff to pay P50,000.00 to the defendant. It held respondent bound to the quotation it submitted to petitioner particularly with respect to the terms of payment and delivery of the cylinder liners. It also declared that respondent had agreed to the cancellation of the contract of sale when it returned the postdated checks issued by petitioner.The CA reversed the decision of the RTC.

ISSUES1. Whether or not respondent incurred delay in performing its obligation under the contract of sale - NO1. Whether or not said contract was validly rescinded by petitioner. NO

RULING

Petitioner maintains that its obligation to pay fully the purchase price was extinguished because the adverted contract was validly terminated due to respondent's failure to deliver within the two-month period. The threshold question, then, is: Was there late delivery of the subjects of the contract of sale to justify petitioner to disregard the terms of the contract considering that time was of the essence thereof?

In determining whether time is of the essence in a contract, the ultimate criterion is the actual or apparent intention of the parties and before time may be so regarded by a court, there must be a sufficient manifestation, either in the contract itself or the surrounding circumstances of that intention. Petitioner insists that although its purchase orders did not specify the dates when the cylinder liners were supposed to be delivered, nevertheless, respondent should abide by the term of delivery appearing on the quotation it submitted to petitioner. Petitioner theorizes that the quotation embodied the offer from respondent while the purchase order represented its (petitioner's) acceptance of the proposed terms of the contract of sale. Thus, petitioner is of the view that these two documents "cannot be taken separately as if there were two distinct contracts." We do not agree.

While this Court recognizes the principle that contracts are respected as the law between the contracting parties, this principle is tempered by the rule that the intention of the parties is primordial and "once the intention of the parties has been ascertained, that element is deemed as an integral part of the contract as though it has been originally expressed in unequivocal terms."

In the present case, we cannot subscribe to the position of petitioner that the documents, by themselves, embody the terms of the sale of the cylinder liners. One can easily glean the significant differences in the terms as stated in the formal quotation and Purchase Order No. 13839 with regard to the due date of the down payment for the first cylinder liner and the date of its delivery as well as Purchase Order No. 14011 with respect to the date of delivery of the second cylinder liner. While the quotation provided by respondent evidently stated that the cylinder liners were supposed to be delivered within two months from receipt of the firm order of petitioner and that the 25% down payment was due upon the cylinder liners' delivery, the purchase orders prepared by petitioner clearly omitted these significant items. The petitioner's Purchase Order No. 13839 made no mention at all of the due dates of delivery of the first cylinder liner and of the payment of 25% down payment. Its Purchase Order No. 14011 likewise did not indicate the due date of delivery of the second cylinder liner.

In the instant case, the formal quotation provided by respondent represented the negotiation phase of the subject contract of sale between the parties. As of that time, the parties had not yet reached an agreement as regards the terms and conditions of the contract of sale of the cylinder liners. Petitioner could very well have ignored the offer or tendered a counter-offer to respondent while the latter could have, withdrawn or modified the same. The parties were at liberty to discuss the provisions of the contract of sale prior to its perfection. In this connection, we turn to the testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer were, indeed, renegotiated prior to the issuance of Purchase Order No. 13839.

The law implies, however, that if no time is fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an immediate delivery intended.

We also find significant the fact that while petitioner alleges that the cylinder liners were to be used for dry dock repair and maintenance of its M/V Dadiangas Express between the later part of December 1989 to early January 1990, the record is bereft of any indication that respondent was aware of such fact. The failure of petitioner to notify respondent of said date is fatal to its claim that time was of the essence in the subject contracts of sale.

Finally, the ten postdated checks issued in November 1989 by petitioner and received by the respondent as full payment of the purchase price of the first cylinder liner supposed to be delivered on 02 January 1990 fail to impress. It is not an indication of failure to honor a commitment on the part of the respondent. The earliest maturity date of the checks was 18 January 1990. As delivery of said checks could produce the effect of payment only when they have been cashed, respondent's obligation to deliver the first cylinder liner could not have arisen as early as 02 January 1990 as claimed by petitioner since by that time, petitioner had yet to fulfill its undertaking to fully pay for the value of the first cylinder liner. As explained by respondent, it proceeded with the placement of the order for the cylinder liners with its principal in Japan solely on the basis of its previously harmonious business relationship with petitioner.

As an aside, let it be underscored that "[e]ven where time is of the essence, a breach of the contract in that respect by one of the parties may be waived by the other party's subsequently treating the contract as still in force." Petitioner's receipt of the cylinder liners when they were delivered to its warehouse on 20 April 1990 clearly indicates that it considered the contract of sale to be still subsisting up to that time. Indeed, had the contract of sale been cancelled already as claimed by petitioner, it no longer had any business receiving the cylinder liners even if said receipt was "subject to verification." By accepting the cylinder liners when these were delivered to its warehouse, petitioner indisputably waived the claimed delay in the delivery of said items.

