Transpo Cases 2
THIRD DIVISION "Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping
G.R. No. 146018 June 25, 2003
EDGAR COKALIONG SHIPPING LINES, INC., Petitioner,
vs.
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be
limited to the value declared by the shipper. On the other hand, the liability of the insurer is
determined by the actual value covered by the insurance policy and the insurance premiums paid
therefor, and not necessarily by the value declared in the bill of lading.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside
the August 31, 2000 Decision2 and the November 17, 2000 Resolution3 of the Court of
Appeals4 (CA) in CA-GR SP No. 62751. The dispositive part of the Decision reads:
"IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from
is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total amount of
₱148,500.00, with interest thereon, at the rate of 6% per annum, from date of this Decision of the
Court. [Respondent’s] claim for attorney’s fees [is] DISMISSED. [Petitioner’s] counterclaims
are DISMISSED."5
The assailed Resolution denied petitioner’s Motion for Reconsideration.
On the other hand, the disposition of the Regional Trial Court’s6 Decision,7 which was later
reversed by the CA, states:
"WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.
"No cost."8
The Facts
The facts of the case are summarized by the appellate court in this wise:
Lines, Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo consisting of one (1)
carton of Christmas décor and two (2) sacks of plastic toys, to be transported on board the M/V
Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on December 12, 1991, for
Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the
cargo. Nestor Angelia was both the shipper and consignee of the cargo valued, on the face
thereof, in the amount of ₱6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner],
consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one
(1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag,
Surigao del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of Lading No.
59 covering the cargo which, on the face thereof, was valued in the amount of ₱14,000.00. Under
the Bill of Lading, Zosimo Mercado was both the shipper and consignee of the cargo.
"On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59,
with the UCPB General Insurance Co., Inc., [respondent] for brevity, for the amount of
₱100,000.00 ‘against all risks’ under Open Policy No. 002/9 1/254 for which she was issued, by
[respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo covered
by Bill of Lading No. 58, with [respondent], for the amount of ₱50,000.00, under Open Policy
No. 002/9 1/254 on the basis of which [respondent] issued Marine Risk Note No. 18410 on said
date.
"When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board,
including the goods of Legaspi. After the vessel had passed by the Mandaue-Mactan Bridge, fire
ensued in the engine room, and, despite earnest efforts of the officers and crew of the vessel, the
fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the cargoes
therein. The Captain filed the required Marine Protest.
"Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo
insured under Marine Risk Note No. 18409 and covered by Bill of Lading No. 59. She
submitted, in support of her claim, a Receipt, dated December 11, 1991, purportedly signed by
Zosimo Mercado, and Order Slips purportedly signed by him for the goods he received from
Feliciana Legaspi valued in the amount of ₱110,056.00. [Respondent] approved the claim of
Feliciana Legaspi and drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net
amount of ₱99,000.00, in settlement of her claim after which she executed a Subrogation
Receipt/Deed, for said amount, in favor of [respondent]. She also filed a claim for the value of the
cargo covered by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated
December 11, 1991 and Order Slips, purportedly signed by Nestor Angelia for the goods he
received from Feliciana Legaspi valued at ₱60,338.00. [Respondent] approved her claim and
remitted to Feliciana Legaspi the net amount of ₱49,500.00, after which she signed
a Subrogation Receipt/Deed, dated March 9, 1992, in favor of [respondent].
Transpo Cases 2
"On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on
torts against [petitioner], with the Regional Trial Court of Makati City, for the collection of the total
principal amount of ₱148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo,
praying that judgment be rendered in its favor and against the [petitioner] as follows:
‘WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment
be rendered ordering [petitioner] to pay [respondent] the following.
1. Actual damages in the amount of ₱148,500.00 plus interest thereon at the legal rate
from the time of filing of this complaint until fully paid;
2. Attorney’s fees in the amount of ₱10,000.00; and
3. Cost of suit.
‘[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem
just and equitable under the premises.’
"[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was
delivered to, and received by, [petitioner] for transportation to Tandag, Surigao del Sur under ‘Bill
of Ladings,’ Annexes ‘A’ and ‘B’ of the complaint; that the loss of the cargo was due to the
negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation
Receipts/Deeds in favor of [respondent] after paying to her the value of the cargo on account of
the Marine Risk Notes it issued in her favor covering the cargo.
"In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of
Marine Inquiry of any negligence in the burning of the vessel; (b) the complaint stated no cause of
action against [petitioner]; and (c) the shippers/consignee had already been paid the value of the
goods as stated in the Bill of Lading and, hence, [petitioner] cannot be held liable for the loss of
the cargo beyond the value thereof declared in the Bill of Lading.
"After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to
take the depositions of Chester Cokaliong, the Vice-President and Chief Operating Officer of
[petitioner], and a resident of Cebu City, and of Noel Tanyu, an officer of the Equitable Banking
Corporation, in Cebu City, and a resident of Cebu City, to be given before the Presiding Judge of
Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did
testify, by way of deposition, before the Court and declared inter alia, that: [petitioner] is a family
corporation like the Chester Marketing, Inc.; Nestor Angelia had been doing business with
[petitioner] and Chester Marketing, Inc., for years, and incurred an account with Chester
Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of Lading Nos.
58 and 59 for the cargo described therein with Zosimo Mercado and Nestor Angelia as
shippers/consignees, respectively; the engine room of the M/V Tandag caught fire after it passed
the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its cargo; an investigation
was conducted by the Board of Marine Inquiry of the Philippine Coast Guard which rendered a
Report, dated February 13, 1992 absolving [petitioner] of any responsibility on account of the fire,
which Report of the Board was approved by the District Commander of the Philippine Coast
Guard; a few days after the sinking of the vessel, a representative of the Legaspi Marketing filed
claims for the values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the
shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to ascertain, from
the shippers/consignees and the representative of the Legaspi Marketing that the cargo covered
by Bill of Lading No. 59 was owned by Legaspi Marketing and consigned to Zosimo Mercado
while that covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the Legaspi
Marketing; that [petitioner] approved the claim of Legaspi Marketing for the value of the cargo
under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount under Equitable
Banking Corporation Check No. 20230486 dated August 12, 1992, in the amount of ₱14,000.00
for which the representative of the Legaspi Marketing signed Voucher No. 4379, dated August 12,
1992, for the said amount of ₱14,000.00 in full payment of claims under Bill of Lading No. 59;
that [petitioner] approved the claim of Nestor Angelia in the amount of ₱6,500.00 but that since the
latter owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off the amount due
to Nestor Angelia under Bill of Lading No. 58 against his account with Chester Marketing, Inc.;
[petitioner] lost/[misplaced] the original of the check after it was received by Legaspi Marketing,
hence, the production of the microfilm copy by Noel Tanyu of the Equitable Banking Corporation;
[petitioner] never knew, before settling with Legaspi Marketing and Nestor Angelia that the cargo
under both Bills of Lading were insured with [respondent], or that Feliciana Legaspi filed claims
for the value of the cargo with [respondent] and that the latter approved the claims of Feliciana
Legaspi and paid the total amount of ₱148,500.00 to her; [petitioner] came to know, for the first
time, of the payments by [respondent] of the claims of Feliciana Legaspi when it was served with
the summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x x
executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in
favor of [respondent]; hence, [petitioner] was absolved of any liability for the loss of the cargo
covered by Bills of Lading Nos. 58 and 59; and even if it was, its liability should not exceed the
value of the cargo as stated in the Bills of Lading.
"[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x"9 (Citations
omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed "to prove that the fire which consumed the vessel and its
cargo was caused by something other than its negligence in the upkeep, maintenance and
operation of the vessel."10
Petitioner had paid ₱14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59.
The CA, however, held that the payment did not extinguish petitioner’s obligation to respondent,
Transpo Cases 2
because there was no evidence that Feliciana Legaspi (the insured) was the owner/proprietor of
Legaspi Marketing. The CA also pointed out the impropriety of treating the claim under Bill of
Lading No. 58 -- covering cargo valued therein at ₱6,500 -- as a setoff against Nestor Angelia’s
account with Chester Enterprises, Inc.
Finally, it ruled that respondent "is not bound by the valuation of the cargo under the Bills of
Lading, x x x nor is the value of the cargo under said Bills of Lading conclusive on the
[respondent]. This is so because, in the first place, the goods were insured with the [respondent]
for the total amount of ₱150,000.00, which amount may be considered as the face value of the
goods."11
Hence this Petition.12
Issues
Petitioner raises for our consideration the following alleged errors of the CA:
"I
"The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that
petitioner’s liability should be based on the ‘actual insured value’ of the goods and not from actual
valuation declared by the shipper/consignee in the bill of lading.
"II
"The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as
sustained by the trial court a quo, holding that the cause of loss of the aforesaid cargoes under Bill
of Lading Nos. 58 and 59 was due to force majeure and due diligence was [exercised] by
petitioner prior to, during and immediately after the fire on [petitioner’s] vessel.
"III
"The Court of Appeals erred in not holding that respondent UCPB General Insurance has no
cause of action against the petitioner."13
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the
extent of its liability?
This Court’s Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure.
It adds that its exercise of due diligence was adequately proven by the findings of the Philippine
Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that
the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil
service tank. Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing
the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a
mere two-inch gap from the engine room walling, thus precluding constant inspection and care by
the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have
been caused by force majeure. Broadly speaking, force majeure generally applies to a natural
accident, such as that caused by a lightning, an earthquake, a tempest or a public
enemy.14 Hence, fire is not considered a natural disaster or calamity. In Eastern Shipping Lines,
Inc. v. Intermediate Appellate Court,15 we explained:
"x x x. This must be so as it arises almost invariably from some act of man or by human means. It
does not fall within the category of an act of God unless caused by lighting or by other natural
disaster or calamity. It may even be caused by the actual fault or privity of the carrier.
"Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to
leases or rural lands where a reduction of the rent is allowed when more than one-half of the fruits
have been lost due to such event, considering that the law adopts a protective policy towards
agriculture.
"As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735
of the Civil Code provides that in all cases other than those mentioned in Article 1734, the
common carrier shall be presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence required by law."
Where loss of cargo results from the failure of the officers of a vessel to inspect their ship
frequently so as to discover the existence of cracked parts, that loss cannot be attributed to force
majeure, but to the negligence of those officials.16
The law provides that a common carrier is presumed to have been negligent if it fails to prove that
it exercised extraordinary vigilance over the goods it transported. Ensuring the seaworthiness of
the vessel is the first step in exercising the required vigilance. Petitioner did not present sufficient
Transpo Cases 2
evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the
vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service
tank was made, what the normal practice was for its maintenance, or some other evidence to
establish that it had exercised extraordinary diligence. It merely stated that constant inspection
and care were not possible, and that the last time the vessel was dry-docked was in November
1990. Necessarily, in accordance with Article 173517 of the Civil Code, we hold petitioner
responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.
Second Issue:
Extent of Liability
Respondent contends that petitioner’s liability should be based on the actual insured value of the
goods, subject of this case. On the other hand, petitioner claims that its liability should be limited
to the value declared by the shipper/consignee in the Bill of Lading.
The records18 show that the Bills of Lading covering the lost goods contain the stipulation that in
case of claim for loss or for damage to the shipped merchandise or property, "[t]he liability of the
common carrier x x x shall not exceed the value of the goods as appearing in the bill of
lading."19 The attempt by respondent to make light of this stipulation is unconvincing. As it had the
consignees’ copies of the Bills of Lading,20 it could have easily produced those copies, instead of
relying on mere allegations and suppositions. However, it presented mere photocopies thereof to
disprove petitioner’s evidence showing the existence of the above stipulation.
A stipulation that limits liability is valid21 as long as it is not against public policy. In Everett
Steamship Corporation v. Court of Appeals,22 the Court stated:
"A stipulation in the bill of lading limiting the common carrier’s liability for loss or destruction of a
cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code which provides:
‘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.’
"Such limited-liability clause has also been consistently upheld by this Court in a number of cases.
Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:
‘It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the
validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless
fully sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just
and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability
only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would
amount to questioning the justness and fairness of the law itself, and this the private respondent
does not pretend to do. But over and above that consideration, the just and reasonable character
of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of
liability limitation by the simple and surely far from onerous expedient of declaring the nature and
value of the shipment in the bill of lading.’
"Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the
common carrier’s liability for loss must be ‘reasonable and just under the circumstances, and has
been freely and fairly agreed upon.
"The bill of lading subject of the present controversy specifically provides, among others:
’18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shipper’s 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 (¥100,000.00) 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.’
"The above stipulations are, to our mind, reasonable and just.1avvphi1 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." (Italics
supplied)
In the present case, the stipulation limiting petitioner’s liability is not contrary to public policy. In
fact, its just and reasonable character is evident. The shippers/consignees may recover the full
value of the goods by the simple expedient of declaring the true value of the shipment in the Bill of
Lading. Other than the payment of a higher freight, there was nothing to stop them from placing
the actual value of the goods therein. In fact, they committed fraud against the common carrier by
deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper
and just transport fare.
Transpo Cases 2
Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common
carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of the amount
that the latter may be liable for in case of loss of the goods. The common carrier can then take
appropriate measures -- getting insurance, if needed, to cover or protect itself. This precaution on
the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the
real worth of the goods it seeks to transport does not only violate a valid contractual stipulation,
but commits a fraudulent act when it seeks to make the common carrier liable for more than the
amount it declared in the bill of lading.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at
₱6,500, the parties have not convinced us to disturb the findings of the CA that compensation
could not validly take place. Thus, we uphold the appellate court’s ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision
is MODIFIED in the sense that petitioner is ORDERED to pay respondent the sums of ₱14,000
and ₱6,500, which represent the value of the goods stated in Bills of Lading Nos. 59 and 58,
respectively. No costs.

Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their SO ORDERED.
respective Bills of Lading. Hence, petitioner was exposed to a risk that was deliberately hidden
from it, and from which it could not protect itself.

It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the
insurance company was paid the correct higher premium by Feliciana Legaspi; while petitioner
was paid a fee lower than what it was entitled to for transporting the goods that had been
deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer
should bear the loss in excess of the value declared in the Bills of Lading. This is the just and
equitable solution.

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

We find no cogent reason to disturb the CA’s finding that Feliciana Legaspi was the owner of the
goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned
to Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or her subrogee
(respondent) was entitled to the goods or, in case of loss, to compensation therefor. There is no
evidence showing that petitioner paid her for the loss of those goods. It does not even claim to
have paid her.

On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of
Lading No. 59, for which the latter subsequently paid ₱14,000. But nothing in the records
convincingly shows that the former was the owner of the goods. Respondent was, however, able
to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to
payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be
deemed to have been extinguished, because payment was made to a person who was not entitled
thereto.
Transpo Cases 2
Republic of the Philippines Respondent Glow Laks Enterprises,Ltd., is likewise a foreign corporation organized and existing
SUPREME COURT under the laws of Hong Kong. It is not licensed to do, and it is not doing business in, the
Manila Philippines.

FIRST DIVISION On or about 14 September 1987, respondent loaded on board M/S Scandutch at the Port of
Manila a total 343 cartoons of garments, complete and in good order for pre-carriage tothe Port of
G.R. No. 156330 November 19, 2014 Hong Kong. The goods covered by Bills of Lading Nos. MHONX-2 and MHONX-34 arrived in good
condition in Hong Kong and were transferred to M/S Amethyst for final carriage to Colon, Free
NEDLLOYD LIJNEN B.V. ROTTERDAM and THE EAST ASIATIC CO., LTD., Petitioners, Zone, Panama. Both vessels, M/S Scandutch and M/S Amethyst, are owned by Nedlloyd
vs. represented in the Phlippines by its agent, East Asiatic. The goods which were valued at
GLOW LAKS ENTERPRISES, LTD., Respondent. US$53,640.00 was agreed to be released to the consignee, Pierre Kasem, International, S.A.,
upon presentation of the original copies of the covering bills of lading.5 Upon arrival of the vessel
DECISION at the Port of Colon on 23 October 1987, petitioners purportedly notified the consignee of the
arrival of the shipments, and its custody was turned over tothe National Ports Authority in
accordance with the laws, customs regulations and practice of trade in Panama. By an unfortunate
PEREZ, J.:
turn ofevents, however, unauthorized persons managed to forge the covering bills of lading and on
the basis of the falsified documents, the ports authority released the goods.
This is a Petition for Review on Certiorari1 filed pursuant to Ruic 45 of the Revised Rules of Comi,
primarily assailing the 11 December 2002 Resolution rendered by the Special Former Sixteenth
On 16 July 1988, respondent filed a formal claim with Nedlloyd for the recovery of the amount of
Division of the Court of Appeals in CA-G.R. CV No. 48277,2 the decretal portion of which states:
US$53,640.00 representing the invoice value of the shipment but to no avail.6 Claiming that
petitioners are liable for the misdelivery of the goods, respondent initiated Civil Case No. 88-45595
WHEREFORE, the appeal is GRANTED and the April 29. 1994 Decision of the Regional Trial
before the Regional Trial Court (RTC) of Manila, Branch 52, seeking for the recovery of the
Court of Manila, Branch 52 thereof' in Civil Case No. 88-45595, SET ASIDE. Nedlloyd Lijncn B.V.
amount of US$53,640.00, including the legal interest from the date of the first demand. 7
Rotterdam and The East Asiatic Co., Ltd arc ordered to pay Glow l ,aks Enterprises, I ,td. the
following:
In disclaiming liability for the misdelivery of the shipments, petitioners asserted in their
Answer8 that they were never remiss in their obligation as a common carrier and the goods were
1. The invoice value of the goodslost worth $53,640.00, or its equivalent in Philippine
discharged in good order and condition into the custody of the National Ports Authority of Panama
currency;
in accordance with the Panamanian law. They averred that they cannot be faulted for the release
of the goods to unauthorized persons, their extraordinary responsibility as a common carrier
2. Attorney’s fees of ₱50,000.00; and having ceased at the time the possession of the goods were turned over to the possession of the
port authorities.
3. Costs.3
After the Pre-Trial Conference, trial on the merits ensued. Both parties offered testimonial and
The Facts documentary evidence to support their respective causes. On 29 April 2004, the RTC rendered a
Decision9 ordering the dismissal of the complaint but granted petitioners’ counterclaims. In effect,
Petitioner Nedlloyd Lijnen B.V. Rotterdam (Nedlloyd) is a foreign corporation engaged in the respondent was directed to pay petitioners the amount of ₱120,000.00 as indemnification for the
business of carrying goods by sea, whose vessels regularly call at the port of Manila. It is doing litigation expenses incurred by the latter. In releasing the common carrier from liability for the
business in the Philippines thru its local ship agent, co-petitioner East Asiatic Co., Ltd. (East misdelivery of the goods, the RTC ruled that Panama law was duly proven during the trial and
Asiatic). pursuant to the said statute, carriers of goods destined to any Panama port of entry have to
discharge their loads into the custody of Panama Ports Authority to make effective government
collection of port dues, customs duties and taxes. The subsequent withdrawal effected by
unauthorized persons on the strength of falsified bills of lading does not constitute misdelivery
Transpo Cases 2
arising from the fault of the common carrier. The decretal part of the RTC Decision reads:
WHEREFORE, judgment is renderedfor [petitioners] and against [Respondent], ordering the
dismissal of the complaint and ordering the latter to pay [petitioners] the amount of ONE
HUNDRED TWENTY THOUSAND PESOS (₱120,000.00) on their counterclaims.
