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III. TRANSPORTATION OF GOODS

15 - Eastern Shipping v. CA (1991)*
Doctrines:

Common carriers are bound to observe extraordinary vigilance over goods x x x according to all circumstances of each case. A common carrier is required to exercise the highest degree of care in the discharge of its business. Carrier who failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the carrier applies.

Facts: Thirteen coils of uncoated 7-wire stress relieved wire strand for prestressed concrete were shipped on board the vessel owned by Eastern Shipping from Japan to Manila. The carrying vessel arrived in Manila and discharged the cargo to the custody of the defendant E. Razon, Inc., from whom the consignees customs broker received it for delivery to the consignees warehouse. While enroute from Kobe to Manila, the carrying vessel encountered very rough seas and stormy weather for three days, more or less, which caused it to roll and pound heavily, moving its master to execute a marine note of protest upon arrival at the port of Manila; that the coils wrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the vessel which was flooded with water about one foot deep; that the water entered the hatch when the vessel encountered heavy weather enroute to Manila; that upon request, a survey of bad order cargo was conducted at the pier in the presence of the representatives of the consignee and the defendant E. Razon, Inc. and it was found that seven coils were rusty on one side each; that upon survey conducted at the consignees warehouse it was found that the wetting (of the cargo) was caused by fresh water that entered the hatch when the vessel encountered heavy weather enroute to Manila; and that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose. The insurer paid the owner of the goods and is now claiming from Eastern Shipping and the arrastre operator. Eastern Shipping claims it should not be held liable as the shipment was discharged and delivered complete into the custody of the arrastre operator under clean tally sheets. Issue: 1. Whether Eastern Shipping should be held liable. Held/Ratio: 1. Yes. While it is true the cargo was delivered to the arrastre operator in apparent good order condition, it is also undisputed that while en route from Kobe to Manila, the vessel encountered very rough seas and stormy weather, the coils wrapped in burlap cloth and cardboard paper were stored in the lower hatch of the vessel which was flooded with water about one foot deep; that the water entered the hatch; that a survey of bad order cargo which was conducted in the pier in the presence of representatives of the consignee and E. Razon, Inc., showed that seven coils were rusty on one side; that a survey conducted at the consignees warehouse also showed that the wetting (of the cargo) was caused by fresh water that entered the hatch when the vessel encountered heavy rain en route to Manila; and that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose. As the CA ruled: Plainly, the heavy seas and rains referred to in the masters report were not caso fortuito, but normal occurrences that an ocean-going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-going vessels would encounter and provide for, in the ordinary course of a voyage. That rain water (not sea water) found its way into the holds of the Jupri Venture is a clear indication that care and foresight did not attend the

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closing of the ships hatches so that rain water would not find its way into the cargo holds of the ship. Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe extra-ordinary vigilance over goods xx xx xx according to all circumstances of each case, and Article 1735 of the same Code states, to wit: ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, 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. Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the carrier applies; and the carrier must present evidence that it has observed the extraordinary diligence required by Article 1733 of the Civil Code in order to escape liability for damage or destruction to the goods that it had admittedly carried in this case. No such evidence exists of record. Thus, the carrier cannot escape liability. The presumption, therefore, that the cargo was in apparent good condition when it was delivered by the vessel to the arrastre operator by the clean tally sheets has been overturned and traversed. The evidence is clear to the effect that the damage to the cargo was suffered while aboard petitioners vessel.

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TRANSPO DIGESTS 16 - Delsan Transport v. CA (2001)**

Facts:

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Caltex Philippines (Caltex) entered into a contract of affreightment with Delsan Transport Lines, Inc., 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 the private respondent, American Home Assurance Corporation (AHAC) On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently, AHAC paid Caltex P5M+ representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, AHAC demanded of Delsan Transport the same amount it paid to Caltex. Due to its failure to collect from the Delsan Transport despite prior demand, AHAC filed a complaint for collection of a sum of money. The trial court found that the vessel, MT Maysun, was seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey Certificate Repor upon inspection during its annual dry-docking and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier (herein petitioner) from liability for the loss of its cargo. The decision of the trial court was reversed on appeal by the Court of Appeals. The CA gave credence to the weather report issued by PAGASA which showed that from 2:00-8:00AM of August 16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity of the Panay Gulf where the subject vessel sank, in contrast to herein Delsans allegation that the waves were twenty (20) feet high. In the absence of any explanation as to what may have caused the sinking of the vessel coupled with the finding that the same was improperly manned, the appellate court ruled that the Delsan is liable on its obligation as common carrier to AHAC as subrogee of Caltex. Issues: 1. W/N the payment made by AHAC to Caltex amounted to an admission that the vessel was seaworthy 2. Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action (not important) Held/Ratio: 1. NO. The payment made by AHAC 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 AHAC as to foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of payment grants to AHAC the subrogatory right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against the petitioner 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 that 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. The tale of strong winds and big waves by the Ship Captain and Chief Mate of Delsan, however, was effectively rebutted and belied by the weather report from PAGASA. Thus, the appellate court correctly ruled that MT Maysun, sank with its entire cargo for the

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reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank. The CA also correctly opined that the ship captain and chief mate, respectively, of the said vessel, could not be expected to testify against the interest of their employer, Delsan Transport. (common carrier) Neither may petitioner escape liability by presenting in evidence certificates that tend to show that at the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit for voyage. These pieces of evidence do not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage. Additionally, the exoneration of MT Maysuns officers and crew by the Board of Marine Inquiry merely concerns their respective administrative liabilities. It does not in any way operate to absolve the petitioner 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. 2. NO. 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 AHAC 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. The presentation of the insurance policy was only necessary in the case of Home Insurance Corporation v. CA (a case cited by Delsan) because the shipment therein (hydraulic engines) passed through several stages with different parties involved in each stage.