We, therefore, hold that in the subject contracts, time was not of the essence. The delivery of the cylinder liners on 20 April 1990 was made within a reasonable period of time considering that respondent had to place the order for the cylinder liners with its principal in Japan and that the latter was, at that time, beset by heavy volume of work.

There having been no failure on the part of the respondent to perform its obligation, the power to rescind the contract is unavailing to the petitioner.

Here, there is no showing that petitioner notified respondent of its intention to rescind the contract of sale between them. Quite the contrary, respondent's act of proceeding with the opening of an irrevocable letter of credit on 23 February 1990 belies petitioner's claim that it notified respondent of the cancellation of the contract of sale. Truly, no prudent businessman would pursue such action knowing that the contract of sale, for which the letter of credit was opened, was already rescinded by the other party.

Sealoader shipping vs grand cementDoctrine:Contributory Negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection

Facts:Sealoader executed a Time Charter Party Aggrement with Joyce Launch for the chartering of MT Viper in order to tow its unpropelled barges for a minimum of 15 days.Sealoder entered into a contract with Grand Cement for the loading of cement clinkers and the delivery thereof to Manila. On March 31, 1994, Sealoders barge arrived at the wharf of Grand Cement tugged by MT Viper. It was not immediately loaded as the employees of Grand Cement were loaded another vessel.On April 4, typhoon Bising struck Cebu area. The barge was still docked at the wharf of Grand Cement. As it became stronger, MT Viper tried to tow the barge away but it was unsuccessful because the towing line connecting the vessels snapped since the mooring lines were not cast off, which is the ultimate cause. Hence, the barge rammed the wharf causing significant damage.Grand Cement filed a complaint for damages (P2.4M) since Sealoader ignored its demands. They allege that Sealoader was negligent when it ignored its employees advice to move the vessels after it had received weather updates. Sealoader filed a motion to dismiss on the ground that Joyce Launch is the one liable since it was the owner of MT Viper, whos employees were manning the vessel. Sealoader filed a cross-claim against Joyce Launch. Joyce maintains that the damages were due to force majeure and faulted Grand Cements employees for abandoning the wharf leaving them helpless and for not warning them early on.Upon testimonies, the RTC rendered judgment in favor of Grand Cement holding the two companies liable since there was complete disregard of the storm signal, the captain of the vessel was not present and the vessel was not equipped with a radio or any navigational facility, which is mandatory. Joyce launch did not appeal.On appeal, the CA affirmed the decision but on MR, it partly reversed its decision finding Grand Cement to be guilty of contributory negligence since it was found that it was still loading the other vessel at the last minute just before the storm hit, hence Sealodersvessel did not move. Damages were reduced to 50%. Hence, petition for review to SC.Issue:Who should be liable for damage sustained by the wharf of Grand Cement?

Ruling:Sealoader is liable for its negligence. First because it was not equipped with a radio or a navigational facility and it failed to monitor the prevailing weather conditions. Second, it cannot pass the responsibility of casting off the mooring lines because the people at the wharf could not just cast off the mooring lines without any instructions from the crew of the vessel. It should have taken the initiative to cast off the mooring lines early on.

With regard to Grand Cements contributory negligence, the court found that it was not guilty thereof. It had timely informed the barge of the impending typhoon and directed the vessels to move to a safer place. Sealoader had the responsibility to inform itself of the prevailing weather conditions in the areas where its vessel was to sail. It cannot merely rely on other vessels for weather updates and warnings on approaching storms. For to do so would be to gamble with the safety of its own vessel, putting the lives of its crew under the mercy of the sea, as well as running the rick of causing damage to property of third parties for which it would necessarily be liable.

2.Presumption of negligence

DELSAN TRANSPORT LINES, INC. vs. AMERICAN HOME ASSURANCE CORPORATIONG.R. No. 149019 August 15, 2006GARCIA, JFacts:Delsan is a domestic corporation which owns and operates the vessel MT Larusan. Onthe other hand, respondent American Home Assurance Corporation (AHAC for brevity) is a foreign insurance company duly licensed to do business in the Philippines through its agent, the American-International Underwriters, Inc. (Phils.). It is engaged, among others,in insuring cargoes for transportation within the Philippines. Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/lAutomotive Diesel Oil (diesel oil) at the Bataan Refinery Corporation for transportation and delivery to the bulk depot in Bacolod City of Caltex Phils.,Inc. (Caltex), pursuant to a Contract of afreightment. The shipment was insured by respondent AHAC against all risks under InlandFloater Policy No. AH-IF64-1011549P and Marine Risk Note No. 34-5093-6. The shipment arrived in Bacolod Cityand immediately thereafter, unloading operations commenced. However, the discharging had to be stopped on account of thediscovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown persons, which caused the diesel oilto spill into thesea.As a result of spillage and backflow ofdiesel oil, Caltex sought recovery of theloss from Delsan, but the latter refusedto pay. Asinsurer, AHAC paid Caltex the sum of P479,262.57 for spillage, pursuant to Marine Risk Note,and P1,939,575.37 for backflow ofthe diesel oil pursuant to InlandFloater Policy. AHAC, as Caltexs subrogee, instituted Civil Case No. 85-29357 againstDelsan forloss caused by the spillage.

