Case Digest: Cathay Pacific v. Court of Appeals, 219 SCRA 520, G.R. No. 60501

 

Cathay Pacific v. Court of Appeals, 219 SCRA 520, G.R. No. 60501, 5 March 1993

Subject: Transportation Law

FACTS

On 19 October 1975, respondent Tomas L. Alcantara was a first-class passenger of petitioner Cathay Pacific Airways, Ltd. on its Flight No. CX-900 from Manila to Hongkong and onward from Hongkong to Jakarta on Flight No. CX-711. The purpose of his trip was to attend the following day, 20 October 1975, a conference with the Director General of Trade of Indonesia, Alcantara being the Executive Vice-President and General Manager of Iligan Cement Corporation, Chairman of the Export Committee of the Philippine Cement Corporation, and representative of the Cement Industry Authority and the Philippine Cement Corporation. He checked in his luggage which contained not only his clothing and articles for personal use but also papers and documents he needed for the conference.

Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When he inquired about his luggage from CATHAY's representative in Jakarta, private respondent was told that his luggage was left behind in Hongkong. For this, respondent Alcantara was offered $20.00 as "inconvenience money" to buy his immediate personal needs until the luggage could be delivered to him.

His luggage finally reached Jakarta more than twenty-four (24) hours after his arrival. However, it was not delivered to him at his hotel but was required by petitioner to be picked up by an official of the Philippine Embassy.

On 1 March 1976, respondent filed his complaint against petitioner with the Court of First Instance (now RTC) of Lanao del Norte. RTC rendered a decision in favor of Alcantara. On appeal, CA affirms the decision of CFI with modifications. Hence this petition.

ISSUE

Whether or not the Warsaw Convention on the liability of a carrier to its passengers is applicable in this case.

RULING

No, it is not.

The Warsaw Convention itself provides in Art. 25 that:

“(1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the damage is caused by his wilfull misconduct or by such default on his part as, in accordance with the law of the court to which the case is submitted, is considered to be equivalent to wilfull misconduct;

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

In this case, SC held that Warsaw Convention declares the carrier liable for damages in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier's employees is found or established, which is clearly the case before us. When petitioner airline misplaced respondent's luggage and failed to deliver it to its passenger at the appointed place and time, some special species of injury must have been caused to him.

Case Digest: PAL v. Court of Appeals, 207 SCRA 100, G.R. No. 92501

 

PAL v. Court of Appeals, 207 SCRA 100, G.R. No. 92501, 6 March 1992

Subject: Transportation Law

FACTS

Isidro Co, plaintiff, accompanied by his wife and son, arrived at the Manila International Airport aboard defendant airline's PAL Flight No. 107 from San Francisco, California, U.S.A. Soon after his embarking, plaintiff proceeded to the baggage retrieval area to claim his checks in his possession. Plaintiff found eight of his luggage, but despite diligent search, he failed to locate ninth luggage, with claim check number 729113 which is the one in question in this case.

Plaintiff then immediately notified defendant company through its employee, Willy Guevarra, who was then in charge of the PAL claim counter at the airport. Willy Guevarra, who testified during the trial court on April 11, 1986, filled up the printed form known as a Property Irregularity Report, acknowledging one of the plaintiff's luggage to be missing, and signed after asking plaintiff himself to sign the same document. In accordance with this procedure in cases of this nature, Willy Guevarra asked plaintiff to surrender to him the nine claim checks corresponding to the nine luggage, i.e., including the one that was missing.

Plaintiff on several occasions unrelentingly called at defendant's office in order to pursue his complaint about his missing luggage but no avail. Thus, on April 15, 1985, plaintiff through his lawyer wrote a demand letter to defendant company though Rebecca V. Santos, its manager, Central Baggage Services. Despite the letter of apology from the inconvenience, however, defendants never found plaintiff's missing luggage or paid its corresponding value. Consequently, in May 1985, plaintiff filed his present complaint against said defendants.

RTC rendered a decision in favor of plaintiff. CA affirmed RTC decision in toto. Hence this petition.

Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00 based on weight as private respondent Co did not declare the contents of his baggage nor pay traditional charges before the flight.

ISSUE                                                                                           

Whether or not CA erred in disregarding the limit of liability under the Warsaw Convention which limits the liability of an air carrier of loss, delay or damage to checked-in baggage to US$20.00 based on weight.

RULING

No, it is not applicable.

Under the law, the liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to the Philippines is governed primarily by the New Civil Code. In all matters not regulated by said Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by Special Laws.