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TRANSPO DIGESTS 17 - Phil. Charter v. Chemoil (2005)

Facts:

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Samkyung Chemical Company, Ltd., shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE (DOP) on board MT TACHIBANA The consignee was Plastic Group Phils., Inc. (PGP) in Manila. PGP insured the cargo with herein petitioner Philippine Charter Insurance Corporation against all risks. The ocean tanker MT TACHIBANA unloaded the cargo to Tanker Barge of respondent Chemoil Lighterage Corporation, which shall transport the same to Del Pan Bridge in Pasig River. Tanker Barge would unload the cargo to tanker trucks, also owned by the respondent, and haul it by land to PGPs storage tanks in Calamba, Laguna. Upon inspection by PGP, the samples taken from the shipment showed discoloration from yellowish to amber, demonstrating that it was damaged, as DOP is colorless and water clear. PGP then sent a letter to the petitioner where it formally made an insurance claim for the loss it sustained due to the contamination. An independent insurance adjuster GIT conducted a Quantity and Condition Survey of the shipment. Report stated that inspection of cargo tanks showed manhole covers of ballast tanks ceilings loosely secured. Also, the rubber gaskets of the manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress to the rusty ballast tanks. The petitioner paid PGP the amount of P5,000,000.00 as full and final payment for the loss. PGP issued a Subrogation Receipt to the petitioner. PGP paid the respondent the amount of P301,909.50 as full payment for the latters services. An action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC. In its answer, respondent alleged that before the DOP was loaded into its barge, the representative of PGP, Adjustment Standard Corporation, inspected it and found the same clean, dry, and fit for loading. The entire loading and unloading of the shipment were also done under the control and supervision of PGPs representative. It was also mentioned by the respondent that the contract between it and PGP expressly stipulated that it shall be free from any and all claims arising from contamination, loss of cargo or part thereof; that the consignee accepted the cargo without any protest or notice; and that the cargo shall be insured by its owner sans recourse against all risks. As subrogee, the petitioner was bound by this stipulation. As carrier, no fault and negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo. After due hearing, the trial court rendered a Decision in favor of the plaintiff. Aggrieved, the respondent sought relief with the CA where it alleged that PGP failed to file any notice, claim or protest within the period required by Article 366 of the Code of Commerce, which is a condition precedent to the accrual of a right of action against the carrier. A telephone call, which was supposedly made by a certain Alfred Chan, an employee of PGP, to one of the Vice Presidents of the respondent, informing the latter of the discoloration, is not the notice required by Article 366. The CA reversed the trial court. Issues: 1. Whether or not the notice of claim was filed within the required period. Held/Ratio: 1. NO. The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties. The petitioner contends that the notice of contamination was given by Alfredo Chan to Ms. Encarnacion Abastillas. This was done by telephone. The supposed notice given by PGP over the telephone was denied by Ms. Abastillas. Between the testimonies of Chan and Abastillas, the latters testimony is purportedly more credible because it would be quite unbelievable and contrary to business practice for Chan to merely make a verbal notice of claim that involves millions of pesos.

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The finding of fact of the CA does not contradict the finding of fact of the trial court. Both courts held that a telephone call was made by Chan to Abastillas, informing the latter of the contamination. However, nothing in the trial courts decision stated that the notice of claim was relayed or filed with the respondent-carrier immediately or within a period of twenty-four hours from the time the goods were received. The CA made the same finding. Having examined the entire records of the case, we cannot find a shred of evidence that will precisely and ultimately point to the conclusion that the notice of claim was timely relayed or filed. The allegation of the petitioner that not only the Vice President of the respondent was informed, but also its drivers, as testified by Alfredo Chan, during the time that the delivery was actually being made, cannot be given great weight as no driver was presented to the witness stand to prove this. Also, the witness Alfredo Chan had no personal knowledge that the drivers of the respondent were informed of the contamination. The second paragraph of Article 366 of the Code of Commerce is also edifying. It is not only when the period to make a claim has elapsed that no claim whatsoever shall be admitted, as no claim may similarly be admitted after the transportation charges have been paid. In this case, there is no question that the transportation charges have been paid, as admitted by the petitioner, and the corresponding official receipt duly issued. But the petitioner is of the view that the payment for services does not invalidate its claim. It contends that under the second paragraph of Article 366, it is clear that if notice or protest has been made prior to payment of services, claim against the bad order condition of the cargo is allowed.

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18 - Philippine American General Insurance Company (PHILAMGEN) v. PKS Shipping Company (2003)**
Doctrine: A common carrier is one who holds himself/itself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his/its services to the public generally. It does NOT matter: o o o Facts: Davao Union Marketing Corporation (DUMC) hired PKS Shipping Company (PKS) to ship 75,000 bags of cement worth P3,375,000 to Tacloban City. The shipment was insured by PHILAMGEN. The goods were transported aboard PKSs barge Limar I, but the Limar I sank off the coast of Zamboanga Del Sur while it was being towed by PKSs tugboat MT Iron Eagle. All 75,000 bags of cement were lost. DUMC filed a claim with the insurer PHILAMGEN, which the latter promptly paid. PHILAMGEN then sought reimbursement from the carrier PKS, but PKS refused to pay, prompting PHILAMGEN to sue them. The RTC dismissed PHILAMGENs claim. The CA affirmed. The CA held that PKS was NOT a common carrier, because: First, it did not carry goods for others in the regular course of business, but merely as a casual occupation; Second; PKS carried only for a limited clientele. Thus, the appellate court held that the standard of diligence required of PKS was merely ordinary diligence and found that the shipper had met this standard. Furthermore, the court held that the loss was caused by fortuitous event, since the ship had been suddenly tossed by waves of extraordinary height, and the court found that the ship had been seaworthy at start of the voyage. Issue: 1. W/N PKS Shipping a common carrier. 2. W/N PKS Shipping should be held liable for the loss of the cement. Held/Ratio: 1. PKS Shipping is a common carrier. Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The Court said that: a. Article 1732 does not distinguish between a carrier that transports persons or goods as a principal business or as an ancillary activity (sideline). b. Neither does said article differentiate between a carrier that offers its services to the general public or one that transports only for a narrow segment of the general population, or a limited clientele. c. Additionally, it does not matter whether the carrier offers its services regularly or on an unscheduled/episodic basis. The court further said that if the nature of the business were such that the contract of carriage was merely an isolated transaction and the carrier did not hold itself out to transport goods or persons for anyone, then the the carrier would be merely a private carrier. (The example given by the court was a bareboat/demise charter, which is basically a contract of lease of the entire boat, wherein the charterer mans the boat with his own crew and becomes the owner pro hac vice of the boat for that voyage only. This is to be distinguished from a contract of whether the carrier does this as a principal or ancillary business activity whether the carrier actually serves the general public or only a limited clientele whether the carrier does this regularly or on an unscheduled basis only

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affreightment, wherein the the boat remains under the ship owners control, and the charterer merely asks that his goods be transported from one place to another. The former would be an example of a contract of private carriage. The latter is an example of a contract of common carriage.) The SC held that the factual findings of the CA would show that PKS shipping had engaged in the business of carrying good for other for a fee, even though for a limited clientele only. It did not matter whether the company had carried the goods merely as an ancillary activity, or whether they served only certain customers; it was still a common carrier. 2. However, the court still absolved PKS from liability. Art. 1733 of the New Civil Code requires common carriers to exercise extraordinary diligence over the carriage of goods, and they are presumed negligent in case of loss, deterioration or destruction; however, under Art. 1734 (1), common carriers are exempt from liability if the same was due to fire, storm, earthquake, lightning, or other natural disaster or calamity. The evidence showed that there was nothing that the boat or the tugboat could have done to stop the waves from sinking the Limar I. Thus, even though the SC disagreed with the CA and held that PKS is a common carrier, the SC affirmed the decision of the RTC and the CA holding it free from liability for the loss of the cement.