Issue: May Delsan be held liable forloss caused by the spillage of thediesel oil?

Held: Yes. The court declared that Delsan, being acommon carrier, should have exercised extraordinary diligence in the performance ofits duties. Common carriers are bound to observe extraordinary diligence in the vigilance over thegoods transported by them. They are presumed to have been at faultor to have acted negligently if the goods are lost, destroyed or deteriorated. Toovercome the presumption of negligence in case of loss, destruction or deteriorationof the goods, the common carrier must prove that itexercised extraordinary diligence subject to exceptions under Art. 1734.The extraordinary responsibility of common carrier lasts from the time the goods are unconditionally placed inthe possession of, and received by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier to theconsignee, or to a person who has theright to receive them. The discharging of oilproducts to Caltex Bulk Depot has notyet been finished, Delsan still has the duty toguard and to preserve the cargo. The carrier stillhas in it the responsibility toguard and preserve the goods, a duty incident to itshaving the goods transported

MAERSK LINES vs. CA

FACTS

Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its general agent Compania de Tabacos de Filipinas, while private respondent Efren Castillo is the proprietor of Ethegal Laboratories, a firm engaged in the manufacture of pharmaceutical products.

On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of Puerto Rico 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The capsules were placed in 6 drums of 100,000 capsules each valued at US$1,668.71. Shipper Eli Liily,Inc. advised Castillo through a Memorandum of Shipment that the products were already shipped on board MV Anders Maesrkline and date of arrival to be April 3, 1977.

However, for unknown reasons, said cargoes of capsules were diverted to Richmond, VA and then transported back to Oakland, CA and with the goods finally arriving in the PI on June 10, 1977. Consignee Castillo refused to take delivery of the goods on account of its failure to arrive on time, and filed an action for rescission of contract with damages against Maersk and Eli Lilly alleging gross negligence and undue delay.

Maersk contends that it is liable only in case of loss, destruction or deterioration of goods under Art 1734 NCC while Eli Lilly in its cross claim argued that the delay was due solely to the negligence of Maersk Line. Trial Court dismissed the complaint against Eli Lilly and the latter withdrew cross claim but TC still held Maersk liable and CA affirmed with modifications.

ISSUES

1. W/N a cause of action exists against Maersk Line given that there was a dismissal of the complaint against Eli Lilly? Yes, but not under the cross claim rather because Maersk was an original party.1. W/N Castillo is entitled to damages resulting from delay in the delivery of the shipment in the absence in the bill of lading of a stipulation on the delivery of goods? Yes.

RULING

The complaint was filed originally against Eli Lilly, Inc. as shipper-supplier and petitioner as carrier. Petitioner Maersk Line being an original party defendant upon whom the delayed shipment is imputed cannot claim that the dismissal of the complaint against Eli Liily inured to its benefit.

Petitioner contends as well that it cannot be held liable because there was no special contract under which the carrier undertook to deliver the shipment on or before a specific date and that the Bill of Lading provides that The Carrier does not undertake that the Goods shall arrive at port of discharge or the place of delivery at any particular time. However, although the SC stated that a bill of lading being a contract of adhesion will not be voided on that basis alone, it did declare that the questioned provision to be void because it has the effect of practically leaving the date of arrival of the subject shipment on the sole determination and will of the carrier. It is established that without any stipulated date, the delivery of shipment or cargo should be made within a reasonable time. In the case at hand, the SC declared that a delay in the delivery of the goods spanning a period of 2 months and 7 days falls way beyond the realm of reasonableness.

FGU INSURANCE vs. CA

FACTS

Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were operated as common carriers. Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another.

The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique. The vessels arrived at San Jose, Antique, at about one oclock in the afternoon of 30 September 1979. The tugboat M/T ANCO left the barge immediately after reaching San Jose, Antique.

When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the clouds over the area were dark and the waves were already big. The arrastre workers unloading the cargoes of SMC on board the D/B Lucio began to complain about their difficulty in unloading the cargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs representative to transfer the barge to a safer place because the vessel might not be able to withstand the big waves.