In this case, since the passenger's destination in this case was the Philippines, Philippine law governs the liability of the carrier for the loss of the passenger's luggage as contemplated in Articles 1733, 1735 and 1753 of the Civil Code. Petitioner failed to overcome, not only the presumption, but more importantly, the private respondent's evidence, proving that the carrier's negligence was the proximate cause of the loss of his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail itself out of having to pay Co's claim. Therefore, CA did not err in disregarding the limits of liability under the Warsaw Convention.

Case Digest: Cruz v. Sun Holidays, 622 SCRA 389, G.R. No. 186312

 

Cruz v. Sun Holidays, 622 SCRA 389, G.R. No. 186312, June 29, 2010

Subject: Transportation Law

FACTS

Spouses Dante and Leonora Cruz (petitioners) lodged a complaint against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.

The newly wed Ruelito and his wife stayed at the resort from September 9 to 11, 2000 by virtue of a tour package-contract with respondent that included transportation to and from the Resort and the point of departure in Batangas.

Respondent denied any responsibility for the incident which it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of ₱10,000 to petitioners upon their signing of a waiver. Petitioners declined respondent’s offer and filed the complaint, as earlier reflected, alleging that respondent was a common carrier guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by PAG-ASA.

RTC dismissed petitioners’ complaint and respondent’s counterclaim. On appeal, CA affirmed the decision of RTC that respondent is a private carrier which is only required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event.

ISSUE

Whether or not, respondent is a private carrier; if not, whether or not the event is caso fortuito, a case exempting liability of a common carrier.

RULING

No. Respondent is a common carrier, and this is not a fortuitous event.

Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers transported by them, according to all the circumstances of each case. They are bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common carrier is at fault or negligent. In fact, there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.

In this case, petitioner’s contention that they complied with all the requirements to set sail and that the event is a fortuitous event are untenable. For fortuitous event to take effect, one of its elements is it should be free from human intervention. Based on circumstantial evidence, the occurrence of squalls was expected under the weather condition of September 11, 2000, and that M/B Coco Beach III suffered engine trouble before it capsized and sank. The incident was, therefore, not completely free from human intervention. Respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it is presumed to have acted recklessly, thus warranting the award of damages.

Case Digest: Everett Steamship v. Court of Appeals, 297 SCRA 496, G.R. No. 122494

 

Everett Steamship v. Court of Appeals, 297 SCRA 496, G.R. No. 122494, October 8, 1998

Subject: Transportation Law

FACTS

Hernandez Trading Co. Inc., private respondent, imported three 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 were shipped from Nagoya, Japan to Manila on board "ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN.

Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. Private respondent thereafter made a formal claim upon petitioner for the value of the lost cargo, the amount shown in its commercial invoice. 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 against petitioner before the RTC. After trial, RTC rendered judgment in favor of private respondent considering defendant's categorical admission of loss and its failure to overcome the presumption of negligence and fault.

On appeal, CA affirms the decision of RTC with the additional observation that private respondent cannot be bound by the terms and conditions of the bill of lading because it was not privy to the contract of carriage. Hence this petition.

ISSUE

1. Whether or not the carrier's limited package liability as stipulated in the bill of lading does apply in the instant case.

2. Whether or not the consent of the consignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it.

RULING

1. Yes, the stipulations in the bill of lading is applicable in the instant case.

Under the law, (Art. 1749) a stipulation that the common carrier's liability is limited to the value of the 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.

In this case, SC held that the trial court's ratiocination that private respondent could not have "fairly and freely" agreed to the limited liability clause in the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid. The stipulation stated in the bill of lading is mind, reasonable and just. The carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. Therefore, the stipulations on the bill of lading applies.

2. Yes, even if the consignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract.

In this case, SC held that when private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case against the latter based on the very same bill of lading, private respondent accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it. Thus, private respondent cannot now reject or disregard the carrier's limited liability stipulation in the bill of lading. Therefore, private respondent is bound by the whole stipulations in the bill of lading and must respect the same.

Case Digest: Central Shipping v. Insurance Company, 438 SCRA 511, G.R. No. 150751

 

Central Shipping v. Insurance Company, 438 SCRA 511, G.R. No. 150751, September 20, 2004.

Subject: Transportation Law

FACTS

In July 1990 at Puerto Princesa, Palawan, Central Shipping 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. Upon completion of loading of the cargo, the vessel left Palawan and commenced the voyage to Manila. However, the vessel sunk while in route to Manila on July 26, 1990 and the cargo was totally lost due to the shifting of logs in hold.

Respondent alleged that the total loss of the shipment was caused by the fault and negligence of the petitioner and its captain and as direct consequence thereof the consignee suffered damage. Alaska Lumber Co. Inc. presented a claim for the value of the shipment to the [petitioner] but the latter failed and refused to settle the claim, hence [respondent], being the insurer, paid said claim and now seeks to be subrogated to all the rights and actions of the consignee as against the [petitioner].