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TRANSPO DIGESTS 19 - Saludo v. CA (1992)*

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20 - Compania Maritima v. Insurance Co. (1964)

Facts: Macleod and Company contracted by telephone the services of Compania Maritima to ship hemp in from Davao City, to Manila, to be subsequently transhipped to Boston, which oral contract was later confirmed by a formal and written booking issued by the shippers branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. Thereafter, the two loaded barges left Macleods wharf and proceeded to and moored at the governments marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded. During the night one of the barges sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. All abaca shipments of Macleod were insured with the Insurance Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss with said insurance company. Having failed to recover from the carrier, which is the only amount supported by receipts, the insurance company instituted the present action. Issue: 1. Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore? 2. Was the damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability? Held/Ratio: 1. Yes. The fact that the carrier sent its lighters free of charge to take the hemp from Macleods wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the hemp delivered to the carriers employees, the rights and obligations of the parties attached thereby subjecting them to the principles and usages of the maritime law. In other words, here we have a complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage. 7. No. The evidence fails to bear this out. It shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions or measures taken by the carrier to prevent the loss. Aside from the fact that, as admitted by appellants own witness, the ill-fated barge had cracks on its bottom which admitted sea water in the same manner as rain entered thru tank man-holes, the barge was not seaworthy it should be noted that on the night of the nautical accident there was no storm, flood, or other natural disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao cannot be classified as storm. For according to Beauforts wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as a storm.

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TRANSPO DIGESTS 21 - Lorenzo Shipping v. BJ Mathel (2004)**

Doctrine:

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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.

Facts: Lorenzo Shipping Corp. is a domestic corporation engaged in coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express. BJ Marthel International, Inc. is an importer and distributor of different brands of engines and spare parts. BJ Marthel supplied Lorenzo Shipping with parts for the latters marine engines. Respondent sent Lorenzo Shipping a quotation of prices of spare parts. The quotation also stated that delivery of the parts will be within 2 months after receipt of firm order. Lorenzo Shipping subsequently issued to BJ Marthel a purchase order for the procurement of one set of cylinder liner to be used for M/V Dadiangas Express. A second purchase order was issued. Both purchase orders did not state the date of the cylinders delivery. BJ Marthel then placed the order for the 2 cylinder liners with its principal in Japan, Daiei Sangyo Co. Ltd., by opening a letter of credit. Pajarillo, sales manager of BJ Marthel, delivered the cylinder liners at petitioners warehouse on April 20, 1990, 6 months after the date on the quotation, instead of the 2 months stated. BJ Marthel subsequently sent a Statement of Account to petitioner. Petitioner failed to pay for the cylinder liners. Hence, BJ Marthel sent a demand letter. Instead of heeding the demand for the full payment, Lorenzo Shipping offered to pay only P150,000. Lorenzo Shipping claims that the cylinders were delivered late and due to the scrapping of the M/V Dadiangas Express, they had to sell the cylinder liners in Singapore. Due to the failure of the parties to settle, respondent filed an action for sum of money and damages before the RTC. Lorenzo Shipping, on the other hand, claims that time was of the essence in the delivery of the cylinder liners and that the delivery was late as respondent committed to deliver the items within 2 months after receipt of firm order. The RTC ruled in favor of petitioner. The CA reversed. Issues: 1. Whether or not respondent incurred delay in performing its obligation under the contract of sale? 2. Whether or not said contract was validly rescinded by Lorenzo Shipping? Held/Ratio: 1. NO. In the subject contracts, time was not of the essence. The delivery of the cylinder liners 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. 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 the purchase orders did not specify the dates of delivery, respondent should abide by the term of delivery found on the quotation. Petitioner claims that the quotation was an offer from respondent and that the purchase order is the acceptance of the proposed terms of the contract of sale. The SC rejects this view. While the quotation stated the delivery date, the purchase orders did not do so. The quotation sent by respondent merely 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. Notably, petitioner was the one who caused the preparation of the purchase orders yet it utterly failed to adduce any justification as to why said documents contained terms which are at variance with those stated in the quotation provided by respondent. The only plausible reason for such failure on the part of petitioner is that the parties had, in fact, renegotiated the proposed terms of the contract of sale.

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The SC also said that while petitioner alleges that the cylinder liners were to be used for dry dock repair and maintenance of its M/V Dadiangas Express, 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. If time was really of the essence, they should have stated the same in the said purchase orders, and not merely relied on the quotation issued by the appellant considering the lapse of time between the quotation issued by the appellant and the purchase orders of the appellee. As an aside, [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 partys subsequently treating the contract as still in force. Petitioners receipt of the cylinder liners when they were delivered to its warehouse clearly indicates that it considered the contract of sale to be still subsisting up to that time. Had the contract of sale been cancelled already as claimed by petitioner, it no longer had any business receiving the cylinder liners. By accepting the cylinder liners when these were delivered to its warehouse, petitioner indisputably waived the claimed delay in the delivery of said items. 2. NO. 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. In addition, the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other.Petitioner never informed respondent of its intention to rescind the contract of sale.

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Bising, barge rammed into the wharf) Doctrines: Facts:

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22 - Sealoader Shipping Corporation v. GrandCement Manufacturing Corporation (2010)* (Typhoon

A common carrier is vested with the responsibility to be prepared with the conditions of the sea. They must not rely on third parties to give them news about such conditions. Contributory negligence is when the damage caused to the plaintiff was caused by the negligence of the same. Damages shall be mitigated in favor of the defendants, which are ultimately responsible for the injury or damage.