ANCOs representative did not heed the request because he was confident that the barge could withstand the waves. This, notwithstanding the fact that at that time, only the M/T ANCO was left at the wharf of San Jose, Antique, as all other vessels already left the wharf to seek shelter. With the waves growing bigger and bigger, only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged into the custody of the arrastre operator.

At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because the barges rope attached to the wharf was cut off by the big waves. At around midnight, the barge run aground and was broken and the cargoes of beer in the barge were swept away.

As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos (P45.20). The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMCs claim against ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO for the amount of One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent (25%) of the total claim as attorneys fees.

ISSUE

ANCO raised the defense that the breach was caused by a fortuitous event, thus it is exempted from liability. Is this contention correct?

RULING

No. In order for fortuitous event to be a valid defense for a common carrier, the event must be:1. Unforeseeable , or if foreseeable it must be inevitable.1. It must be the proximate and the only cause of the loss.1. The common carrier must exercise due diligence to prevent or minimize the loss (before, during after the occurrence of the event).

Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability)[19] by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were inevitable. It is therefore not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid.

In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a circumstance which prompted SMCs District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine and could not maneuver by itself. Even if ANCOs representatives wanted to transfer it, they no longer had any means to do so as the tugboat M/T ANCO had already departed, leaving the barge to its own devices. The captain of the tugboat should have had the foresight not to leave the barge alone considering the pending storm.

While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO could not escape liability to respondent SMC. The records clearly show the failure of petitioners representatives to exercise the extraordinary degree of diligence mandated by law. To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss. There must have been no contributory negligence on the part of the common carrier. As held in the case of Limpangco Sons v. Yangco Steamship Co.:

. . . To be exempt from liability because of an act of God, the tug must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. For, although the immediate or proximate cause of the loss in any given instance may have been what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by any culpable act or omission of its own, it is not excused.

Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the part of M/T ANCOs crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the request of SMCs representatives to have the barge transferred to a safer place, as was done by the other vessels in the port; thus, making said blatant negligence the proximate cause of the loss of the cargoes.

DSR-SENATOR vs. FEDERAL

FACTS Berde Plants delivered 632 units of artificial trees to C.F. Sharp, the General Ship Agent of DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia.

C.F. Sharp issued International Bill of Lading for the cargo the port of discharge for the cargo was at the Khor Fakkan port and the port of delivery was Riyadh, Saudi Arabia, via Port Dammam. The cargo was loaded in M/S Arabian Senator.

Federal Phoenix Assurance insured the cargo against all risks.

On June 7, 1993, M/S Arabian Senator left the Manila South Harbor for Saudi Arabia with the cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was reloaded on board DSR-Senator Lines feeder vessel, M/V Kapitan Sakharov, bound for Port Dammam, Saudi Arabia.

However, while in transit, the vessel and all its cargo caught fire.

On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V Kapitan Sakharov with its cargo was gutted by fire and sank on or about July 4, 1993. On December 16, 1993, C.F. Sharp issued a certification to that effect

Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61 corresponding to the amount of insurance for the cargo. In turn Berde Plants executed in its favor a Subrogation Receipt dated January 17, 1994.

On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp demanding payment of P941,429.61 on the basis of the Subrogation Receipt. C.F. Sharp denied any liability on the ground that such liability was extinguished when the vessel carrying the cargo was gutted by fire.On March 11, 1994, Federal Phoenix Assurance filed with the RTC, Branch 16, Manila a complaint for damages against DSR-Senator Lines and C.F. Sharp, praying that the latter be ordered to pay actual damages of P941,429.61, compensatory damages of P100,000.00 and costs.ISSUE

W/N DSR-Senator is liable YES

RULING

Under Article 1734, Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or destruction of the cargo. Since the peril of fire is not comprehended within the exceptions in Article 1734, then 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.

The natural disaster must have been the proximate and only cause of the loss, and that the carrier has exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster.

When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated.

Respondent Federal Phoenix Assurance raised the presumption of negligence against petitioners. However, they failed to overcome it by sufficient proof of extraordinary diligence.

PHILAMGEN vs. SWEET LINES

FACTS A total 7,000 bags of low density polyethylene (600 bags of polyethylene 641 and 6,400 bags of polyethylene 647) were shipped from Baton Rouge, LA to Manila on board SS Vishva Yash, a vessel belonging to the Shipping Corporation of India (SCI). From Manila, the cargoes were shipped to Davao on board MV Sweet Love, a vessel owned by Sweet Lines. The consignee was Far East Bank with arrival notice to Tagum Plastics, Inc., Tagum, Davao City. The cargoes were insured by Far East Bank with the Philippine American General Insurance Co (Philamgen) and were covered by bills of lading which contained the following stipulation in paragraph 5:

Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if container shows exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted within 60 days from date of accrual of right of action. Failure to file claims or institute judicial proceedings as herein provided constitutes waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier.