Petitioner 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."

RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any other caso fortuito. CA affirmed RTC’s decisions and concluded that the doctrine of limited liability was not applicable, in view of petitioner’s negligence—particularly its improper stowage of the logs. Hence, this Petition.

ISSUE

1. Whether the carrier is liable for the loss of the cargo.

2. Whether the doctrine of limited liability is applicable.

RULING

1. Yes, the carrier is liable for the loss of the cargo.

Under the law, common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to: (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; and, (5) Order or act of competent public authority.

In this case, the weather condition encountered by petitioner’s vessel was not a "storm" or a natural disaster comprehended in the law. Given the known weather condition prevailing during the voyage, the manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling action of the sea. The carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now disclaim any liability for the loss.

2. No. 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 shipowner 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.

Case Digest: Coastwise Lighterage Corp. v. CA, G.R. No. 114167

 

Coastwise Lighterage Corp. v. CA, G.R. No. 114167, July 12, 1995

Subject: Transportation Law

FACTS

Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise.

Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck an unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a hole "two inches wide and twenty-two inches long". As consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein private respondent, Philippine General Insurance Company (PhilGen, for short) and against the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc.

As subrogee, PhilGen then filed an action against Coastwise Lighterage before the RTC of Manila, seeking to recover the amount it paid to Pag-asa Sales, Inc.,

RTC awarded the amount prayed for by PhilGen. On appeal, CA affirmed RTC’s decision. Hence, this petition.

ISSUE

1. Whether or not petitioner Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of affreightment which it entered with the consignee, Pag-asa Sales, Inc.

2. Whether or not, if it were in fact transformed into a private carrier, did it exercise the ordinary diligence to which a private carrier is in turn bound.

RULING

1. No, Coastwise Lighterage was not transformed into a private carrier.  

In Puromines case, a contract of affreightment is one in which the owner of the vessel lease part or all its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire.  An owner who retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo. 

In this case, SC held that a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment on account of aforementioned definition. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but the possession, command and navigation of the vessels remained with petitioner Coastwise Lighterage. Pursuant to existing jurisprudence, Coastwise Lighterage was not converted to private carrier. Hence, the presumption of negligence remains to the common carrier.

2. No, it was not diligent in the exercise of its duties.

Under the law, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733.

In this case, petitioner’s contention that nothing could have prevented the event because of PCG’s failure to chart sunken derelicts in the Manila North Harbor, making it beyond the pale of even the exercise of extraordinary diligence because of uncharted sunken derelicts in the Manila harbor was the cause of the mishap was trashed by SC. Based on record, Coastwise Lighterage embarks on a voyage with an unlicensed patron, a clear violation of Article 609 of the Civil Code. It appeared that the carrier was culpably remiss in the observance of its duties.

Case Digest: Mirasol v. The Robert Dollar Co., G.R. No. L-29721

 

Mirasol v. The Robert Dollar Co., G.R. No. L-29721, March 27, 1929

Subject: Transportation Law

FACTS

Plaintiff alleges that he is the owner and consignee of two cases of books, shipped in good order and condition at New York, U.S.A., on board the defendant's steamship President Garfield, for transport and delivery to the plaintiff in the City of Manila.

The two cases arrived in Manila on September 1, 1927, in bad order and damaged condition, resulting in the total loss of one case and a partial loss of the other. Hence, plaintiff filed his claims, and defendant has refused and neglected to pay, giving as its reason that the damage in question "was caused by sea water."

Defendant made a general and specific denial and alleged the following: 

1. that the steamship President Garfield at all the times alleged was in all respects seaworthy and properly manned, equipped and supplied, and fit for the voyage; hence they are not liable on the grounds of being unseaworthy.

2. that in the bill of lading issued by the defendant to plaintiff, it was agreed in writing that defendant should not be "held liable for any loss of, or damage to, any of said merchandise resulting from “Acts of God, perils of the sea or other waters," and that plaintiff's damage, if any, was caused by "Acts of God" or "perils of the sea."

3. defendant quoted clause 13 of the bill of lading, in which it is stated that in no case shall it be held liable "for or in respect to said merchandise or property beyond the sum of $250 for any piece, package or any article not enclosed in a package, unless a higher value is stated herein and ad valorem freight paid or assessed thereon," and that there was no other agreement.

4. defendant alleges that the damage, if any, was caused by "sea water," and that the bill of lading exempts defendant from liability for that cause. That damage by "sea water" is a shipper's risk, and that defendant is not liable.

After trial, RTC rendered judgment in favor of plaintiff.