Cost against [Respondent].10
On appeal, the Court of Appeals reversed the findings of the RTC and held that foreign laws were
not proven in the manner provided by Section 24, Rule 132 of the Revised Rules of Court, and
therefore, it cannot be given full faith and credit.11 For failure to prove the foreign law and custom,
it is presumed that foreign laws are the sameas our local or domestic or internal law under the
doctrine of processual presumption. Under the New Civil Code, the discharge of the goods intothe
custody of the ports authority therefore does not relieve the commoncarrier from liability because
the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of
the cargoes tothe consignee or to the person who has the right to receive them. Absent any proof
that the notify party or the consignee was informed of the arrival of the goods, the appellate court
held that the extraordinary responsibility of common carriers remains. Accordingly, the Court of
Appeals directed petitioners to pay respondent the value of the misdelivered goods in the amount
of US$53,640.00.
The Issues
Dissatisfied with the foregoing disquisition, petitioners impugned the adverse Court of Appeals
Decision before the Court on the following grounds:
I.
THERE IS ABSOLUTELY NO NEED TO PROVE PANAMANIAN LAWS BECAUSE
THEYHAD BEEN JUDICIALLY ADMITTED. AN ADMISSION BY A PARTY IN THE
COURSE OF THE PROCEEDINGS DOES NOT REQUIRE PROOF.
II.
BY PRESENTING AS EVIDENCE THE [GACETA] OFFICIAL OF REPUBLICA DE
PANAMA NO. 17.596 WHERE THE APPLICABLE PANAMANIAN LAWS WERE
OFFICIALLY PUBLISHED, AND THE TESTIMONY OF EXPERT WITNESSES,
PETITIONERS WERE ABLE TO PROVE THE LAWS OF PANAMA.
III.
IF WE HAVE TO CONCEDE TO THE COURT OF APPEALS’ FINDING THAT THERE
WAS FAILURE OF PROOF, THE LEGAL QUESTION PRESENTED TO THE
HONORABLE COURT SHOULD BE RESOLVED FAVORABLY BECAUSE THE
CARRIER DISCHARGED ITS DUTY WHETHER UNDER THE PANAMANIAN LAW OR
UNDER PHILIPPINE LAW.12
The Court’s Ruling
We find the petition bereft of merit.
It is well settled that foreign laws do not prove themselves in our jurisdiction and our courts are not
authorized to take judicial notice of them. Like any other fact, they must be alleged and
proved.13 To prove a foreign law, the party invoking it must present a copy thereof and comply with
Sections 24 and 25 of Rule 132 of the Revised Rules of Court14 which read: SEC. 24. Proof of
official record. — The record of public documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official publication thereof or by a copy
attested by the officer having the legal custody of the record, or by his deputy, and accompanied,
if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the
office in which the record is kept is in a foreigncountry, the certificate may be made by a secretary
of the embassy or legation, consul general, consul, vice- consul, or consular agent or by any
officer in the foreign service of the Philippines stationed in the foreign country in which the record
is kept, and authenticated by the seal of his office.
SEC. 25. What attestation of copy must state. — Whenever a copy of a document or record is
attested for the purpose of the evidence, the attestation must state,in substance, that the copy is a
correct copy of the original, or a specific part thereof, as the case may be. The attestation must be
under the official seal of the attesting officer, if there be any, or if he be the clerk of a court having
a seal, under the seal of such court.
For a copy of a foreign public document to be admissible, the following requisites are mandatory:
(1) itmust be attested by the officer having legal custody of the records or by his deputy; and (2) it
must be accompanied by a certificate by a secretary of the embassy or legation, consul general,
consul, vice-consular or consular agent or foreign service officer, and with the seal of his
office.15 Such official publication or copy must be accompanied, if the record is not kept in the
Philippines, with a certificate that the attesting officer has the legal custody thereof. 16 The
certificate may be issued by any of the authorized Philippine embassy or consular officials
stationed in the foreign country in which the record is kept, and authenticated by the seal of his
office.17 The attestation must state, in substance, that the copy is a correct copy of the original, or
a specific part thereof, as the case may be, and mustbe under the official seal of the attesting
officer.18
Transpo Cases 2
Contrary to the contention of the petitioners, the Panamanian laws, particularly Law 42 and its
Implementing Order No. 7, were not duly proven in accordance with Rules of Evidence and as
such, it cannot govern the rights and obligations of the parties in the case at bar. While a
photocopy of the Gaceta Official of the Republica de Panama No. 17.596, the Spanish text of Law
42 which is theforeign statute relied upon by the court a quoto relieve the common carrier from
liability, was presented as evidence during the trial of the case below, the same however was not
accompanied by the required attestation and certification.
It is explicitly required by Section 24, Rule 132 of the Revised Rules of Court that a copy of the
statute must be accompanied by a certificate of the officer who has legal custody of the records
and a certificate made by the secretary of the embassy or legation, consul general, consul, vice-
consular or by any officer in the foreign service of the Philippines stationed in the foreign country,
and authenticated by the seal of his office. The latter requirement is not merely a technicality but is
intended to justify the giving of full faith and credit to the genuineness of the document in a foreign
country.19 Certainly, the deposition of Mr. Enrique Cajigas, a maritime law practitioner in the
Republic of Panama, before the Philippine Consulate in Panama, is not the certificate
contemplated by law. At best, the deposition can be considered as an opinion of an expert witness
who possess the required special knowledge on the Panamanian laws but could not be
recognized as proof of a foreign law, the deponent not being the custodian of the statute who can
guarantee the genuineness of the document from a foreign country. To admit the deposition as
proof of a foreign law is, likewise, a disavowal of the rationaleof Section 24, Rule 132 of the
Revised Rules of Court, which isto ensure authenticity of a foreign law and its existence so as to
justify its import and legal consequence on the event or transaction in issue. The above rule,
however, admits exceptions, and the Court in certain cases recognized that Section 25, Rule132
of the Revised Rules of Court does not exclude the presentation of other competent evidence to
prove the existence of foreign law. In Willamete Iron and Steel Works v. Muzzal20 for instance, we
allowed the foreign law tobe established on the basis of the testimony in open court during the trial
in the Philippines of an attorney-atlaw in San Francisco, California, who quoted the particular
foreign law sought to be established.21 The ruling is peculiar to the facts. Petitioners cannot invoke
the Willamete ruling to secure affirmative relief since their so called expert witness never appeared
during the trial below and his deposition, that was supposed to establish the existence of the
foreign law, was obtained ex-parte.
It is worth reiterating at this point that under the rules of private international law, a foreign law
must be properly pleaded and proved as a fact. In the absence of pleading and proof, the laws of
the foreign country or state will be presumed to be the same as our local or domestic law. This is
known as processual presumption.22 While the foreign law was properly pleaded in the case at
bar, it was,however, proven not in the manner provided by Section 24, Rule 132 of the Revised
Rules of Court. The decision of the RTC, which proceeds from a disregard of specific rules cannot
be recognized.
Having settled the issue on the applicable Rule, we now resolve the issue of whether or not
petitioners are liable for the misdelivery of goods under Philippine laws.
Under the New Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligencein the vigilance over goods, according
to the circumstances of each case.23 Common carriers are responsible for loss, destruction or
deterioration of the goods unless the same is due to flood, storm, earthquake or other natural
disaster or calamity.24 Extraordinary diligence is that extreme care and caution which persons of
unusual prudence and circumspection use for securing or preserving their own property or
rights.25 This expecting standardimposed on common carriers in contract of carrier of goods is
intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once
the goods have been lodged for the shipment.26 Hence, in case of loss of goods in transit, the
common carrier is presumed under the law to have been in fault or negligent.27
While petitioners concede that, as a common carrier, they are bound to observe extraordinary
diligence in the care and custody of the goods in their possession, they insist that they cannot be
held liable for the loss of the shipments, their extraordinary responsibility having ceased at the
time the goods were discharged into the custody of the customs arrastreoperator, who in turn took
complete responsibility over the care, storage and delivery of the cargoes.28
In contrast, respondent, submits that the fact that the shipments were not delivered to the
consignee as statedin the bill of lading or to the party designated or named by the consignee,
constitutes misdelivery thereof, and under the law it is presumed that the common carrier is at fault
or negligent if the goods they transported, as in this case, fell into the hands of persons who have
no right to receive them.
We sustain the position of the respondent.
Article 1736 and Article 1738 are the provisions in the New Civil Code which define the period
when the common carrier is required to exercise diligence lasts, viz:
Article 1736. The extraordinary responsibility of the common carrier lasts from the time the
goodsare 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 a right to receive them, without prejudice to the provisions of
article 1738.
Article 1738. The extraordinary liability of the common carrier continues to be operative even
during the time the goods are stored in a warehouse of the carrier at the place of destination, until
the consignee has been advised of the arrival of the goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose of them.
Transpo Cases 2
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the
common carrier begins from the time the goods are delivered to the carrier. 29 This responsibility
remains in full force and effect even when they are temporarily unloaded or stored in transit,
unless the shipper or owner exercises the right of stop page in transitu, and terminates only after
the lapse of a reasonable time for the acceptance, of the goods by the consignee or such other
person entitled to receive them.30
It was further provided in the samestatute that the carrier may be relieved from the responsibility
for loss or damage to the goods upon actual or constructive delivery of the same by the carrier to
the consignee or to the person who has the right to receive them.31 In sales, actual delivery has
been defined as the ceding of the corporeal possession by the seller, and the actual apprehension
of the corporeal possession by the buyer or by some person authorized by him to receive the
goods as his representative for the purpose of custody or disposal. 32 By the same token, there is
actual delivery in contracts for the transport of goods when possession has been turned over to
the consignee or to his duly authorized agent and a reasonable time is given him to remove the
goods.33
In this case, there is no dispute that the custody of the goods was never turned over to the
consignee or his agents but was lost into the hands of unauthorized persons who secured
possession thereof on the strength of falsified documents. The loss or the misdelivery of the goods
in the instant case gave rise to the presumption that the common carrier is at fault or negligent.