On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody of the consignee. A survey conducted on July 8, 1977 showed that of the shipment totalling 7,000 bags, originally contained in 175 pallets, only a total of 5,820 bags were delivered to the consignee in good order condition, leaving a balance of 1,080 bags. Some of the 1,080 bags were either MISSING OR DAMAGED beyond the point of being useful for the intended purpose.

FEBTC and Tagum Plastics sued the international carrier, SCI, the inter-island carriers, Sweet Lines, the arrastre company, Davao Arrastre and FE Zuellig (which I assume is the shipper). Before trial, a compromise agreement was entered into between the complainants and SCI and F.E. Zuellig, thus, only Sweet Lines and Davao Arrastre remained as defendants.The trial court ruled in favour of Philamgen and Tagum Plastics. The CA reversed on the ground of prescription and denied the motion for reconsideration.

ISSUES1. Was there a prescriptive period?1. If yes, was the prescriptive period valid and legal?1. If it was valid and legal, did Philamgen act within the prescriptive period?

RULING(1) Yes. There was a prescriptive period. When the complaint was filed, prescription as an affirmative defense was seasonably raised by Sweet Lines in its answer. Though the bills of lading were not presented in evidence, the SC said that: As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills of lading, such bills of lading can be categorized as actionable documents which under the Rules must be properly pleaded either as causes of action or defenses, and the genuineness and due execution of which are deemed admitted unless specifically denied under oath by the adverse party. The rules on actionable documents cover and apply to both a cause of action or defense based on said documents. In their answer, Sweet Lines included the prescriptive period under paragraph 5 of the bills of lading. Philamgen did not deny the existence of the bill of lading under oath. Instead, in its reply to the answer, Philamgen asserted that the bills of lading were contracts of adhesion and that such provisions were contrary to law and public policy and thus, Sweet Lines cannot avail of such prescriptive period as a valid defense. The SC said that Philamgens failure to deny under oath the existence of the bills of lading was tantamount to an admission of its existence, together with paragraph 5 containing the prescriptive period. Thus, the existence of the prescriptive period was duly proved even if the bills of lading were not presented in court.

(2) Yes. The prescriptive periods were valid and legal. Philamgen insists that the bills of lading were contracts of adhesion and that the prescriptive periods stated therein were void for being contrary to law and public policy. The SC, citing Ong Yu vs CA, said that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent. Philamgen, thus, gave its consent to the contracts the bills of lading including consent to the prescriptive periods therein. The SC also agreed with the CA that parties can stipulate a shorter prescriptive period for the filing of suits. The SC quoted the CA, It must be noted, at this juncture, that the aforestated time limitation (paragraph 5) in the presentation of claim for loss or damage, is but a restatement of the rule prescribed under Art. 366 of the Code of Commerce... The SC said that, ... the validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the statutory period therefor has generally been upheld as such stipulation merely affects the shipper's remedy and does not affect the liability of the carrier. In the absence of any statutory limitation and subject only to the requirement on the reasonableness of the stipulated limitation period, the parties to a contract of carriage may fix by agreement a shorter time for the bringing of suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations. Such limitation is not contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by action at an earlier period than would be necessary to defeat it through the operation of the ordinary statute of limitations. The SC also said that, ..., the shortened period for filing suit is not unreasonable and has in fact been generally recognized to be a valid business practice in the shipping industry. This is in recognition of the inherent dangers of carriage by sea.

(3) No. Philamgen did not act within the prescriptive period. The shipment was discharged into the custody of the consignee on May 15, 1977, and it was from this date that petitioners' cause of action accrued, with thirty (30) days therefrom within which to file a claim with the carrier for any loss or damage which may have been suffered by the cargo and thereby perfect their right of action. Claim was filed only on April 28, 1978, way beyond the period provided in the bills of lading and violative of the contractual provision, the inevitable consequence of which is the loss of petitioners' remedy or right to sue. The SC said, Even the filing of the complaint on May 12, 1978 is of no remedial or practical consequence, since the time limits for the filing thereof, whether viewed as a condition precedent or as a prescriptive period, would in this case be productive of the same result, that is, that petitioners had no right of action to begin with or, at any rate, their claim was time-barred.

Other things discussed by the SC:1. ...where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims.

2. Philamgen also asserted that since the purpose of the notice of claim or loss was to charge Sweet Lines with actual knowledge of the loss and damage involved, then the issuance of Sweet Lines of a Report on Losses and Damage dated May 15, 1977, would obviate the need for or render superfluous the filing of a claim within the stipulated period. The SC said, The report on losses and damages is not the claim referred to and required by the bills of lading for it does not fix responsibility for the loss or damage, but merely states the condition of the goods shipped. The claim contemplated herein, in whatever form, must be something more than a notice that the goods have been lost or damaged; it must contain a claim for compensation or indicate an intent to claim. Furthermore, the report bears an annotation at its lower part that says this Copy should be submitted together with your claim invoice or receipt within 30 days from date of issue otherwise your claim will not be honored."