ISSUE

Whether or not defendant has presented sufficient evidence to prove its exercise of extraordinary diligence required of a common carrier to merit its exemption from liability given the conditions stated on the bill of lading.

RULING

No, there was no sufficient proof to merit defendant’s exemption from liability.

Under the law, even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration.

In this case, there is no claim or pretense that the two cases were not in good order when received on board the ship, and it is admitted that they were in bad order on their arrival at Manila. Hence, they must have been damaged in transit. In the very nature of things, if they were damaged by reason of a tempest, rocks, icebergs, foundering, stranding or the perils of the sea, that would be a matter exclusively within the knowledge of the officers of defendant's ship, and in the very nature of things would not be within plaintiff's knowledge, and upon all such questions, there is a failure of proof. Hence, defendant shall not be exempt from liability.

Case Digest: Maersk Lines v. Court of Appeals, 222 SCRA 108, G.R. 94761

 

Maersk Lines v. Court of Appeals, 222 SCRA 108, G.R. 94761, May 17, 1993.

Subject: Transportation Law

FACTS

Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its general agent Compania General de Tabacos de Filipinas. Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manufacturer of pharmaceutical products.

Through a Memorandum of Shipment, the shipper Eli Lilly, Inc. of Puerto Rico advised private respondent as consignee that the 600,000 empty gelatin capsules in six (6) drums of 100,000 capsules each, were shipped on board MV "Anders Maerskline"  for shipment to the Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.

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

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

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

Defendant Eli Lilly, Inc. filed its answer with compulsory and crossclaim alleging that the delay in the arrival of the subject merchandise was due solely to the gross negligence of petitioner Maersk Line. The issues having been joined, private respondent moved for the dismissal of the complaint against Eli Lilly, Inc. on the ground that the evidence on record shows that the delay in the delivery of the shipment was attributable solely to petitioner. Responding to this, RTC dismissed the complaint against Eli Lilly, Inc.

After trial RTC rendered judgment in favor of respondent Castillo. On appeal, CA affirmed the decision of RTC with modification as to the awarding of corresponding damages and attorney’s fees. Hence this appeal.

ISSUE

Whether or not 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 period of delivery.

RULING

Yes, Castillo is entitled to damages despite absence in the bill of lading of a stipulation on the period of delivery.

Under the law and existing jurisprudence, common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a reasonable time.

In this case, a delay in the delivery of the goods spanning a period of two (2) months and seven (7) days falls was beyond the realm of reasonableness for it was through petitioner's negligence that the cargo was mishipped to Richmond, Virginia. Hence, petitioner's insistence that it cannot be held liable for the delay finds no merit. While there was no special contract (aside from the bill of lading which is a contract of adhesion) entered into by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were expected to arrive as indicated in the bill of lading itself. SC held that there is no need to execute another contract for the purpose as it would be a mere superfluity.

Case Digest: Delsan Transport v. American Home, G.R. No. 149019

Delsan Transport v. American Home, G.R. No. 149019, August 15, 2006.

Subject: Transportation Law

FACTS

Delsan is a domestic corporation which owns and operates the vessel MT Larusan while 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.

In Aust 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l Automotive Diesel Oil (diesel oil) at the Bataan Refinery Corporation for transportation and delivery to the bulk depot in Bacolod City of Caltex Phils., Inc. (Caltex), pursuant to a Contract of Afreightment. The shipment was insured by respondent AHAC against all risks under Inland Floater Policy and Marine Risk Note.

The shipment arrived in Bacolod City. The discharging of the diesel oil started at about 1:30 PM, however, at about 10:30 PM, the discharging had to be stopped on account of the discovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown persons. Because there was nothing holding it, the vessel drifted westward, dragged and stretched the flexible rubber hose attached to the riser, broke the elbow into pieces, severed completely the rubber hose connected to the tanker from the main delivery line at seabed level and ultimately caused the diesel oil to spill into the sea. To avoid further spillage, the vessel’s crew tried water flushing to clear the line of the diesel oil but to no avail. In the meantime, the shore tender, who was waiting for the completion of the water flushing, was surprised when the tanker signaled a "red light" which meant stop pumping. Unaware of what happened, the shore tender, thinking that the vessel would, at any time, resume pumping, did not shut the storage tank gate valve. As all the gate valves remained open, the diesel oil that was earlier discharged from the vessel into the shore tank backflowed.

As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused to pay. As insurer, AHAC paid Caltex for spillage and for backflow pursuant to Marine Risk Note and Inland Floater Policy respectively. Subsequently, AHAC, as subrogee to Caltex, instituted two separate civil cases against Delsan before the Manila RTC for the loss caused by the spillage and for the backflow.