A common carrier is presumed to have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported.34 When the goods shipped are either lost or
arrived in damaged condition, a presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence to hold it liable.35 To overcome
the presumption of negligence, the common carrier must establish by adequateproof that it
exercised extraordinary diligence over the goods.36 It must do more than merely show that some
other party could be responsible for the damage.37
In the present case, petitioners failed to prove that they did exercise the degree of diligence
required by law over the goods they transported. Indeed, aside from their persistent disavowal of
liability by conveniently posing an excuse that their extraordinary responsibility isterminated upon
release of the goods to the Panamanian Ports Authority, petitioners failed to adduce sufficient
evidence they exercised extraordinary care to prevent unauthorized withdrawal of the shipments.
Nothing in the New Civil Code, however, suggests, even remotely, that the common carriers’
responsibility over the goods ceased upon delivery thereof to the custom authorities. To the mind
of this Court, the contract of carriage remains in full force and effect even after the delivery of the
goods to the port authorities; the only delivery that releases it from their obligation to observe
extraordinary care is the delivery to the consignee or his agents. Even more telling of petitioners’
continuing liability for the goods transported to the fact that the original bills of lading up to this
time, remains in the possession of the notify party or consignee. Explicit on this point is the
provision of Article 353 of the Code of Commerce which provides:
Article 353. The legal evidence of the contract between the shipper and the carrier shall be the
bills of lading, by the contents of which the disputes which may arise regarding their execution and
performance shall be decided, no exceptions being admissible other than those of falsity and
material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued shall be
returned to him, and by virtue of the exchange of this title with the thing transported, the respective
obligations and actions shall be considered cancelled, unless in the same act the claim which the
parties may wish to reserve be reduced to writing, with the exception of that provided for in Article
366.
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the
carrier, because of its loss or of any other cause, he must give the latter a receiptfor the goods
delivered, this receipt producing the same effects as the return of the bill of lading.
While surrender of the original bill of lading is not a condition precedent for the common carrier to
bedischarged from its contractual obligation, there must be, at the very least, an
acknowledgement of the delivery by signing the delivery receipt, if surrender of the original of the
bill of lading is not possible.38 There was neither surrender of the original copies of the bills of
lading nor was there acknowledgment of the delivery in the present case. This leads to the
conclusion that the contract of carriage still subsists and petitioners could be held liable for the
breach thereof.
Petitioners could have offered evidence before the trial court to show that they exercised the
highest degree of care and caution even after the goods was turned over to the custom
authorities, by promptly notifying the consignee of its arrival at the P01i of Cristobal in order to
afford them ample opportunity to remove the cargoes from the port of discharge. We have scoured
the records and found that neither the consignee nor the notify paiiy was informed by the
petitioners of the arrival of the goods, a crucial fact indicative of petitioners' failure to observe
extraordinary diligence in handling the goods entrusted to their custody for transport. They could
have presented proof to show that they exercised extraordinary care but they chose in vain, full
reliance to their cause on applicability of Panamanian law to local jurisdiction. It is for this reason
that we find petitioners liable for the misdelivery of the goods. It is evident from the review of the
records and by the evidence adduced by the respondent that petitioners failed to rebut the prima
facie presumption of negligence. We find no compelling reason to depa1i from the ruling of the
Court of Appeals that under the contract of carriage, petitioners are liable for the value of the
misdelivcred goods.
Transpo Cases 2
WHEREFORE, premises considered, the petition is hereby DENIED. The assailed Resolution of
the Court of Appeals is hereby AFFIRMED.

SO ORDERED.
Transpo Cases 2
FIRST DIVISION
[ G.R. No. 190271, September 14, 2016 ]
TRANSIMEX CO., PETITIONER, VS. MAFRE ASIAN INSURANCE CORP., RESPONDENT.
DECISION
SERENO, C.J.:
This case involves a money claim filed by an insurance company against the ship agent of a
common carrier. The dispute stemmed from an alleged shortage in a shipment of fertilizer
delivered by the carrier to a consignee. Before this Court, the ship agent insists that the shortage
was caused by bad weather, which must be considered either a storm under Article 1734 of the
Civil Code or a peril of the sea under the Carriage of Goods by Sea Act (COGSA).[1]
In the Decision[2] and the Resolution[3] assailed in this Petition for Review on Certiorari,[4] the Court
of Appeals (CA) affirmed the Decision[5] of the Regional Trial Court (RTC). The RTC ordered
petitioner Transimex Co. (Transimex) to pay respondent Mafre Asian Insurance Corp.[6] the
amount of P1,617,527.37 in addition to attorney's fees and costs. Petitioner is the local ship agent
of the vessel, while respondent is the subrogee of Fertiphil Corporation (Fertiphil),[7] the consignee
of a shipment of Prilled Urea Fertilizer transported by M/V Meryem Ana.
FACTUAL ANTECEDENTS
On 21 May 1996, M/V Meryem Ana received a shipment consisting of 21,857 metric tons of Prilled
Urea Fertilizer from Helm Duengemittel GMBH at Odessa, Ukraine.[8] The shipment was covered
by two separate bills of lading and consigned to Fertiphil for delivery to two ports - one in Poro
Point, San Fernando, La Union; and the other in Tabaco, Albay.[9] Fertiphil insured the cargo
against all risks under Marine Risk Note Nos. MN-MAR-HO-0001341 and MN-MAR-HO-0001347
issued by respondent.[10]
On 20 June 1996, M/V Meryem Ana arrived at Poro Point, La Union, and discharged 14,339.507
metric tons of fertilizer under the first bill of lading.[11] The ship sailed on to Tabaco, Albay, to
unload the remainder of the cargo. The fertilizer unloaded at Albay appeared to have a gross
weight of 7,700 metric tons.[12] The present controversy involves only this second delivery.
As soon as the vessel docked at the Tabaco port, the fertilizer was bagged and stored inside a
warehouse by employees of the consignee.[13] When the cargo was subsequently weighed, it was
discovered that only 7,350.35 metric tons of fertilizer had been delivered.[14] Because of the
alleged shortage of 349.65 metric tons, Fertiphil filed a claim with respondent for
P1,617,527.37,[15] which was found compensable.[16]
After paying the claim of Fertiphil, respondent demanded reimbursement from petitioner on the
basis of the right of subrogation. The claim was denied, prompting respondent to file a Complaint
with the RTC for recovery of sum of money.[17] In support of its claim, respondent presented a
Report of Survey[18] and a Certification[19] from David Cargo Survey Services to prove the shortage.
In addition, respondent submitted an Adjustment Report[20] prepared by Adjustment Standards
Corporation (ASC) to establish the outturn quantity and condition of the fertilizer discharged from
the vessel at the Tabaco port.[21] In the report, the adjuster also stated that the shortage was
attributable to the melting of the fertilizer while inside the hatches, when the vessel took on water
because of the bad weather experienced at sea.[22] Two witnesses were then presented by
respondent to buttress its documentary evidence.[23]
Petitioner, on the other hand, denied that there was loss or damage to the cargo.[24] It submitted
survey certificates and presented the testimony of a marine surveyor to prove that there was, in
fact, an excess of 3.340 metric tons of fertilizer delivered to the consignee.[25] Petitioner also
alleged that defendants had exercised extraordinary diligence in the transport and handling of the
cargo.[26]
THE RTC RULING
The RTC ruled in favor of respondent and ordered petitioner to pay the claim of P1,617,527.37. In
its Decision,[27] the trial court found that there was indeed a shortage in the cargo delivered, for
which the common carrier must be held responsible under Article 1734 of the Civil Code. The RTC
also refused to give credence to petitioner's claim of overage and noted that the presumption of
fault and/or negligence on the part of the carrier remained unrebutted. The trial court explained:
The defendants' defense is that there was no loss/damage to the cargo because instead of a
shortage there was an overage of 3.340, invoking the findings of Raul Pelagio, a marine surveyor
connected with Survey Specialists, Inc. whose services were engaged by the defendants.
However, the Court notes that what was loaded in the vessel M/V Meryem Ana at Odessa,
Ukraine on May 21, 1996 was 21,857 metric tons of prilled urea fertilizer (Draft Survey Report,
Exhibit F). How the quantity loaded had increased to 21,860.34 has not been explained by the
defendants. Thus, the Court finds incredible the testimony of Raul Pelagio that he found an
overage of 3.340 metric tons. The Court is inclined to give credence to the testimonies of witness
Jaime David, the cargo surveyor engaged by consignee Fertiphil Corporation, and witness Fabian
Bon, a cargo surveyor of Adjustment Standards Corporation, whose services were engaged by
plaintiff Mafre Asian Insurance Corporation, there being no reason for the Court to disregard their
findings which jibe with one another.
Thus, it appears crystal clear that on the vessel M/V Meryem Ana was loaded in bulk on May 21,
1996 at Odessa, Ukraine a cargo consisting of 21,857 metric tons of prilled urea fertilizer bound
for delivery at Poro Point, San Fernando, La Union and at Tabaco, Albay; that the cargo unloaded
at said ports of destination had a shortage of 349.65 metric tons.
xxxx
As to the defense that defendants had supposedly exercised extraordinary care and diligence in
Transpo Cases 2
the transport and handling of the cargo, the Court finds that the evidence presented by the
defendants is absolutely and completely bereft of anything to support their claim of having
exercised extraordinary care and diligence.