1. The claim against the carrier, Sweet Lines, has prescribed but what about the claim against Davao Arrastre. The SC said that there was not enough proof to pinpoint the party responsible for the lost and damaged bags. (What I found surprising was that the SC also said, Unlike a common carrier, an arrastre operator does not labor under a presumption of negligence in case of loss, destruction or deterioration of goods discharged into its custody. In other words, to hold an arrastre operator liable for loss of and/or damage to goods entrusted to it there must be preponderant evidence that it did not exercise due diligence in the handling and care of the goods.

BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondent.

PANGANIBAN, J.:

Facts:CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.Despite receipt of a formal demand, Phil. First insurance refused to submit to the consignees claim. Consequently, Belgian Overseas paid the consignee P506,086.50, and was subrogated to the latters rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured.Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.

Issue: Whether or not petitioners have overcome the presumption of negligence of a common carrier

Held:No.Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony offered by private respondent. The contention is untenable.Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport. 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. The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence.However, the presumption of fault or negligence will not arise if the loss is due to any of the following causes: (1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or (5) an order or act of competent public authority. 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.Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the records and more so by the evidence adduced by respondent

EDGAR COKALIONG SHIPPING LINES, INC. VS UCPBFacts: Nestor Angelia and Zosimo Mercado both delivered to petitioner cargo, valued on its face 6,500 and 14,000 pesos respectively The Bills of Lading contain the stipulation that in case of claim for loss or for damage to the shipped merchandise or property, the liability of the common carrier shall not exceed the value of the goods appearing in the Bill of Lading Nestor was both the shipper and consignee of the cargo Feliciana Legaspi insured the cargo of the 2 bills of lading for the amount of 50, 000 and 100,000 pesos against all risks Fire ensured in the engine room and destroyed the entire vessel and all the cargo therin Feliciana filed a claim for the value of the cargo, it was approved for the amount of 49,500 and 99,000 pesos for both bills of lading Respondent filed a complaint in the RTC for the collection of 148,500 pesos, the total principal amount it paid to Feliciana Legaspi Petitioners argued that after settling his claim, Nestor Angelia executed the Release and Quitclaim hence it was absolved of any liability for the loss of the cargo and even if it was, its liability should not exceed the value of the cargo as stated in the Bills of Lading CA held that petitioner is not bound by the valuation of the cargo under the Bills of Lading, nor is the value of the cargo under said Bills of Lading conclusive on the respondentthe goods were insured with the respondent for the total amount of 150,000 pesos, which amount may be considered as the face value of the goods

Issue: Amount of liability of petitioner: WON it is that which was stated in the Bills of Lading, or the extent of the amount paid by the insurance company

Held: That which is stated in the Bills of Lading

Ratio: A stipulation that limits liability is valid as long as it is not against public policy A stipulation in the Bill of Lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law [1749, 1750] The present stipulation is not against public policy, it is just and reasonable; 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 In fact, they even committed fraud in deliberately undervaluing the goods Purpose of the limiting stipulation is to protect the common carrierto notify it of the amount it may be liable for and be able to take appropriate measures to cover or protect itself i.e. getting insurance For assuming a higher risk, the insurance company was paid the correct higher premium while the petitioner was paid a fee lower for transporting the goods that had been deliberately undervalued Between the two of them, the insurer should bear the loss in excess of the value declared in the bill of lading, this is a just and equitable solution

Sarkies Tours Philippines, Inc. v. CA,Elino Fortades, Marisol Fortades and FatimaMinerva FortadesG.R. No. 108897 October 2, 1997

Romero, J.

FACTS:

Fatima boarded Sarkies Tours bus in Manila on her way to Legazpi City. She had her 3pieces of luggage containing all of her optometry review books, materials and equipment,trial lenses, trial contact lenses, passport and visa, as well as her mother Marisols U.S.immigration(green)card,amongother importantdocumentsandpersonalbelongings loaded in the bus luggage compartment. During a stopover at Daet, itwas discovered thatonly one bag remained in the open compartment. The others, including Fatimas things, were missing and might have dropped along the way.