In August 1989, RTC rendered its decision in favor of AHAC holding Delsan liable for the loss of the cargo for its negligence in its duty as a common carrier. On appeal, CA affirmed the decision of RTC hence this petition.

Delsan insists that the CA committed reversible error in ruling that Article 1734 of the Civil Code cannot exculpate it from liability for the loss of the subject cargo and in not applying the rule on contributory negligence against Caltex, the shipper-owner of the cargo, and in not taking into consideration the fact that the loss due to backflow occurred when the diesel oil was already completely delivered to Caltex.

ISSUE

Whether or not, Delsan, as common carrier, is absolve from liability.

RULING

No.

Under the law, the extraordinary responsibility of common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to a person who has the right to receive them.

In this case, SC held that Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been actually and legally delivered to Caltex at the time it entered the shore tank holds no water. The subject cargo was still in the custody of Delsan because the discharging thereof has not yet been finished when the backflow occurred. Since the discharging of the cargo into the depot has not yet been completed at the time of the spillage when the backflow occurred, there is no reason to imply that there was actual delivery of the cargo to the consignee. The discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to guard and preserve the goods, a duty incident to its having the goods transported.

Case Digest: Philippine First Insurance v. Wallem First Shipping, 582 SCRA 457, G.R. No. 165647

 

Philippine First Insurance v. Wallem First Shipping, 582 SCRA 457, G.R. No. 165647, March 26, 2009

Subject: Transportation Law

FACTS

In October 1995, Anhui Chemicals Import & Export Corporation loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium sulphate anhydrous 99 PCT Min. (shipment), complete and in good order for transportation to and delivery at the port of Manila for consignee, L.G. Atkimson Import-Export, Inc. (consignee), covered by a Clean Bill of Lading. The Owner and/or Charterer of M/V Offshore Master is unknown while the shipper of the shipment is Shanghai Fareast Ship Business Company. Both are foreign firms doing business in the Philippines, thru its local ship agent, respondent Wallem Philippines Shipping, Inc. (Wallem).

The shipment arrived at the port of Manila and was subsequently discharged. It was disclosed that during the discharge of shipment, 2,426 poly bags (bags) were in bad order and condition, having sustained various degrees of spillages and loss.

Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from the pier to the consignee’s warehouse in Quezon City, where final inspection was conducted jointly by the consignee’s representative and the cargo surveyor. Upon inspection, it was discovered that 63,065.00 kilograms of the shipment had sustained unrecovered spillages, while 58,235.00 kilograms had been exposed and contaminated, resulting in losses due to depreciation and downgrading.

In April 1996, the consignee filed a formal claim with Wallem for the value of the damaged shipment, to no avail. Thus, consignee filed a formal claim with petitioner Philippines First Insurance Co., Inc., insurer of goods, for the damage and losses sustained by the shipment and the latter signed a subrogation receipt. In the exercise of its right of subrogation, petitioner sent a demand letter to Wallem for the recovery of the amount paid by petitioner to the consignee. However, despite receipt of the letter, Wallem did not settle nor even send a response to petitioner’s claim.

Consequently, petitioner instituted an action before the RTC for damages against respondents. RTC held the shipping company and the arrastre operator solidarily liable since both the arrastre operator and the carrier are charged with and obligated to deliver the goods in good order condition to the consignee. In an appeal, CA reversed and set aside the RTC’s decision holding that there is no solidary liability between the carrier and the arrastre operator because it was clearly established by the court a quo that the damage and losses of the shipment were attributed to the mishandling by the arrastre operator in the discharge of the shipment. Hence this petition.

ISSUE

Whether or not the common carrier’s duties extend to the obligation to safely discharge the cargo from the vessel; Whether or not the carrier should be held liable for the cost of the damaged shipment.

RULING                                   

Yes.

Section 3(2) of the COGSA states that among the carriers’ responsibilities are to properly and carefully load, care for and discharge the goods carried. The bill of lading covering the subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is turned over to him until its delivery at the port of unloading.

In this case, the bad order torn bags, was due to stevedores[‘] utilizing steel hooks/spikes in piling the cargo to [the] pallet board at the vessel’s cargo holds and at the pier designated area before and after discharged that cause the bags to torn while under the supervision of Wallem. It is undisputed that the damage or losses were incurred during the discharge of the shipment while under the supervision of the carrier. Consequently, the carrier is liable for the damage or losses caused to the shipment.

Case Digest: SULPICIO LINES, INC. vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION, G.R. No. 140349

SULPICIO LINES, INC. vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION, G.R. No. 140349, June 29, 2005

Subject: Transportation Law

 

FACTS

In February 1992, Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract to transport a shipment of goods consisting of three (3) wooden crates containing one hundred thirty-six (136) cartons of inductors and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden Singapore Pte, Ltd.