Hence, the presumption of fault and/or negligence as provided in Art. 1735 of the Civil Code on
the part of the defendants stands unrebutted as against the latter.[28]
THE CA RULING
The CA affirmed the ruling of the RTC and denied petitioner's appeal.[29] After evaluating the
evidence presented during trial, the appellate court found no reason to disturb the trial court's
conclusion that there was indeed a shortage in the shipment.[30]
The CA also rejected the assertion that petitioner was not a common carrier.[31] Because the latter
offered services to the public for the transport of goods in exchange for compensation, it was
considered a common carrier in accordance with Article 1732 of the Civil Code. The CA further
noted that petitioner had already admitted this fact in the Answer[32] and even raised the defenses
usually invoked by common carriers during trial and on appeal, i.e., the exercise of extraordinary
care and diligence, and fortuitous event.[33] These defenses were, however, found unmeritorious:
Defendants-appellants claim that the loss was due to a fortuitous event as the Survey Report of
Jaime David stated that during its voyage, the vessel encountered bad weather. But to excuse a
common carrier fully of any liability, Article 1739 of the Civil Code requires that the fortuitous event
must have been the proximate and only cause of the loss. Moreover, it should have exercised due
diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous
event.
xxxx
In the present case, defendants-appellants did not present proof that the "bad weather" they
encountered was a "storm" as contemplated by Article 1734(1). String winds are the ordinary
vicissitudes of a sea voyage. Even if the weather encountered by the ship was to be deemed a
natural disaster under Article 1739 of the Civil Code, defendants-appellants failed to show that
such natural disaster or calamity was the proximate and only cause of the loss. The shortage must
not have been caused or worsened by human participation. The defense of fortuitous event or
natural disaster cannot be successfully made when the injury could have been avoided by human
precaution.[34]
Petitioner moved for reconsideration of the CA Decision, but the motion was denied. [35] Not only
did the Motion for Reconsideration lack meit according to the appellate court; it was also filed out
of time.[36]
PROCEEDINGS BEFORE THIS COURT
On 3 December 2009, Transimex filed a Petition for Review on Certiorari[37] before this Court
praying for the reversal of the CA Decision and Resolution.[38] Petitioner asserts that the lower
courts erred in holding it liable for the alleged shortage in the shipment of fertilizer. While it no
longer questions the existence of the shortage, it claims that the loss or damage was caused by
bad weather.[39] It then insists that the dispute is governed by Section 4 of COGSA, which exempts
the carrier from liability for any loss or damage arising from "perils, dangers and accidents of the
sea.[40]
In its Comment,[41] respondent maintains that petitioner was correctly held liable for the shortage of
the cargo in accordance with the Civil Code provisions on common carriers.[42] It insists that the
factual findings of the lower courts must be respected[43] particularly in this case, since petitioner
failed to timely appeal the Decision of the CA.[44]
Petitioner, in its Reply,[45] takes a position different from its initial stance as to the law applicable to
the dispute. It concedes that the Civil Code primarily governs its liability as a carrier, with COGSA
as a suppletory source.[46] Under both laws, petitioner contends that it is exempt from liability,
because damage to the cargo was caused by the bad weather encountered by the vessel while at
sea. This kind of weather supposedly qualifies as a violent storm under the Civil Code; or as a
peril, danger or accident of the sea under COGSA.[47]
ISSUES
The following issues are presented for resolution by this Court:
1. Whether the CA Decision has become final and executory
2. Whether the transaction is governed by the provisions of the Civil Code on common carriers or
by the provisions of COGSA
3.Whether petitioner is liable for the loss or damage sustained by the cargo because of bad
weather
OUR RULING
We DENY the Petition.
This Court finds that the CA Decision has become final because of the failure of petitioner to timely
file a motion for reconsideration. Furthermore, contrary to the argument raised by the latter, there
is insufficient evidence to establish that the loss or damage to the cargo was caused by a storm or
a peril of the sea.
The CA Decision has become final and executory.
In the assailed Resolution, in which the CA ruled that petitioner's Motion for Reconsideration was
filed late, it explained:
Defendants-appellants' motion for reconsideration of the Court's Decision dated August 7, 2009
was filed out of time, as based on the reply letter dated October 13, 2009 of the Chief,
Transpo Cases 2
Administrative Unit, Office of the Postmaster, Makati City, copy of said Decision was received by
defendants-appellants' counsel on September 4, 2009, not September 14, 2009 as alleged in the
motion for reconsideration. Consequently, the subject Decision dated August 27, 2009 had
become final and executory considering that the motion for reconsideration was filed only on
September 29, 2009, beyond the fifteen (15)-day reglementary period which lasted until
September 19, 2009.[48]
The Court agrees. The Certification issued by the Office of the Postmaster of Makati, which states
that the Decision was received by respondent's counsel on 4 September 2009, is entitled to full
faith and credence. In the absence of contradictory evidence, the presumption is that the
postmaster has regularly performed his duty.[49] In this case, there is no reason to doubt his
statement as to the date respondent received the CA Decision.
Significantly, Transimex failed to address this matter in its Petition. While it continued to allege that
it received the CA Decision on 14 September 2009, it did not refute the finding of the appellate
court that the former's Motion for Reconsideration had been filed late. It was only after respondent
again asserted the finality of the CA Decision in its Comment did petitioner attempt to explain the
discrepancy:
x x x Apparently, the said Decision dated 27 August 2009 was delivered by the postman to the
guard on duty at the ground floor of the building where undersigned counsel's office is located. It
was the guard on duty who received the said decision on 4 September 2009 but it was only on 14
September 2009 that undersigned counsel actually received the said decision. Hence, the date of
receipt of the decision should be reckoned from the date of receipt by the counsel of the decision
and not from the date of receipt of the guard who is not an employee of the law office of the
undersigned counsel.
This Court notes that the foregoing account remains unsupported by evidence. The guard on duty
or any employee of the law firm could have easily substantiated the explanation offered by
counsel for petitioner, but no statement from any of them was ever submitted. Since petitioner was
challenging the official statement of the Office of the Postmaster of Makati on the matter, the
former had the burden of proving its assertions and presenting countervailing evidence.
Unfounded allegations would not suffice.
In any event, this Court has decided to review the merits of this case in the interest of justice. After
a judicious evaluation of the arguments interposed by the parties, we find no reason to reverse the
CA Decision and Resolution.
The provisions of the Civil Code on common carriers are applicable.
As previously discussed, petitioner initially argued that the CA erred in applying the provisions of
the Civil Code to this case. It insisted that the contract of carriage between the parties was
governed by COGSA,[50] the law applicable to "all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade."[51] This assertion is bereft of merit.
This Court upholds the ruling of the CA with respect to the applicable law. As expressly provided in
Article 1753 of the Civil Code, "[t]he law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, destruction or deterioration." Since
the cargo in this case was transported from Odessa, Ukraine, to Tabaco, Albay, the liability of
petitioner for the alleged shortage must be determined in accordance with the provisions of the
Civil Code on common carriers. In Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., the
Court declared:
According to the New Civil Code, the law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, destruction or deterioration. The Code
takes precedence as the primary law over the rights and obligations of common carriers with the
Code of Commerce and COGSA applying suppletorily.[52]
Besides, petitioner itself later conceded in its Reply that the Civil Code provisions on common
carriers are primarily applicable to the present dispute, while COGSA only applies in a suppletory
manner.[53]
Petitioner is liable for the shortage incurred by the shipment.
Having settled the foregoing preliminary issues, the only argument left for this Court to resolve is
petitioner's assertion that it is exempt from liability for the loss or damage to the cargo. As grounds
for this exemption, petitioner cites both the Civil Code and COGSA, particularly the provisions
absolving a carrier from loss or damage sustained as the result of a "storm" or a "peril of the sea."
In its Petition, Transimex summarizes the testimony of one witness for respondent supposedly
proving that the shortage in the shipment was caused by inclement weather encountered by the
vessel at sea. Petitioner claims that this testimony proves that damage to the cargo was the result
of the melting of the fertilizer after seawater entered Hatch No. 1 of the vessel as a result of the
bad weather conditions at sea:
The evidence for the respondent clearly proves that the loss/damage/shortage [suffered by] the
cargo was caused by the bad weather encountered by the vessel during the voyage from Odessa,
Ukraine to Poro Point, San Fernando, La Union, wherein due to bad weather[,] sea water found its
way inside Hatch No. 1 resulting in the wetting, melting and discoloration of the prilled urea
fertilizer. The fact that sea water found its way inside Hatch No. 1 was clearly testified to by the
witness for the respondent. Jaime R. Davis testified that:
"He was present during the discharging operation, that he saw the hatches opened whereupon
he noticed the presence of water thereat; accordingly, he informed the master of the vessel
of the presence of water at the hatches to which the master of the vessel replied that on the
way they encountered bad weather."[54] (Emphasis in the original)
Petitioner also cites a portion of the Adjustment Report submitted by respondent during trial as
proof that damage to the cargo was caused by a storm:
How the sea water found its way inside Hatch No. 1 was clearly explained by another witness for
the respondent by the name of Fabian Bon who stated in his Adjustment as follows:
Our inquiries disclosed that the master of the vessel interviewed by the consignee's surveyor
(David Cargo Survey Services) that during sailing from Odessa (Ukraine) bound to Poro Point,
San Fernando, La Union, Philippines, the vessel encountered bad weather on June 3, 1996
Transpo Cases 2
and was rolling from starboard to portside top of the 1, 2, 3, 4, 5, 6 & 7 hatch covers and
sea water were washing over all main deck.