Grand Cement Manufacturing is a domestic corporation engaged in the manufacturing of cement. It has private wharfs in Cebu, Manila, and San Francisco. It contracted with Sealoader, a domestic shipping corporation. Sealoader in turn, contracted with Joy Launch Corporation to tug the formers barge in loading Grand Cements goods. The loading of the goods was delayed for 4 days. This caused Sealoaders barge and Joy Launchs tugboat to stay near Grand Cements wharf. On April 4 Typhoon Bising hit the wharf of Grand Cement in Cebu. This caused the barge of Sealoader to smash to the wharf causing a great amount of damage. Sealoader claims that they are not wholly liable since Grand Cement delayed the loading of the goods. They say that if the goods were boarded on time, the barge would have docked some place else and should have avoided the accident. Issues: 1. W/N Sealoader is liable for the damage caused by the barge to the wharf Held/Ratio: 1. Yes. With the knowledge that a storm was approaching, prudence would have dictated them to tug the barge to shelter and safety at the earliest possible time. Instead, they waited until the last minute to take action which was already too late. Their experience would have prompted them to take precautionary measures considering that the weather and the sea are capricious. Whether Grand Cement was late n loading the barge or not is of no moment. It was the judgment of the vessels captain and patron that was crucial.

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TRANSPO DIGESTS 23 - Mitsui Lines v. CA (1998)

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24 - Sulpicio Lines, Inc. v. First Lepanto-Taisho Insurance Corporation (2005)*

Facts: Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract under which Delbros was to transport a shipment of goods consisting of 3 wooden crates containing 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. For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. During the unloading of the shipment, one crate containing 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 Sulpicio Lines for the recovery of the value of the rejected cargo which was refused by the latter. Thereafter, the owner of the goods sought payment from First Lepanto-Taisho Insurance Corporation (insurer) under a marine insurance policy issued to the former. The insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. Insurer then filed claims for reimbursement from Delbros, Inc. and Sulpicio Lines Sulpicio Lines, Inc. which were subsequently denied. Insurer then filed a case for damages against Delbros and Sulpicio. Delbros alleged in their answer that the crate in question was truly in bad order and that fault is with Sulpicio which was responsible for the unloading of the crates. Sulpicio, on the other hand, alleges 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: 1. W/N Sulpicio Lines is liable for damages Held/Ratio: 1. YES. The shipment sustained damage while in the custody of Sulpicio Lines. It is not disputed that one of the 3 crates did fall from the cargo hatch to the pier apron while Sulpicio Lines was unloading the cargo from its vessel. Neither is it impugned that upon inspection, it was found that 2 cartons were torn on the side and the top flaps were open and that 2 cello bags, each of 50 pieces ferri inductors, were missing from the cargo. Sulpicio Lines contend 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. This is erroneous. Sulpicio Lines seems to belabor under the misapprehension that a distinction must be made between the cargo packaging and the contents of the cargo. According to it, damage to the packaging is not tantamount to damage to the cargo. It must be stressed that in the case at bar, the damage sustained by the packaging of the cargo while in Sulpicio Liness custody resulted in its unfitness to be transported to its consignee in Singapore. Such failure to ship the cargo to its final destination because of the ruined packaging, indeed, resulted in damages on the part of the owner of the goods. The falling of the crate during the unloading is evidence of Sulpicio Liness negligence in handling the cargo. As a common carrier, it is expected to observe extraordinary diligence in the handling of goods placed in its possession for transport. 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. Sulpicio Lines 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. Hence, Sulpicio Lines is liable to pay damages. Upon the insurers payment of the alleged amount of loss suffered by the insured (the owner of the goods), the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the common carrier whose negligence or wrongful act caused the loss.

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25 - Coastwise Lighterage Corporation v. Court of Appeals and Philippine General Insurance Company (1995)**
Facts: Pag-asa Sales, Inc. entered into a contract to transport molasses from Negros to Manila with Coastwise Lighterage Corporation. For this purpose, Coastwises barges were used. These barges were towed by a tugboat likewise owned by Coastwise. As the barges approached Pier 18 along Manila Bay where it was set to unload the cargo, one of the barges struck an unknown sunken object which resulted in a hole 2-inches wide and 20-inches long. As a consequence, water gushed through and contaminated the molasses, rendering the entire shipment unfit for use. Pag-asa Sales rejected the shipment as a total loss and thereafter filed a claim with its insurer Philippine General Insurance (PhilGen) and Coastwise. PhilGen paid Pag-asa the amount of Php700,000.00 representing the value of the damaged cargo. Coastwise, on the other hand, denied the claim. Subsequently, PhilGen filed a claim against Coastwise before the RTC of Manila, seeking to recover the amount it paid Pag-asa. The action was grounded upon PhilGens right to be subrograted to all the contractual rights and claims of the Pag-asa as consignee against Coastwise as carrier. RTC ruled in favor of PhilGen. The CA affirmed. Hence, this petition. Issues: 1. W/N Coastwise should be treated as a private carrier for the purposes of the contract entered into with Pag-asa 2. W/N PhilGen was subrograted into the rights of Pag-asa against Coastwise upon payment Held/Ratio: 1. No. Coastwise claims that the contract it entered into with Pag-asa was a charter agreement. Upon this premise, Coastwise hoped to shield itself from liability by citing Home Insurance Company v. American Steamship Agencies wherein the Court decreed that a common carrier undertaking to carry special cargo or chartered to a special person only should be treated for such purposes as a private carrier. However, the nature of the contract entered into by the parties reveals that it is not a mere charter agreement wherein the owner of the vessel relinquishes complete possession, command and navigation to the charterer. Rather, it is a contract of affreightment, wherein the owner of the vessel merely leases part or all of its space to haul goods for others. The possession, command and navigation of the vessels remained with Coastwise. Thus, the contract entered into by the parties did not convert Coastwise from a common carrier to a private one. As a consequence, the presumption of negligence that attaches to common carriers once the goods it transports are lost, destroyed applies to Coastwise. This presumption, which is overcome only by proof of the exercise of extraordinary diligence, remained unrebutted in this case. While records seem to show that the collision, which caused damage to the cargo, was an unavoidable occurrence that should free Coastwise from liability, this is overcome by the fact that the patron of the vessel was not licensed and therefore did not have the skill necessary to exert the required degree of diligence called for by the circumstances. *Note: This case is assigned under Duration of Responsibility. Perhaps Atty. Abao intends to point out that Coastwise is liable for failing to exert extraordinary responsibility at the time of the collision as required by Article 1736. Since the mishap took place before Coastwise was able to deliver the cargo to Pag-asa, the responsibility to exert extraordinary diligence had yet to be discharged. 2. Yes. PhilGens right to be subrograted into the rights of Pag-asa is explicitly provided under Article 2207 of the Civil Code: If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who violated the contract.

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Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to Pag-asa, the consignee of the cargo of molasses totally damaged while being transported by Coastwise Lighterage, the former was subrogated into all the rights which Pag-asa may have had against the carrier, herein petitioner Coastwise.