Delbros, Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier) to ship the goods from Cebu City to Manila. During unloading, one crate containing forty-two (42) cartons dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo, and upon an alleged finding that the contents of the crate were no longer usable for their intended purpose, they were rejected as a total loss and returned to Cebu City.

The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused by the latter. The owner sought payment from respondent First Lepanto-Taisho Insurance Corporation (insurer). As subrogee, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were subsequently denied. Hence they filed a suit for damages in the RTC.

Petitioner-carrier filed its Answer to Delbros, Inc.’s cross-claim asserting that it observed extraordinary diligence in the handling, storage and general care of the shipment and that subsequent inspection of the shipment by the Manila Adjusters and Surveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound condition, except that "2 cello bags each of 50 pieces ferri inductors No. LC FL 112270K-60 (c) were unaccounted for and missing as per packaging list."

ISSUE

Whether or not, based on the evidence presented during the trial, the owner of the goods, respondent-insurer’s predecessor-in-interest, did incur damages, and if so, whether or not petitioner-carrier is liable for the same.

RULING

Yes, petitioner-carrier is liable.

Under the law, a common carrier is bound to transport its cargo and its passengers safely "as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard to all circumstances." 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 the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires."

In this case, petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to overcome the presumption that it was negligent in transporting the cargo. Petitioner-carrier contention’s that its liability, if any, is only to the extent of the cargo damage or loss and should not include the lack of fitness of the shipment for transport to Singapore due to the damaged packing is erroneous. SC affirms CA’s findings that there was damage suffered by the goods which consisted in the destruction of one wooden crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to Singapore. The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot exculpate itself from liability because it failed to prove that it exercised extraordinary diligence.

 

Case Digest: Mitsui Lines v. Court of Appeals, 287 SCRA 366, G.R. No. 119571

 

Mitsui Lines v. Court of Appeals, 287 SCRA 366, G.R. No. 119571, March 11, 1998

Subject: Transportation Law

FACTS

Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage through Meister Transport, Inc., an international freight forwarder, with private respondent Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded private respondent's container van for carriage at the said port of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment arrived in Le Havre only on November 14, 1991. The consignee allegedly paid only half the value of the said goods on the ground that they did not arrive in France until the "off season" in that country. The remaining half was allegedly charged to the account of private respondent which in turn demanded payment from petitioner through its agent.

As petitioner denied private respondent's claim, the latter filed a case in the Regional Trial Court on April 14, 1992. In the original complaint, private respondent impleaded as defendants Meister Transport, Inc. and Magsaysay Agencies, Inc., the latter as agent of petitioner Mitsui O.S.K. Lines Ltd. On the other hand, petitioner filed a motion to dismiss alleging that the claim against it had prescribed under the Carriage of Goods by Sea Act.

RTC denied petitioner's motion as well as its subsequent motion for reconsideration. Also, CA affirmed the decision of RTC. Hence this petition.

ISSUE

Whether or not the private respondent's action is for "loss or damage" to goods shipped, within the meaning of Section 3 (6) of the Carriage of Goods by Sea Act (COGSA).

RULING

No, the action is not for “loss or damage” to goods shipped, within the meaning of Section 3(6) of COGSA.

As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown, or they cannot be recovered.

In this case, there is neither deterioration nor disappearance nor destruction of goods caused by the carrier's breach of contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit. The suit is not for "loss or damage" to goods contemplated in Section 3(6), the question of prescription of action is governed not by the COGSA but by Article 1144 of the Civil Code which provides for a prescriptive period of ten years.

Case Digest: Negros Navigation v. CA, G.R. No. 110398

 

Negros Navigation v. CA, G.R. No. 110398, November 7, 1997

Subject: Transportation Law

FACTS

In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980.

The ship sailed from the port of Manila on schedule.

Unfortunately, Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some of the victims were found and brought to shore, but the four members of private respondents' families were never found.

Private respondents filed a complaint in RTC of Manila against Negros Navigation, PNOC, and PNOC/STC, seeking damages for the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26.

RTC ruled in favor of private respondent and ordered the defendants (petitioner) to pay jointly and severally the damages. On appeal, CA affirmed RTC’s decision with some modification. Hence this petition.

ISSUE

Whether or not the crew members of petitioner are grossly negligent in the performance of their duties; and is Mecenas vs IAC is binding in this case.

RULING

Yes, the crew members of petitioner are grossly negligent in the performance of their duties and the decision promulgated by the court in Mecenas vs IAC is binding in this case.