Fatima filed an action against Sarkies Tours, claiming that the loss was dueto its failure toobserve extraordinary diligence in the care of her luggage and that Sarkies Tours dealtwith them in bad faithfrom the start

ISSUE:WON Sarkies Tours is liable

HELD:Yes. Common carriers, from the nature of their business and for reasons of publicpolicy,areboundtoobserveextraordinarydiligenceinthevigilanceoverthegoodstransported by them, and this liability lasts from the time the goods are unconditionally placed in the possession of, andreceived by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the person who has a right to receive them, unless the loss is due toany of the excepted causes under Art. 1734.The cause of the loss was Sarkies Tours negligence in not ensuring that the doors of the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggage was lost, tothe prejudice of the paying passengers.

Valenzuela Hardwood vs. CA(GR 102316, 30 June 1997)

FACTS:Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the Seven Brothers whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. VHIS insured the logs against loss and/or damage with South Sea Surety and Insurance Co.

The said vessel sank resulting in the loss of VHIS insured logs. VHIS demanded from South Sea Surety the payment of the proceeds of the policy but the latter denied liability under the policy for non-payment of premium. VHIS likewise filed a formal claim with Seven Brothers for the value of the lost logs but the latter denied the claim.The RTC ruled in favor of the petitioner.Both Seven Brothers and South Sea Surety appealed. The Court of Appeals affirmed the judgment except as to the liability of Seven Brothers.South Sea Surety and VHIS filed separate petitions for review before the Supreme Court. In a Resolution dated 2 June 1995, the Supreme Court denied the petition of South Sea Surety. The present decision concerns itself to the petition for review filed by THIS.ISSUE:Is a stipulation in a charter party that the (o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo valid?

HELD:Yes, It is undisputed that private respondent had acted as a private carrier in transporting petitioners lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner 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 ship owner 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 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.

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, invoices or 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 carriers 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

lberta Yobido and Cresencio Yobido v. CA, Leny Tumboy, Ardee Tumboy andJasmin Tumboy

Romero, J.FACTS:

Spouses Tito and LenyTumboy and their minor children named Ardee and Jasmin, boardeda Yobido Liner bus bound for Davao City. Along the trip, the left front tire of the bus exploded. The bus fell into a ravine around 3 ft. from the road and struck a tree. The incident resulted in the death of Titoand physical injuries to other passengers.

Factual backdrop based on testimony ofLeny: the winding road thebus traversed was not cemented and was wet due to the rain; it was rough with crushed rocks. The bus which was full of passengers had cargoes on top. Since it was running fast, (at a speed of 50-60kph based on another witness testimony) she cautioned the driver to slow down but he merely stared at her through the mirror.

A complaint for breach of contract of carriage was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver; Yobidos raised the affirmativedefenseofcasofortuito;theyalsofiledathird partycomplaintagainst Philippine Phoenix Surety and Insurance, Inc.

Upon a finding that the third party defendant was not liable under the insurance contract, the lower courtdismissed the third party complaint.

ISSUE:WON the tire blowout was a caso fortuito as toexempt Yobidos from liability

HELD:No.tire blowout- mechanical defect of the conveyance or a fault in itsequipment which was easily discoverable if the bus had been subjected to a more thorough or rigid check-up before it took to the road

when a passenger boards a common carrier, he takes the risks incidental to the mode oftravel he has taken. After all, acarrier is not an insurer ofthe safety ofits passengers and is not boundabsolutely and at all events to carry them safely and without injury. However, when a passenger is injured or dies while travelling, the law presumes that the common carrier is negligent. (see Art. 1756)Art. 1755 provides that acommon carrier is bound tocarry the passengers safely as far ashumancareandforesightcanprovide,usingtheutmostdiligenceofverycautiouspersons,withadueregardforallthecircumstances.Inculpacontractual,onceapassenger dies or is injured, the carrier is presumed tohave been at fault orto have acted negligently. Thisdisputablepresumptionmay onlybeovercome byevidence thatthe carrier had observed extraordinary diligence as prescribed by Arts. 1733, 1755 and 1756 or that the death orinjury of the passenger was due to afortuitous event.

Characteristicsoffortuitousevent:a)thecauseoftheunforeseenandunexpectedoccurrence,orthefailureofthedebtortocomplywithhisobligations,mustbeindependent of human will; b) it must beimpossible to foresee the event which constitutesthe caso fortuito, or if itcan be foreseen, it must be impossible to avoid; c)the occurrencemust be such as to render it impossible for the debtor to fulfill his obligation in a normalmanner; and d) the obligor must be free from any participation in the aggravation of theinjury resulting to thecreditor

Art1174:noperson shallberesponsiblefor afortuitousevent whichcouldnotbeforeseen, or which, though foreseen, wasinevitable

the explosion of the new tire may not be considered a fortuitous event; there are humanfactors involved in the situation; the fact that the tire was new did not imply that it wasentirely free from manufacturing defects or that it was properly mounted on thevehicle.