On the following day, June 4, 1996, wind reading up to 40 knots and very high swells were
coming from south west direction. The vessel was rolling and pitching heavily. Heavy sea
water were washing all main deck and were jumping from main deck to top of the seven (7)
hatch covers. As a result, the master filed a Marine Note of Protest on June 19, 1996 at the
Port of Poro Point, San Fernando, La Union, Philippines.[55] (Emphases in the original)
The question before this Court therefore comes down to whether there is sufficient proof that the
loss or damage incurred by the cargo was caused by a "storm" or a "peril of the sea."
We rule in the negative. As will be discussed, petitioner failed to prove the existence of a storm or
a peril of the sea within the context of Article 1734(1) of the Civil Code or Section 4(2)(c) of
COGSA. Furthermore, there was no sufficient proof that the damage to the shipment was solely
and proximately caused by bad weather.
The presence of a "storm" or a "peril of the sea" was not established.
It must be emphasized that not all instances of bad weather may be categorized as "storms" or
"perils of the sea" within the meaning of the provisions of the Civil Code and COGSA on common
carriers. To be considered absolutory causes under either statute, bad weather conditions must
reach a certain threshold of severity.
With respect to storms, this Court has explained the difference between a storm and ordinary
weather conditions in Central Shipping Co. Inc. v. Insurance Company of North America:[56]
Nonetheless, to our mind it would not be sufficient to categorize the weather condition at the time
as a "storm" within the absolutory causes enumerated in the law. Significantly, no typhoon was
observed within the Philippine area of responsibility during that period.
According to PAGASA, a storm has a wind force of 48 to 55 knots, equivalent to 55 to 63
miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that the
wind was blowing around force 7 to 8 on the Beaufort Scale. Consequently, the strong winds
accompanying the southwestern monsoon could not be classified as a "storm." Such
winds are the ordinary vicissitudes of a sea voyage.[57] (Emphases supplied; citations omitted)
The phrase "perils of the sea" carries the same connotation. Although the term has not been
definitively defined in Philippine jurisprudence, courts in the United States of America generally
limit the application of the phrase to weather that is "so unusual, unexpected and catastrophic as
to be beyond reasonable expectation."[58] Accordingly, strong winds and waves are not
automatically deemed perils of the sea, if these conditions are not unusual for that particular sea
area at that specific time, or if they could have been reasonably anticipated or foreseen.[59] While
cases decided by U.S. courts are not binding precedents in this jurisdiction, the Court considers
these pronouncements persuasive[60] in light of the fact that COGSA was originally an American
statute[61] that was merely adopted by the Philippine Legislature in 1936.[62]
In this case, the documentary and testimonial evidence cited by petitioner indicate that M/V
Meryem Ana faced winds of only up to 40 knots while at sea. This wind force clearly fell short of
the 48 to 55 knots required for "storms" under Article 1734(1) of the Civil Code based on the
threshold established by PAGASA.[63] Petitioner also failed to prove that the inclement weather
encountered by the vessel was unusual, unexpected, or catastrophic. In particular, the strong
winds and waves, which allegedly assaulted the ship, were not shown to be worse than what
should have been expected in that particular location during that time of the year. Consequently,
this Court cannot consider these weather conditions as "perils of the sea" that would absolve the
carrier from liability.
As a side note, we observe that there are no definite statutory standards for determining the
existence of a "storm" or "peril of the sea" that would exempt a common carrier from liability.
Hence, in marine insurance cases, courts are constrained to rely upon their own understanding of
these terms of art, or upon imprecise accounts of the speed of the winds encountered and the
strength of the waves experienced by a vessel. To obviate uncertainty, it may be time for
Congress to lay down specific rules to distinguish "storms" and other "perils of the sea" from the
ordinary action of the wind and waves. While uniform measures of severity may prove difficult to
establish, the legislature may consider providing more detailed standards to be used by the
judiciary in resolving maritime cases. These may include wind velocity, violence of the seas, the
height of the waves, or even the expected weather conditions in the area involved at the time of
the incident.
Petitioner failed to prove the other requisites for exemption from liability under Article 1734
of the Civil Code.
Even assuming that the inclement weather encountered by the vessel amounted to a "storm"
under Article 1734(1) of the Civil Code, there are two other reasons why this Court cannot absolve
petitioner from liability for loss or damage to the cargo under the Civil Code. First, there is no proof
that the bad weather encountered by M/V Meryem Ana was the proximate and only cause of
damage to the shipment. Second, petitioner failed to establish that it had exercised the diligence
required from common carriers to prevent loss or damage to the cargo.
We emphasize that common carriers are automatically presumed to have been at fault or to have
acted negligently if the goods they were transporting were lost, destroyed or damaged while in
transit.[64] This presumption can only be rebutted by proof that the carrier exercised extraordinary
diligence and caution to ensure the protection of the shipment in the event of foul weather.[65] As
this Court explained in Fortune Sea Carrier, Inc. v. BPI/MS Insurance Corp.:
While the records of this case clearly establish that M/V Sea Merchant was damaged as result of
extreme weather conditions, petitioner cannot be absolved from liability. As pointed out by this
Court in Lea Mer Industries, Inc. v. Malayan Insurance, Inc., a common carrier is not liable for loss
only when (1) the fortuitous event was the only and proximate cause of the loss and (2) it
exercised due diligence to prevent or minimize the loss. The second element is absent here. As a
Transpo Cases 2
common carrier, petitioner should have been more vigilant in monitoring weather disturbances
within the country and their (possible) effect on its routes and destination. More specifically, it
should have been more alert on the possible attenuating and dysfunctional effects of bad weather
on the parts of the ship. It should have foreseen the likely prejudicial effects of the strong waves
and winds on the ship brought about by inclement weather and should have taken the necessary
precautionary measures through extraordinary diligence to prevent the weakening or dysfunction
of the parts of the ship to avoid or prune down the loss to cargo.[66] (citations omitted)
In the instant case, there is absolutely no evidence that petitioner satisfied the two requisites.
Before the trial court, petitioner limited itself to the defense of denial. The latter refused to admit
that the shipment sustained any loss or damage and even alleged overage of the cargo
delivered.[67] As a result, the evidence it submitted was severely limited, i.e., the testimony of a
witness that supposedly confirmed the alleged excess in the quantity of the fertilizer delivered to
the consignee in Albay.[68] No other evidence was presented to demonstrate either the proximate
and exclusive cause of the loss or the extraordinary diligence of the carrier.

Under these circumstances, the Court cannot absolve petitioner from liability for the shortage
incurred by the shipment.

WHEREFORE, the Petition is DENIED. The Court of Appeals Decision and Resolution dated 27
August 2009 and 10 November 2009, respectively, are hereby AFFIRMED.

SO ORDERED.
Transpo Cases 2
EN BANC
[G.R. No. 13972. July 28, 1919. ]
G. MARTINI, LTD., Plaintiff-Appellee, v. MACONDRAY & CO. (INC.) , Defendant-Appellant.
Lawrence & Ross for Appellant.
Gabriel La O for Appellee.
SYLLABUS
1. SHIPPING; DECK CARGO; DAMAGE RESULTING FROM ACTION OF ELEMENTS. — Where
cargo is, with the owner’s consent, transported on the deck of a sea-going vessel upon a bill of
lading exempting the ship’s company from liability for damage, the risk of any damage resulting
from carriage on deck, such as the damage caused by rain or the splashing aboard of sea water,
must be borne by the owner.
DECISION
STREET, J. :
In September of the year 1916, the plaintiff G. Martini, Ltd., arranged with the defendant company,
as agents of the Eastern and Australian Steamship Company, for the shipment of two hundred
and nineteen cases or packages of chemical products from Manila, Philippine Islands, to Kobe,
Japan. The goods were embarked at Manila on the steamship Eastern, and were carried to Kobe
on the deck of that ship. Upon arrival at the port of destination it was found that the chemicals
comprised in the shipment had suffered damage from the effects of both fresh and salt water; and
the present action was instituted by the plaintiff to recover the amount of the damage thereby
occasioned. In the Court of First Instance judgment was rendered in favor of the plaintiffs for the
sum of P34,997.56, with interest from March 24, 1917, and costs of the proceeding. From this
judgment the defendant appealed.
That the damage was caused by water, either falling in the form of rain or splashing aboard by the
action of wind and waves, is unquestionable; and the contention of the plaintiff is that it was the
duty of the ship’s company to stow this cargo in the hold and not to place it in an exposed position
on the open deck. The defense is that by the contract of affreightment the cargo in question was to
be carried on deck at the shipper’s risk; and attention is directed to the fact that on the face of
each bill of lading is clearly stamped with a rubber stencil in conspicuous letters the words "on
deck at shipper’s risk." In this connection the defendant relies upon paragraph 19 of the several
bills of lading issued for transportation of this cargo, which reads as follows:jgc:chanrobles.com.ph
"19. Goods signed for on this bill of lading as carried on deck are entirely at shipper’s risk, whether
carried on deck or under hatches, and the steamer is not liable for any loss or damage from any
cause whatever."cralaw virtua1aw library
The plaintiff insists that the agreement was that the cargo in question should be carried in the
ordinary manner, that is, in the ship’s hold, and that the plaintiff never gave its consent for the
goods to be carried on deck. The material facts bearing on this controverted point appear to be
these: On September 15, 1916, the plaintiff applied to the defendant for necessary space on the
steamship Eastern, and received a shipping order, which constituted authority for the ship’s
officers to receive the cargo aboard. One part of this document contained a form which, when
signed by the mate, would constitute the "mate’s receipt," showing that the cargo had been taken
on.