26 - Phil. First Insurance v. Wallem First Shipping (2009)*

Facts: Anhui Chemicals loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium sulphate anhydrous (shipment) for delivery at Manila for L.G. Atkimson (consignee), covered by a Clean Bill of Lading. The Bill of Lading reflects the gross weight of the total cargo at 500,200kg. The Owner and/or Charterer of M/V Offshore Master is unknown while the shipper of the shipment is Shanghai Fareast Ship Business. Wallem Philippines Shipping, Inc. (Wallem) is the local agent of the owner/charterer and Shanghai Fareast (shipper). The shipment arrived at the port of Manila on board the vessel from which it was subsequently discharged. It was disclosed during the discharge of the shipment from the carrier that 2,426 bags were in bad order and condition, because of spillages and losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes (turn-over survey) of the arrastre operator, Asian Terminals, Inc. (arrastre operator). The bad state of the bags is also evidenced by the arrastre operators Request for Bad Order Survey. Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from the pier to the consignees warehouse in Quezon City, while the final inspection was conducted jointly by the consignees representative and the cargo surveyor. During the unloading, it was found and noted that the 2,426bags had been discharged in damaged and bad order condition. The consignee filed a formal claim with Wallem for the value of the damaged shipment, to no avail. Since the shipment was insured with petitioner Phil. First Insurance Co., against all risks, the consignee filed a formal claim with Phil. First for the damage and losses. After evaluating the invoices, the turn-over survey, the bad order certificate and other documents, Phil. First paid the consignee and the latter signed a subrogation receipt. Phil. First Insurance, in the exercise of its right of subrogation, sent a demand letter to Wallem for the recovery of the amount paid by petitioner to the consignee. However, Wallem did not settle nor even send a response to Phil. Firsts claim. Thus, Phil. First filed a case before the RTC for the recovery of actual damages suffered by petitioner plus legal interest thereon. The RTC ordered respondents to pay petitioner with interest plus attorneys fees and costs of the suit. It attributed the damage and losses sustained by the shipment to the arrastre operators mishandling in the discharge of the shipment. The 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 condition. The CA reversed and set aside the RTCs decision. According to the CA, there is no solidary liability between the carrier and the arrastre operator because it was clearly established by the trial court that the damage and losses of the shipment were attributed to the mishandling by the arrastre operator in the discharge of the shipment. Hence, the arrastre operator was held solely liable to the consignee. Issues: [Relevant only] 1. Does the Common carriers duties extend to the obligation to safely discharge the cargo from the vessel? 2. Whether or not the carrier should be held liable for the cost of the damaged shipment. Held/Ratio: 1. Yes, Willam (representing the shipper and owner/charterer) was ordered to pay. Respondent is a common carrier, thus the following provisions apply. Article 1734 of the Civil Code, provides that the extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until

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the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise. (The ship captains liability is ultimately that of the shipowner by regarding the captain as the representative of the ship owner.) Section 3 (2) of the COGSA states that among the carriers responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried. Also, the Bill of Lading between the shipper and consignee provides that the responsibility of the carrier shall commence from the time when the goods are loaded on board the vessel and shall cease when they are discharged from the vessel, and that the Carrier shall not be liable of loss of or damage to the goods before loading and after discharging from the vessel, howsoever such loss or damage arises. On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the wharf or between the establishment of the consignee or shipper and the ships tackle. Being the custodian of the goods discharged from a vessel, an arrastre operators duty is to take good care of the goods and to turn them over to the party entitled to their possession. Handling cargo is mainly the arrastre operators principal work so its drivers/operators or employees should observe the standards and measures necessary to prevent losses and damage to shipments under its custody. Thus, both the ARRASTRE and the CARRIER are charged with and obligated to deliver the goods in good condition to the consignee. But the liability of the arrastre operator and the carrier are not always solidary as the facts of a case may vary the rule. It was found in the testimony of Mr. Talens that the stevedores, and head checker were under the supervision of master of the vessel at the time of unloading/discharging of the shipment. Moreover, the liability of Wallem is highlighted by Mr. Talens notes in the Bad Order Inspection, that the bad order torn bags, was due to stevedores[] utilizing steel hooks/spikes in piling the cargo to [the] pallet board at the vessels cargo holds and at the pier designated area before and after discharged that cause the bags to torn [sic]. Evidence shows that the damage to the bags happened before and after their discharge and it was caused by the stevedores of the arrastre operator who were then under the supervision of Wallem. It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier. In the instant case, 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.

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27 - Delsan Transport Lines v. American Home Assurance Corporation (2006)

Facts: Delsan Transport is a corporation which owns and operates the vessel MT Larusan. American Home, on the other hand it an insurance corporation. Delsan entered into a contract of afreightment with Caltex whereby Delsan undertook the shipment and delivery of 1,986 k/l of diesel oil from Bataan to Bacolod. When the shipment of oil arrived in Bacolod city, unloading operations immediately commenced. Discharging of the diesel oil started at around 1:30 pm. However, the discharging operations had to be stopped at around 10:30 pm when it was discovered that the port bow mooring the vessel was cut or stolen by unknown persons. Because of this, the vessel drifted away from shore and stretched the rubber hose attached to the riser causing the elbow to break. The rubber hose connected to the tanker was severed completely causing the diesel to spill into the sea. The tanker signaled a red light which meant stop pumping. However, the shore watcher assumed that the pumping would commence at any time and did not close the storage tank gate valve. Because the valve remained open, the oil which was delivered into the storage tank backflowed. For the diesel oil which spilled and backflowed, Caltex sought to recover from Delsan. Delsan refused to pay but American Home payed Caltex pursuant to their insurance agreement. Both the trial court and the Court of Appeals held Delsan liable for the loss of the cargo for its negligence of its duty as common carrier. Issues: 1. W/N Delsan is liable for the loss of the cargo for negligene of its duty as a common carrier Held/Ratio: 1. Yes, Delsan is liable for the loss of the cargo. The proximate cause of the spillage and backflow of the diesel oil was the severance of the port bow mooring line of the vessel and the failure of the shore watcher to close the storage tank gate valve. Delsans 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. It had been settled that 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 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. Because the discharging of oil products has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it theresponsibility to guard and preserve the goods, a duty incident to its having the goods transported.