Under the law, a common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

In this case, applying the principle of stare decisis, decision on the Mecenas case was applicale. Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and other crew members while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact with the M/T Tacloban City. In addition, the ship was overloaded evidenced by the Certificate of Inspection issued by the Philippine Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864 but there were 1,004 on board the vessel when it sank. Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and better-equipped vessel, could have avoided a collision with the PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to observe an internationally recognized rule of navigation, the Don Juan was guilty of contributory negligence.

Case Digest: Trans‐Asia Shipping v. CA, G.R. No. 118126

Trans‐Asia Shipping v. CA, G.R. No. 118126, March 4, 1996

Subject: Transportation Law

FACTS

Private respondent, Atty. Renato Arroyo, a public attorney, bought a ticket from Trans-Asia Shipping, a corporation engaged in inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991.

At around 5:30 in the evening of November 12, 1991, Aroyo boarded the M/V Asia Thailand vessel. At that instance, plaintiff noticed that some repair works were being undertaken on the engine of the vessel. The vessel departed at around 11:00 in the evening with only one (1) engine running.

After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After half an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage to, Cagayan de Oro City. The captain acceded to their request and thus the vessel headed back to Cebu City.

At Cebu City, Aroyo together with the other passengers who requested to be brought back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. The next day, Aroyo boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of petitioner.

On account of this failure of Trans-Asia to transport him to the place of destination on November 12, 1991, Aroyo filed before the trial court a complaint for damages against petitioner.

Private respondent asserted that his complaint was "an action for damages arising from bad faith, breach of contract and from tort," with the former arising from the petitioner's "failure to carry [him] to his place of destination as contracted," while the latter from the "conduct of the [petitioner] resulting [in] the infliction of emotional distress" to the private respondent.

After trial, RTC ruled that it did not appear from the evidence that plaintiff was left in the Port of Cebu because of the fault, negligence, malice or wanton attitude of defendant's employees, the complaint is DISMISSED. Defendant's counterclaim is likewise dismissed it not appearing also that filing of the case by plaintiff was motivated by malice or bad faith.

Unsatisfied, the private respondent appealed to the Court of Appeals. CA reversed RTC’s decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of the Civil Code and, accordingly, awarded compensatory, moral, and exemplary damages.

Hence this petition.

ISSUE

Whether or not petitioner exercised extraordinary diligence required of common carrier.

RULING

No, petitioner did not.

Under the law, a common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

In this case, SC fully agree with CA that in allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and reckless manner. Petitioner’s contention that the safety or the vessel and passengers was never at stake because the sea was "calm" in the vicinity where it stopped as faithfully recorded in the vessel's logbook and the private respondent was merely "over-reacting" to the situation obtaining then is unacceptable.

Petitioner's defense cannot exculpate it nor mitigate its liability. On the contrary, such a claim demonstrates beyond cavil the petitioner's lack of genuine concern for the safety of its passengers. It was, perhaps, only providential then the sea happened to be calm. Even so, the petitioner should not expect its passengers to act in the manner it desired. The passengers were not stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar zone as nighttime is not the sole prerogative of the faint-hearted. More so in the light of the many tragedies at sea resulting in the loss of lives of hopeless passengers and damage to property simply because common carriers failed in their duty to exercise extraordinary diligence in the performance of their obligations.

Case Digest: Lorenzo Shipping v. BJ Marthel, 443 SCRA 163, G.R. No. 145483

Lorenzo Shipping v. BJ Marthel, 443 SCRA 163, G.R. No. 145483, November 19, 2004

Subject: Obligations and Contracts

FACTS

Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express. The respondent BJ Marthel International, Inc. is a business entity engaged in trading, marketing, and selling of various industrial commodities. It is also an importer and distributor of different brands of engines and spare parts.

In 1989, petitioner asked respondent for a quotation for various machine parts.

Petitioner issued a two separate Purchase Orders. Instead of paying the 25% down payment for the first cylinder liner, petitioner issued in favor of respondent ten postdated checks to be drawn against the former's account with Allied Banking Corporation. The checks were supposed to represent the full payment of the first cylinder liner while the liner was subject to term of payment to be "25% upon delivery, balance payable in 5 bi-monthly equal installments." Both purchase orders did not state the date of the cylinder liner's delivery.

In 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. 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.

Respondent thereafter placed the order for the two (02) cylinder liners with its principal in Japan, Daiei Sangyo Co. Ltd., and delivered the two (02) cylinder liners at petitioner's warehouse in North Harbor, Manila. The sales invoices evidencing the delivery of the cylinder liners both contain the notation "subject to verification" under which the signature of Eric Go, petitioner's warehouseman, appeared.