Ordinarily the shipper is supposed to produce the mate’s receipt to the agents of the ship’s
company, who thereupon issue the bill of lading to the shipper. When, however, the shipper, as
not infrequently happens, desires to procure the bill of lading before he obtains the mate’s receipt,
it is customary for him to enter into a written obligation, binding himself, among other things, to
abide by the terms of the mate’s receipt. In the present instance the mate’s receipt did not come to
the plaintiff’s hand until Monday night, but as the plaintiff was desirous of obtaining the bills of
lading on the Saturday morning preceding in order that he might negotiate them at the bank, a
request was made for the delivery of the bills of lading on that day To effectuate this, the plaintiff
was required to enter into the written obligation, calling itself a "letter of guarantee," which was
introduced in evidence as Exhibit D-C. This document is of the date of September 16, 1916, and
of the following tenor:jgc:chanrobles.com.ph
"In consideration of your signing us clean B/L for the undermentioned cargo per above steamer to
be shipped on or under deck at ship’s option, for Kobe without production of the mate’s receipt, we
hereby guarantee to hold you free from any responsibility by your doing so, and for any expense
should the whole or part of the cargo be shut out, or otherwise, and to hand you said mate’s
receipt as soon as it reaches us and to abide by all clauses and notations on the same."cralaw
virtua1aw library
In conformity with the purpose of this document the bills of lading were issued, and the negotiable
copies were, upon the same day, negotiated at the bank by the plaintiff for 90 per cent of the
invoice value of the goods. As already stated these bills of lading contained on their face,
conspicuously stenciled, the words "on deck at shipper’s risks." The mate’s receipt, received by
the plaintiff two days later also bore the notation "on deck at shipper’s risk," written with pencil, and
evidently by the officer who took the cargo on board and signed the receipt.
The plaintiff insists that it had at no time agreed for the cargo to be carried on deck; and G. Martini,
manager of Martini & Company, says that the first intimation he had of this was when, at about 4
Transpo Cases 2
p.m. on that Saturday afternoon, he examined the nonnegotiable copies of the bills of lading,
which had been retained by the house, and discovered the words "on deck at shipper’s risk"
stamped thereon. Martini says that upon seeing this, he at once called the attention of S. Codina
thereto, the latter being an employee of the house whose duty it was to attend to all shipments of
merchandise and who in fact had entire control of all matters relating to the shipping of this cargo.
Codina pretends that up to the time when Martini directed his attention to the fact, he himself was
unaware that the cargo was being stowed on deck; and upon the discovery of this fact the two
gentlemen mentioned expressed mutual surprise and dissatisfaction. Martini says that he told
Codina to protest at once to Macondray & Company over the telephone, while Martini himself
proceeded to endite a letter, which appears in evidence as Exhibit D-T of the defendant and is in
its material part as follows:jgc:chanrobles.com.ph
"MANILA, September 16, 1916.
"MESSRS. MACONDRAY & Co.,
"Manila,
"DEAR SIRS: In re our shipment per steamship Eastern, we are very much surprised to see that
the remark ’on deck at shipper’s risk’ has been stamped on the bills of lading Nos. 8 to 23. . . . and
although not believing that the same have actually been shipped on deck we must hold you
responsible for any consequence, loss, or damage deriving from your action should they have
been shipped as stated.
"Yours faithfully,
"G. MARTINI, LTD.
"By S. CODINA."cralaw virtua1aw library
This letter was followed by another of the same date and of substantially the same tenor but
containing the following additional statement:jgc:chanrobles.com.ph
"It is the prevailing practice that, whenever a cargo is being carried on deck, shipowners or agents
give advice of it to shippers previous to shipment taking place, and obtain their consent to it. If we
had been advised of it, shipment would not have been effected by us. We regret very much this
occurrence, but you will understand that in view of your having acted in this case on your own
responsibility, we shall have to hold you amenable for any consequences that may be caused
from your action."cralaw virtua1aw library
The first of these letters was forthwith dispatched by messenger, and upon receiving it, Macondray
& Company called Codina by telephone at about 4.30 p.m. and, referring to the communication
just received, told him that Macondray & Company could not accept the cargo for transportation
otherwise than on deck and that if Martini & Company were dissatisfied, the cargo could be
discharged from the ship.
There is substantial conformity in the testimony of the two parties with respect to the time of the
conversation by telephone and the nature of the message which Macondray & Company intended
to convey, though the witnesses differ as to some details and in respect to what occurred
immediately thereafter. Basa, who was in charge of the shipping department of Macondray &
Company and who conducted the conversation on the part of the latter, says that he told Codina
that if Martini & Company was unwilling for the cargo to be carried on deck that they could
discharge it and further advised him that Macondray & Company’s empty boats were still at the
ship’s side ready to receive the cargo. In reply Codina stated that Martini, the manager, was then
out and that he would answer in a few minutes, after communication with Martini. Within the
course of half an hour Codina called Basa up and said that as the cargo was already stowed on
deck, Martini & Company were willing for it to be carried in this way, and that their protest was a
mere formality. Codina admits that he was informed by Basa that the cargo could not be carried
under the hatches, and that if Martini & Company were dissatisfied to have it carried on deck, they
could discharge it. He denies being told that it could be taken off in Macondray & Company’s
boats. Codina further states that when the conversation was broken off for the purpose of enabling
him to communicate with Martini, he consulted with the latter, and was directed to say that Martini
& Company did not consent for the cargo to be carried on deck and that it must be discharged.
Upon returning to the telephone, he found that the connection had been broken, and he says that
he was thereafter unable to get Macondray & Company by telephone during that afternoon,
although he attempted to do so more than once.
In the light of all the evidence the conclusion seems clear enough that, although Martini &
Company would have greatly preferred for the cargo to be carried under the hatches, they
nevertheless consented for it to go on deck. Codina, if attentive to the interests of his house, must
have known from the tenor of the guaranty to which his signature is affixed that the defendant had
reserved the right to carry it on deck, and when the bills of lading were delivered to the plaintiff
they plainly showed that the cargo would be so carried.
It must therefore be considered that the plaintiff was duly affected with notice as to the manner in
which the cargo was shipped. No complaint, however, was made until after the bills of lading had
been negotiated at the bank. When the manager of Martini & Company first had his attention
drawn to the fact that the cargo was being carried on deck, he called Codina to account, and the
latter found it to his interest to feign surprise and pretend that he had been deceived by
Macondray & Company. Even then there was time to stop the shipment, but Martini & Company
failed to give the necessary instructions, thereby manifesting acquiescence in the accomplished
fact.
In a later letter of October 25, 1916, addressed to Macondray & Company, Martini, referring to the
incident says: "If previous to the mailing of the documents, you had actually notified us by phone
or otherwise that you could not accept our cargo in any other way but on deck, we should have
Transpo Cases 2
promptly given you instructions to leave it on the lighters and at our disposal."cralaw virtua1aw
library
From this it is inferable that one reason why the plaintiff allowed the cargo to be carried away
without being discharged, was that the bills had been discounted and to stop the shipment would
have entailed the necessity of refunding the money which the bank had advanced, with the
inconveniences incident thereto. Another reason apparently was that Martini discerned, or thought
he discerned the possibility of shifting the risk so as to make it fall upon the ship’s company.
With reference to the practicability of discharging the cargo in the late afternoon or evening of
Saturday, September 16, before the ship departed, as it did at 8 p.m. some evidence was
introduced tending to show that in order to get the cargo off certain formalities were necessary
which could not be accomplished, as for instance, the return of the mate’s receipt (which had not
yet come to the plaintiff’s hands), the securing of a permit from the customs authorities, and the
securing of an order of discharge from the steamship company. In view of the fact that the plaintiff
did nothing whatever looking towards the discharge of the cargo, not even so much as to notify
Macondray & Company that the cargo must come off, the proof relative to the practicability of
discharge is inconclusive. If the plaintiff had promptly informed Macondray & Company of their
resolve to have the cargo discharged, and the latter had nevertheless permitted the ship to sail
without discharging it, there would have been some ground for plaintiff’s contention that its
consent had not been given for the goods to be carried on deck. Needless to say we attach no
weight to the statement of Codina that he was unable to get Macondray & Company by telephone
in order to communicate directions for the discharge of the cargo.
The evidence submitted in behalf of the defendant shows that there was no space in the hold to
take the cargo; and it was therefore unnecessary to consider whether the chemicals to be shipped
were of an explosive or inflammable character, such as to require stowage on deck. By reason of
the fact that the cargo had to be carried on deck at all events, if carried at all, the guaranty Exhibit
D-C was so drawn as to permit stowage either on or under deck at the ship’s option; and the
attention of Codina must have been drawn to this provision because Macondray & Company
refused to issue the bills of lading upon a guaranty signed by Codina upon another form (Exhibit
R), which contained no such provision. The messenger between the two establishments who was
sent for the bills of lading accordingly had to make a second trip and go back for a letter of
guaranty signed upon the desired form. The pretense of Codina that he was deceived into signing
a document different from that which he supposed himself to be signing is wholly unsustained.
The result of the discussion is that Martini & Company must be held to have assented to the
shipment of the cargo on deck and that they are bound by the bills of lading in the form in which
they were issued. The trial court in our opinion erred in holding otherwise, and in particular by
ignoring, or failing to give sufficient weight to the contract of guaranty.