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28 - Wildvalley Shipping v. CA and Philippine President Lines Inc. (2000)*

Doctrine: Facts: The Philippine Roxas is a vessel owned by Philippine President Lines (PPL). It arrived at Venezuela to load iron ore. Upon departing from the port, Venezuelan authorities appointed an official Venezuelan pilot, Ezzar Vasquez, to navigate the ship through the Orinoco River. When they left the port, the ships captain/master Colon, Vasquez, the ships third mate and a helmsman were on the bridge of the ship. When the vessel was under way, the ships captain/master left the bridge. Shortly thereafter, they felt vibrations but Vasquez assured the watch officer that everything was alright. They felt another round of vibrations and the watch officer called the captain/master to the bridge. The captain inspected the position of the vessel, confirmed that they were in the middle of a channel and asked that the bottom tanks be checked. The Philippine Roxas apparently ran aground the Orinoco River thus obstructing the ingress/egress of other vessels. Wildvalley filed a complaint for unearned profits, interests, attorneys fees and costs against Philippine President Lines and their underwriter, Pioneer Insurance, alleging that it was through the formers negligence that their vessel, the Malandrinon, failed to sail out of Puerto Ordaz. Wildvalley claims that the Philippine Roxas was under the command of its shipmaster, Capt. Colon while Philippine Pres. Lines argue that it was Vasquez who was in control of the ship. Issues: 1. W/N the ship was under the control of the PPL Captain. 2. W/N PPL was negligent. [MAIN ISSUE] Held/Ratio: 1. YES. BUT THE FAULT LIES WITH THE PILOT NOT WITH THE CAPTAIN. According to Philippine Law, the master remains the overall commander of the vessel even though a pilot is on board. However, the law also recognizes that when the ship is navigating through a pilotage district, then the ship must be under compulsory pilotage. And although the Captain could still veto the decisions of the pilot, the Court recognized the fact that the pilot appointed by the Venezuelan government was appointed because of his mastery of the topography of the Orinoco River being a pilot for 8 years. Therefore, the Court sees it fit for the Captain to rely on the decisions made by the pilot without further overseeing. The doctrine of res ipsa loquitur cannot also be applied because for this to apply there is a need for the instrumentality at fault to be under the control of the superior. As was already said temporary control of the ship was shifted to the pilot. Therefore the captain/PPL could not be held liable under this doctrine. 2. NO, PPL WAS NOT NEGLIGENT. There being no contract of carriage between Wildvalley and PPL, PPL was expected only to perform the necessary diligence of a good father. The Court found that PPL sufficiently exercised this diligence when the vessel sailed only after the main engine, machineries, and other auxiliaries were checked and found to be in good running condition, when the master left a competent officer, the officer on watch on the bridge with a pilot who is experienced in navigating the Orinoco River; when the master ordered the inspection of the vessels double bottom tanks when the vibrations occurred anew. (sub-issues) Applicability of Venezuelan Law / Foreign Documents inapplicable because Plaintiffs failed to prove it in accordance with the Rule 132 of the RoC requiring certification from the embassies/person having custody. Seaworthiness of the Ship The ship was seaworthy despite having several defects, as certified by a surveyor. What is important is that the ship is able to comply with the particular requirements of the voyage. In the absence of a contractual obligation, the common carrier is required only to observe the diligence required of a good father of a family over his property.

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TRANSPO DIGESTS 29 - Maersk Lines v. CA (1993)**

Doctrine:

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ATTY. ABAO

The oft-repeated rule regarding a carriers liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver properly within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen.

Facts: Efren Castillo, proprietor of Ethegal Laboratories, ordered from Eli Lilly Inc. 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The capsules were placed in 6 drums of 100,000 capsules each. Through a Memorandum of Shipment, Eli Lilly advised Castillo that the drums containing the capsules were already shipped on board Maersk Lines vessel for shipment to the Philippines via Oakland, California. It was also specified in the memorandum that the date of arrival would be on April 3, 1977. However, for unknown reasons, the cargo was misshipped and diverted to Virginia, USA and then transported back to Oakland, California. As a result, the cargo arrived in the Philippines on June 10, 1977, 2 months from the specified date of arrival. Castillo refused to take the goods for failure to arrive on time. He filed an action for rescission of contract with damages against both Eli Lilly and Maersk Line, alleging gross negligence and undue delay in the delivery of the goods. Maersk Line, in its answer, argued that the cargo was transported in accordance with the provisions in the bill of lading and that it is only liable in case of loss, destruction or deterioration of the goods as provided for in Article 1734. Eli Lilly filed a cross-claim against Maersk Line and alleged that the delay was solely due to the gross negligence of Maersk Line. The trial court dismissed the complaint against Eli Lilly since the evidence on record shows that the delay was entirely due to the fault of Maersk Line. It also ruled that due to the delay, Maersk Line was liable for damages under Article 1170 since there was a breach in the performance of the obligation. Maersk Line was ordered to pay actual, moral, and exemplary damages to Castillo. This was affirmed by the CA. Issues: 1. W/N the dismissal of the complaint against Eli Lilly would also amount to the dismissal of the complaint against Maersk Line 2. W/N Maersk Line is liable for damages because of the delay in delivering the shipment Held/Ratio: 1. NO. Maersk Line is an original party defendant upon whom the delayed shipment is imputed. Thus, it cannot claim that the dismissal of the complaint against Eli Lilly inured to its benefit. 2. YES. Maersk Line argued that it could not be liable for the delay in the delivery of the cargo since it acted in good faith and there was no special contract under which it undertook to deliver the cargo on or before a specified date. It also said that as provided in the bill of lading covering the subject shipment, the Carrier does not undertake that the goods shall arrive at the port of discharge or the place of delivery at any particular time or to meet any particular market or use, the Carrier shall in no circumstances be liable for any direct, indirect or consequential loss or damage caused by delay. A bill of lading operates both as a receipt and as contract to transport and deliver the same a therein stipulated. Being a contract, it is the law between the parties who are bound by its terms and conditions provided that these are not contrary to law, morals, good customs, public order and public policy. However, this only applies if the contract will not create an absurd situation. In the present case, the quoted provision from the bill of lading has the effect of practically leaving the date of arrival of the shipment on the sole determination and will of the carrier. It

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is a contract of adhesion and therefore it should not automatically exempt Maersk Line from any liability due to delay. The oft-repeated rule regarding a carriers liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver properly within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. In the case at hand, there was no special contract entered into between the parties regarding the date of arrival of the subject shipment. But an examination of the bill of lading shows that the subject shipment was estimated to arrive in Manila on April 3, 1977. Therefore, even in the absence of a special contract, Maersk Line was liable for the delay since it was aware of the specific date when the goods were expected to arrive, as indicated in the bill of lading itself. The Court also stated that the delay in the delivery (2 months and 7 days) was beyond the realm of reasonableness.