Respondent thereafter sent a Statement of Account to petitioner. While the other items listed in said statement of account were fully paid by petitioner, the two-cylinder liners delivered to petitioner on 20 April 1990 remained unsettled. Consequently, respondent sent a demand letter to petitioner requiring the latter to pay the value of the cylinder liners subjects of this case. Instead of heeding the demand of respondent for the full payment of the value of the cylinder liners, petitioner sent the former a letter dated 12 March 1991 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.

Due to the failure of the parties to settle the matter, respondent filed an action for sum of money and damages before RTC of Makati City.

Petitioner alleged 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" from petitioner.

RTC dismissed the action upon findings that 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.

Aggrieved, respondent filed an appeal with the CA which reversed and set aside RTC’s decision. The appellate court brushed aside petitioner's claim that time was of the essence in the contract of sale between the parties herein considering the fact that a significant period of time had lapsed between respondent's offer and the issuance by petitioner of its purchase orders. There was no evidence of the alleged cancellation of orders by petitioner and that the delivery of the cylinder liners on 20 April 1990 was reasonable under the circumstances.

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."

Hence this petition.

ISSUE

Whether or not there was 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.

RULING

No, there was late delivery.

Under the law, the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

In this case, 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.

Case Digest: PCIC vs. UNKNOWN OWNER OF THE VESSEL M/V "NATIONAL HONOR," NSCP and ICSI, G.R. No. 161833

PHILIPPINE 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 08, 2005.

Subject: Transportation Law

FACTS

On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a shipment of four units of parts and accessories in the port of Pusan, Korea, on board the vessel M/V "National Honor," represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The shipment was for delivery to Manila, Philippines. Freight forwarder, Samhwa Inter-Trans Co., Ltd., issued Bill of Lading No. SH9410306 in the name of the shipper consigned to the order of Metropolitan Bank and Trust Company with arrival notice in Manila to ultimate consignee Blue Mono International Company, Incorporated (BMICI), Binondo, Manila.

The shipment was contained in two wooden crates, complete and in good order condition. here were no markings on the outer portion of the crates except the name of the consignee.

The M/V "National Honor" arrived at the Manila International Container Terminal (MICT) on November 14, 1995. The International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew the contents of the crate. The following day, the vessel started discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a winchman from the ICTSI, the exclusive arrastre operator of MICT.

As the crate was being hoisted from the vessel’s hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessel’s twin deck, sending all its contents crashing down hard, resulting in extensive damage to the shipment.

BMICI’s customs broker, JRM Incorporated, took delivery of the cargo in such damaged condition. Upon receipt of the damaged shipment, BMICI found that the same could no longer be used for the intended purpose.

BMICI subsequently filed separate claims against the NSCP, the ICTSI, and its insurer, the PCIC. When the other companies denied liability, PCIC paid the claim and was issued a Subrogation Receipt. As subrogee, PCIC then filed with the RTC of Manila, a Complaint for Damages against the "Unknown owner of the vessel M/V National Honor," NSCP and ICTSI, as defendants. PCIC alleged that the loss was due to the fault and negligence of the defendants

RTC rendered judgment for PCIC and ordered the complaint dismissed. CA affirmed in toto the decision of RTC.

Petitioner asserts that the mere proof of receipt of the shipment by the common carrier (to the carrier) in good order, and their arrival at the place of destination in bad order makes out a prima facie case against it; in such case, it is liable for the loss or damage to the cargo absent satisfactory explanation given by the carrier as to the exercise of extraordinary diligence.

ISSUE

Whether or not the damage sustained by the shipment was due to its defective packing and not to the fault and negligence of the common carrier.

RULING

Yes, the damage sustained was due to defective packaging and not the fault of the respondents.

Under the law, 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 circumstance 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 that they observed extraordinary diligence.

In this case, SC held that appellant’s allegation that since the cargo arrived safely from the port of Pusan, Korea without defect, the fault should be attributed to the arrastre operator who mishandled the cargo, is without merit. The cargo fell while it was being carried only at about five (5) feet high above the ground. It would not have so easily collapsed had the cargo been properly packed. Not only did the shipper fail to properly pack the cargo, it also failed to indicate an arrow in the middle portion of the cargo where additional slings should be attached. At any rate, the issue of negligence is factual in nature and in this regard, it is settled that factual finding of the lower courts are entitled to great weight and respect on appeal, and, in fact, accorded finality when supported by substantial evidence.

Petitioner failed to adduce any evidence to counter that of respondent ICTSI. In addition, under Bill of Lading issued by the respondent NSCP and accepted by the petitioner, the latter represented and warranted that the goods were properly packed, and disclosed in writing the "condition, nature, quality or characteristic that may cause damage, injury or detriment to the goods." Absent any signs on the shipment requiring the placement of a sling cable in the mid-portion of the crate, the respondent ICTSI was not obliged to do so.