1. Defenses and condition

CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent.Doctrine of Limited Liability does not apply to situations in which the loss or the injury is due to the concurrent negligence of the shipowner and the captain.

Facts:

1. On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the M/V Central Bohol, 376 pieces of Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc.

2. During the voyage the degree of the position of the ship would change due to the shifting of the logs inside. Eventually at about 15 degrees the captain ordered for everyone to abandon the ship.

3. Respondent alleged that the total loss of the shipment was caused by the fault and negligence of the petitioner and its captain. Petitioner while admitting the sinking of the vessel, interposed the defense that the vessel was fully manned, fully equipped and in all respects seaworthy; that all the logs were properly loaded and secured; that the vessels master exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the storm.

4. It raised as its main defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither [petitioner] nor the captain of its vessel could have foreseen.

5. The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. It noted that monsoons, which were common occurrences during the months of July to December, could have been foreseen and provided for by an ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier, the trial court held petitioner liable for the loss of the cargo.

6. The CA affirmed the trial courts finding that the southwestern monsoon encountered by the vessel was not unforeseeable. Given the season of rains and monsoons, the ship captain and his crew should have anticipated the perils of the sea. Citing Arada v. CA,7 it said that findings of the BMI were limited to the administrative liability of the owner/operator, officers and crew of the vessel. However, the determination of whether the carrier observed extraordinary diligence in protecting the cargo it was transporting was a function of the courts, not of the BMI.Issue:Whether or not the Doctrine of Limited Liability applies.

Held:No it does not.

Common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case; In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration was brought aboutamong othersby flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence.The doctrine of limited liability under Article 587 of the Code of Commerce is not applicable to the present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the ship-owner and the captain. It has already been established that the sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of logs. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As such, the shipowner was equally negligent. It cannot escape liability by virtue of the limited liability rule.

Everett Steamship Corporation vs. CAG.R. No.122494, October 8, 1998

FACTS:Private respondent imported 3 crates of bus spare parts marked as MARCO C/No. 12,MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates wereshippedfrom Nagoya,JapantoManila inboard"ADELFAEVERETTE,"avessel owned by petitioner's principal, Everett Orient Lines. Upon arrival at the port of Manila,itwasdiscoveredthatthecratemarkedMARCOC/No.14wasmissing.Private respondent claim upon petitioner for the value of the lost cargo amounting to One MillionFiveHundredFiftyTwoThousandFiveHundred(Y1,552,500.00)Yen,theamountshowninanInvoiceNo.MTM941,datedNovember14,1991.However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner. Private respondent rejected the offer and thereafter instituted a suit for collection. Thetrial court renderedadecision infavor ofthe private respondents and this was affirmed by the Court of Appeals. Thus, this instant petition.

ISSUES:1.Isthepetitionerliablefortheactualvalueandnotthemaximumvalue recoverable under the bill of lading?

2. Is private respondent, as consignee, who is not a signatory to the bill of lading bound by the stipulations thereof?

ARGUMENTS:

1.The Petitioner is only liable for the maximum value recoverable under the bill oflading. Clause 18 of the covering bill of lading:18. All claims for which the carrier may be liable shall be adjusted and settled onthe basis ofthe shipper'snet invoice costplusfreightand insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss.The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred thousandYen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) un less the value of the goods higher than this amount is declared in writing bythe shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required

. (Emphasis supplied)Pertinent provisions that is applicable as to this case: Art. 1749. Astipulation that thecommon carrier's liability islimited tothe value ofthe goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon. Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting thecommoncarrier'sliabilityforlossmustbe"reasonableandjustunderthecircumstances, and has been freely and fairly agreed upon."The above stipulations are reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen.

Cruz vs son holidays case digest

SOUTHERN LINES INC vs CA and CITY OF ILOILODOCTRINE:If the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom.

FACTS:

- The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC).- NARIC shipped 1,726 sacks of rice consigned to the City of Iloilo on board of SS General Wright belong to Southern Lines.- The City of Iloilo received the shipment and paid the amount stated in the bill of lading (around Php 63K).- However, at the bottom of the bill of lading, it was noted that City of Iloilo received the merchandise in the same condition as when shipped, except that it received only 1,685 sacks.- Upon actual weighing, it was discovered that the shortage was equal to 41 sacks of rice.- Thus, the City of Iloilo filed a complaint against NARIC and Southern Lines for the recovery of the value of the shortage of the shipment of rice (Php 6,486.35).- The lower court absolved NARIC but sentenced Southern Lines to pay the amount.-CA affirmed.-Hence, this petition for review.-Southern Lines claims exemption from liability by contending that the shortage in the shipment of rice was due to such factors as shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received the same and negligence of the agents of City of Iloilo in receiving the shipment.

ISSUES:

- Wheth