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TRANSPO DIGESTS 30 - FGU Insurance v. CA (2005)**

Facts:

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Evidence shows that 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. San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio several cargo. 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 barge complained about their difficulty in unloading the cargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs representative to transfer the barge to a safer place but the representative did not heed the request. 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. Hence, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO amounted to P1,346,197.00. Issue: 1. Whether or not respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under the insurance contract considering the circumstances surrounding the loss of the cargoes; and 2. Whether or not the Court of Appeals committed an error of law in holding that the doctrine of res judicata applies in the instant case. Held/Ratio: 1. YES. One of the purposes for taking out insurance is to protect the insured against the consequences of his own negligence and that of his agents. Thus, it is a basic rule in insurance that the carelessness and negligence of the insured or his agents constitute no defense on the part of the insurer. However, when the evidence shows that the insureds negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated. 2. YES. It is ANCOs contention that the decision in Civil Case No. R-19341, which was decided in its favor, constitutes res judicata with respect to the issues raised in the case at bar. The doctrine is still inapplicable due to the absence of the last essential requisite of identity of parties, subject matter and causes of action. The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant case, SMC is the plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as defendants, with the latter merely impleading FGU as third-party defendant. Moreover, the controversy in the first case involved the rights and liabilities of the shipowner vis--vis that of the insurer, while the present case involves the rights and liabilities of the shipper vis--vis that of the shipowner. Also, the subject matter of the third-party complaint against FGU in this case is different from that in Civil Case No. R-19341. In the latter, ANCO was suing FGU for the insurance contract over the vessel while in the former, the third-party complaint arose from the insurance contract covering the cargoes on board the D/B Lucio.

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TRANSPO DIGESTS 31 - Southern Lines v. CA (1962)

Doctrine: Facts:

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The carrier of goods in order to free itself from liability is obliged to prove that damages/ loss were due to fortuitous event, force-majeure, inherent nature and defect of goods.

In 1948, Iloilo City ordered rice from NARIC (Natl Rice and Corn Corp) in Manila. Pursuant to this, 1,726 sacks of rice were boarded in the vessel SS Gen. Wright (owned by Southern Lines) to be transported from Manila to Iloilo City. On Sept. 3, City of Iloilo received the shipment and paid for the 1,726 sacks. It was later found out in the bill of lading that only 1,685 sacks were received. City of Iloilo then filed a complaint in the CFI against NARIC and Southern Lines for the recovery of the sum of the41 sacks that were not delivered. CFI ordered Southern Lines to pay the amount. Southern Lines, in their appeal, claims that they should be exempted from liability because the shortage due to shrinkage, leakage, spillage of rice was brought about by the bad condition of the sacks when they were boarded in the vessel. Issue: 1. W/N Southern lines (carrier) liable for the loss or shortage of the rice shipped. Held/Ratio: 1. YES. The Court held Southern lines liable for the shortage. According to the Code of Commerce, carriers shall be liable for the losses and damages suffered by the goods except if the damages/shortage were caused by the nature of the goods or by unavoidable accident. The carrier has the burden of proving that the losses or damages were brought about by fortuitous event, force majeure, inherent nature and defect of goods. In this case, Southern Lines failed to prove that the shortage was not resulted by their own negligence. The excuse of sacks being in bad condition even from the start is not accepted because Southern lines should have immediately protested or refused the goods when they saw that the packaging/sacks were already bad to begin with. Southern Lines, however, did not do this and it still agreed to transport the goods. This act of Southern lines is regarded by the Court as an act of negligence.

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TRANSPO DIGESTS 32 - DSR-Senator v. Federal (2003)**

Doctrines:

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A 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 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 it liable.

Facts:

Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to C.F. Sharp and Company, Inc. (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. Under the bill of lading issued by C.F. Sharp, the port of discharge for the cargo was at Khor Fakkan port and the port of delivery was Riyadh, Saudi Arabia, via Port Dammam. Said cargo was loaded in M/S Arabian Senator. Federal Phoenix Assurance Company, Inc. (Federal Phoenix Assurance) insured the cargo against all risks. When the vessel arrived in Khor Fakkan, the cargo was reloaded on board DSR-Senator Lines feeder vessel, M/V Kapitan Sakharov bound for Port Damman. While in transit, the vessel and all its cargo caught fire and sank. DSR-Senator Lines informed Berde Plants of the incident and C.F Sharp issued a certification to that effect. Consequently, Federal Phoenix Assurance paid Berde Plants the amount of the insurance of the cargo. It then demanded payment from C.F. Sharp on the basis of the Subrogration Receipt executed by Berde Plants in its favor. C.F. Sharp denied any liability on the ground that such liability was extinguish when the vessel carrying the cargo caught fire. Federal Phoenix Assurance filed with the RTC of Manila a complaint for damages against DSR-Senator Lines and C.F. Sharp. The RTC ruled in favor of Federal Phoenix Assurance. On appeal, the CA affirmed. Thus, the petition for review on certiorari. Issue: 1. W/N DSR-Senator Lines and C.F. Sharp are liable for damages. Held/Ratio: 1. Yes. Art. 1734 of the NCC provides: Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether intentional 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 public authority. Fire is not one of those enumerated under the provision which exempts a carrier from liability for loss or destruction of the cargo. As provided for in the case of Eastern Shipping Lines, Inc. v. IAC, since the peril of fire is not comprehended within the exceptions in Art. 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 work. Even if fire were to be considered as a natural disaster under Art. 1734, it is required under Art. 1739 that it must

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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. Moreover, a 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 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 it liable.

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TRANSPO DIGESTS 33 - Philamgen v. CA (1993)* 34 - Central Shipping v. Ins (2004)**

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TRANSPO DIGESTS 35 - Citadel Lines v. CA (1990)*

Facts:

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In this case, 90 cases of cigarettes as cargo were lost. It was found by the CA that the subject cargo which was placed in a container van, padlocked and sealed by the representative of the CARRIER was still in its possession and control when the loss occurred, there having been no formal turnover of the cargo to the ARRASTRE. 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 extra ordinary diligence as required in Article 1733 of the Civil Code. The duty of the consignee is to prove merely that the goods were lost. Thereafter, the burden is shifted to the carrier to prove that it has exercised the extraordinary diligence required by law. And, its extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee or to the person who has the right to receive them. Considering, that the subject shipment was lost while it was still in the custody of the CARRIER, and considering further that it failed to prove that the loss was occasioned by an excepted cause, the inescapable conclusion is that the CARRIER was negligent and should be held liable therefor. However, the liability of the carrier is limited as stipulated under the bill of lading. Basic is the rule that a stipulation limiting the liability of the carrier to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Further, a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.

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TRANSPO DIGESTS 36 - Everett Steamship v. CA (1998)*

Facts:

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Private respondent Hernandez Trading Co. Inc 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 were shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by petitioners principal, Everett Orient Lines. Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. Private respondent claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1, 552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 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. The trial court rendered a decision in favour of the private respondents and this was affirmed by the Court of Appeals. Thus, this instant petition. Issues: 1. Is the petitioner liable for the actual value and not the maximum value 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? Held/Ratio: 1. The Petitioner is only liable for the maximum value recoverable under the bill of lading. The liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.. Clause 18 of the covering bill of lading states: 18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost plus freight and 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 thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required. Pertinent provisions that is applicable as to this case: Art. 1749. A stipulation that the common carriers 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. Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers liability for loss must be reasonable and just under the circumstances, 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. 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. 2. Private Respondents are still bound by the stipulations of the bill of lading In Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), it was held that 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.

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TRANSPO DIGESTS 37 - Cruz v. Sun Holidays (2010)**

Facts:

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Petitioners, spouses Dante and Leonora Cruz lodged a Complaint against Sun Holidays, Inc. with RTC of Pasig for damages arising from the death of their son Ruelito Cruz who perished with his wife 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 Resourt owned and operated by Respondent. On. Sept. 11, 2000, as it was still windy, Matute and 25 other Resort guests including Ruelito and his wife trekked to the other side of the coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas. Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forard to the front, leaving the wheel to one of the crew members. Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier since by its tour package, the transporting of its guests is an integral part of its resort business. They inform that another division of the appellate court in fact held respondent liable for damages to the other survivors of the incident. Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a common carrier; that the Resorts ferry services for guests cannot be considered as ancillary to its business as no income is derived therefrom; that it exercised extraordinary diligence as shown by the conditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was caused by a fortuitous event without any contributory negligence on its part; and that the other case wherein the appellate court held it liable for damages involved different plaintiffs, issues and evidence. Issue: 1. W/N respondent is a common carrier Held/Ratio: 1. YES. Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the general public, i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberately refrained from making such distinctions. Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly considered ancillary thereto. The constancy of respondents ferry services in its resort operations is underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry services, may be availed of by anyone who can afford to pay the same. These services are thus available to the public. That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators offering tour packages to factor the transportation fee in arriving at the tour package price. That guests who opt not to avail of respondents ferry services pay the same amount is likewise inconsequential. These guests may only be deemed to have overpaid. About Fortuitous Event The elements of a fortuitous event are: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.

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To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only cause of the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event. Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls was expected under the weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it capsized and sank. The incident was, therefore, not completely free from human intervention. Note: Many issues (Common Carrier, Fortuitous Event, Indeminity for Death with life expectancy and net earning, exemplary damages)

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TRANSPO DIGESTS 38 - PAL v. CA (1992)** 39 - PANAM v. IAC (1990) 40 - Cathay Pacific v. CA (1993)*

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TRANSPO DIGESTS 41 - Transasia Shipping v. CA (1996)**

Facts:

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Atty. Arroyo bought a ticket from Trans-Asia Shipping for the voyage of M/V Thailand to Cagayan de Oro from Cebu City. At 5:30 pm the plaintiff boarded the vessel and at that instance noticed that some repair works were being undertaken on the engine. The vessel departed with only one engine running. After an hour the vessels slowed down and dropped anchor near Kawit Island. After 30 minutes of no movement, some passengers demanded that they be allowed to return to Cebu. The vessels captain acceded to their request and thus the vessel returned to Cebu. At Cebu City, those who wanted to disembark were allowed to do so and thereafter, the vessel continued with its voyage to Cagayan de Oro. The next day, plaintiff boarded M/V Japan for its voyage to Cagayan de Oro. Plaintiff filed an action for damage for failure of the vessel to transport him to the place of destination and prayed to be awarded compensatory, moral and actual damages. The trial court dismissed the complaint. The CA reversed the judgment of the trial court and awarded moral, exemplary damages as well as awarding attorneys fee. The CA however did not award damages for delay in the performance of obligation of the carrier for not bringing the plaintiff to the place of destination. Issue: 1. W/N Trans-Asia breached its contract of common carriage with the plaintiff? 2. W/N the CA erred when they did not award compensatory damages but awarded moral and exemplary damages? Held/Ratio: 1. YES. Under 1733 the carrier was bound to observe extraordinary diligence in ensuring the safety of the plaintiff which meant that the carrier was bound to carry the plaintiff safely as far as human care and foresight could provide using the utmost diligence of a very cautious person with due regards of all the circumstances. Before commencing the contracted voyage, Transasia undertook repair on the cylinder head of one of the vessels engine. But even before the repairs could be finished, they allowed the vessel to leave the port with only one functioning engine. Eventually, even the lone engine broke down and caused the vessel to drift, thus to prevent the ship from sinking it had to drop anchor. The vessel was unseaworthy even before the voyage began. To be seaworthy the vessel must be adequately equipped and sufficiently manned. The failure of the common carrier to maintain seaworthy condition is its vessel is a clear breach of its contract of carriage. 2. NO. The CA did not do reversible error when they did not award compensatory damages but awarded moral and exemplary damages. The CA did not grant actual damages because they said no delay were incurred because there was no demand. This is not applicable in the case. This is because there was no delay in the commencement of the voyage. If there was delay it was when the engine conked out. Any further delay to the arrival of the plaintiff at the point of destination was because of his decision to disembark. Had he remained in the vessel he would have arrived at noon of the day of the vessel. This meant he would have been able to report to his office in the afternoon and would have lost only half a days salary. There is no evidence that he did not receive his salary not that his absence was not excused. Actual or compensatory damages must be proved. The Court fully agreed with the CA in the award of moral and exemplary damages. Transasia allowed the vessel fully aware that it faced the peril of the sea. They assert that safety of the vessel and passengers were not at stake because the sea was calm and that the plaintiff was over-reacting to the situation. The Court said that his defense showed lack of concern. It was only providential that the sea was calm. It was not unusual for the plaintiff to react this was at the prospect of stoppage at sea at night. More so in the light of many sea tragedies resulting in loss of life and damage to property simply because the carrier failed in their duty to exercise extraordinary diligence in the performance of their obligations. The Court however deleted the award of attorneys fees. They are only recoverable in the concept of actual damages and must be proved. Also, this award must be prayed for. This is not present in the case.

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