Having determined that the plaintiff consented to the shipment of the cargo on deck, we proceed
to consider whether the defendant can be held liable for the damage which befell the cargo in
question. It of course goes without saying that if a clean bill of lading had been issued and the
plaintiff had not consented for the cargo to go on deck, the ship’s company would have been liable
for all damage which resulted from the carriage on deck. In the case of The Paragon (1 Ware, 326;
18 Fed. Cas. No. 10708), decided in 1836 in one of the district courts of the United States, it
appeared that cargo was shipped from Boston, Massachusetts, to Portland, Maine, upon what is
called a clean bill of lading, that is, one in the common form without any memorandum in the
margin or on its face showing that the goods are to be carried on deck. It was proved that the
shipper had not given his consent for carriage on deck. Nevertheless, the master stowed the
goods on deck; and a storm having arisen, it became necessary to jettison them. None of the
cargo in the hold was lost. It was thus evident that although the cargo in question was lost by peril
of the sea, it would not have been lost except for the fact that it was being carried on deck. It was
held that the ship was liable. In the course of the opinion the following language was
used:jgc:chanrobles.com.ph
"It is contended that the goods, in this case, having been lost by the dangers of the seas, both the
master and the vessel are exempted from responsibility within the common exemption in bills of
lading; and the goods having been thrown overboard from necessity, and for the safety of the
vessel and cargo, as well as the lives of the crew, that it presents a case for a general average or
contribution, upon the common principle that when a sacrifice is made for the benefit of all, that
the loss shall be shared by all. . . . In every contract of affreightment, losses by the dangers of the
seas are excepted from the risks which the master takes upon himself, whether the exception is
expressed in the contract or not. The exception is made by the law, and falls within the general
principle that no one is responsible for fortuitous events and accidents of major force. Casus
fortuitous nemo praestat. But then the general law is subject to an exception, that when the
inevitable accident is preceded by a fault of the debtor or person bound without which it would not
have happened, then he becomes responsible for it. (Pothier, des Obligations, No. 542; Pret. a
Usage, No. 57; Story, Bailm., c. 4, No. 241; In Majorious casibus si culpa ejus interveniat tenetur;
Dig. 44, 7, 1, s. 4.)
"The master is responsible for the safe and proper stowage of the cargo, and there is no doubt
that by the general maritime law he is bound to secure the cargo safely under deck. . . . If the
master carries goods on deck without the consent of the shipper . . . he does it at his own risk. If
they are damaged or lost in consequence of their being thus exposed, he cannot protect himself
from responsibility by showing that they were damaged or lost by the dangers of the seas. . . .
When the shipper consents to his goods being carried on deck, he takes the risk upon himself of
these peculiar perils. . . . This is the doctrine of all the authorities, ancient and modern."cralaw
virtua1aw library
Van Horn v. Taylor (2 La. Ann., 587; 46 Am. Dec., 558), was a case where goods stowed on deck
were lost in a collision. The court found that the ship carrying these goods was not at fault, and
that the shipper had notice of the fact that the cargo was being carried on deck. It was held that
the ship was not liable. Said the court:jgc:chanrobles.com.ph
Transpo Cases 2
"It is said that the plaintiff’s goods were improperly stowed on deck; that the deck load only was
thrown overboard by the collision, the cargo in the hold not being injured. The goods were thus
laden with the knowledge and implied approbation of the plaintiff. He was a passenger on board
the steamer, and does not appear to have made any objection to the goods being thus carried,
though the collision occurred several days after the steamer commenced her voyage."cralaw
virtua1aw library
In the case of The Thomas P. Thorn (8 Ben., 3; 23 Fed., Cas. No. 13927), decided in the District
Court in the State of New York, it appeared that tobacco was received upon a canal boat, with the
understanding that it was to be carried on deck, covered with tarpaulins. Upon arrival at its
destination it was found damaged by water, for the most part on the top, and evidently as a
consequence of rains. At the same time a quantity of malt stowed below deck on the same voyage
was uninjured. In discussing the question whether upon a contract to carry on deck, the vessel
was liable for the wetting of the tobacco, the court said:jgc:chanrobles.com.ph
"It is manifest that the injury to the tobacco arose simply from the fact that it was carried on deck.
The malt, carried below, although an article easily injured, received no damage, and the voyage
was performed with usual care, and without disaster. Indeed, there is evidence of a statement by
the libelant, that tobacco must of necessity be injured by being carried on deck. But, under a
contract to carry upon deck, the risk of any damage resulting from the place of carriage rests upon
the shipper, and, without proof of negligence causing the damage, there can be no recovery. Here
the evidence shows that all reasonable care was taken of the tobacco during its transportation;
that the manner of stowing and covering it was known to and assented to by the shipper; and the
inference is warranted that the injury arose, without fault of the carrier, from rain, to which
merchandise transported on deck must necessarily be in some degree exposed. Any loss arising
from damaged thus occasioned is to be borne by the shipper."cralaw virtua1aw library
Lawrence v. Minturn (17 How [U.S,], 100; 15 L ed., 58), was a case where goods stowed on deck
with the consent of the shipper were jettisoned during a storm at sea. In discussing whether this
cargo was entitled to general average, the Supreme Court of the United States
said:jgc:chanrobles.com.ph
"The maritime codes and writers have recognized the distinction between cargo placed on deck,
with the consent of the shipper, and cargo under deck.
"There is not one of them which gives a recourse against the master, the vessel, or the owners, if
the property lost had been placed on deck with the consent of its owner, and they afford very high
evidence of the general and appropriate usages, in this particular, of merchants and shipowners.
"So the courts of this country and England, and the writers on this subject, have treated the owner
of goods on deck, with his consent, as not having a claim on the master or owner of the ship in
case of jettison. The received law, on the point, is expressed by Chancellor Kent, with his usual
precision, in 3 Com., 240: ’Nor is the carrier in that case (Jettison of deck load) responsible to the
owner, unless the goods were stowed on deck without the consent of the owner, or a general
custom binding him, and then he would be chargeable with the loss.’"
In Gould v. Oliver (4 Bing., N. C., 132), decided in the English Court of Common Pleas in 1837,
Tindal, C.J., said:jgc:chanrobles.com.ph
"Where the loading on deck has taken place with the consent of the merchant, it is obvious that no
remedy against the shipowner or master for a wrongful loading of the goods on deck can exist.
The foreign authorities are indeed express; on that point. And the general rule of the English law,
that no one can maintain an action for a wrong, where he has consented or contributed to the act
which occasioned his loss, leads to the same conclusion."cralaw virtua1aw library
The foregoing authorities fully sustain the proposition that where the shipper consents to have his
goods carried on deck he takes the risks of any damage or loss sustained as a consequence of
their being so carried. In the present case it is indisputable that the goods were injured during the
voyage and solely as a consequence of their being on deck, instead of in the ship’s hold. The loss
must therefore fall on the owner. And this would be true, under the authorities, even though
paragraph 19 of the bills of lading, quoted near the beginning of this opinion, had not been made a
term of the contract.
It is undoubtedly true that, upon general principle, and momentarily ignoring paragraph 19 of these
bills of lading, the ship’s owner might be held liable for any damage directly resulting from a
negligent failure to exercise the care properly incident to the carriage of the merchandise on deck.
For instance, if it had been improperly placed or secured, and had been swept overboard as a
proximate result of such lack of care, the ship would be liable, to the same extent as if the cargo
had been deliberately thrown over without justification. So, if it had been shown that,
notwithstanding the stowage of these goods on deck, the damage could have been prevented, by
the exercise of proper skill and diligence in the discharge of the duties incumbent on the ship, the
owner might still be held.
To put the point concretely, let it be supposed that a custom had been proved among mariners to
protect deck cargo from the elements by putting a tarpaulin over it; or approaching still more to
imaginable conditions in the present case, let it be supposed that the persons charged with the
duty of transporting this cargo, being cognizant of the probability of damage by water, had
negligently and without good reason failed to exercise reasonable care to protect it by covering it
with tarpaulins. In such case it could hardly be denied that the ship’s company should be held
liable for such damage as might have been avoided by the use of such precaution.
But it should be borne in mind in this connection that it is incumbent on the plaintiff, if his cause of
action is founded on negligence of this character, to allege and prove that the damage suffered
was due to failure of the persons in charge of the cargo to use the diligence properly incident to
carriage under these conditions.
Transpo Cases 2
In Clark v. Barnwell (12 How. [U.S. ], 272; 13 L. ed., 985), the Supreme Court distinguishes with & Pacific Co. (38 Phil. Rep., 875), it may be collected that the carrier would be held liable in such
great precision between the situation where the burden of proof is upon the shipowner to prove case, notwithstanding the exemption contained in paragraph 19. But however that may be
that the loss resulted from an excepted peril and that where the burden of proof is upon the owner damages certainly cannot be recovered on the ground of negligence, even from a carrier, where
of the cargo to prove that the loss was caused by negligence on the part of the persons employed negligence is neither alleged nor proved.
in the conveyance of the goods. The first two syllabi in Clark v. Barnwell read as
follows:jgc:chanrobles.com.ph The judgment appealed from is reversed and the defendant is absolved from the complaint. No
express pronouncement will be made as to the costs of either instance. So ordered.
"Where goods are shipped and the usual bill of lading given, ’promising to deliver them in good
order, the dangers of the seas excepted,’ and they are found to be damaged the onus probandi is
upon the owners of the vessel, to show that the injury was occasioned by one of the excepted
causes.

"But, although the injury may have been occasioned by one of the excepted causes, yet still the
owners of the vessel are responsible if the injury might have been avoided, by the exercise of
reasonable skill and attention on the part of the persons employed in the conveyance of the
goods. But the onus probandi then becomes shifted upon the shipper, to show the negligence.

The case just referred to was one where cotton thread, put up in boxes, had deteriorated during a
lengthy voyage in a warm climate, owing to dampness and humidity. In discussing the question of
the responsibility of the ship’s owner, the court said:jgc:chanrobles.com.ph

"Notwithstanding, therefore, the proof was clear that the damage was occasioned by the effect of
the humidity and dampness of the vessel, which is one of the dangers of navigation, it was
competent for the libelants to show that the respondents might have prevented it by proper skill
and diligence in the discharge of their duties; but no such evidence is found in the record. For
caught that appears every precaution was taken that is usual or customary, or known to
shipmasters, to avoid the damage in question. And hence we are obliged to conclude that it is to
be attributed exclusively to the dampness of the atmosphere of the vessel, without negligence or
fault on the part of the master or owners."cralaw virtua1aw library

Exactly the same words might be used as applicable to the facts of the present case; and as it is
apparent that the damage here was caused by rain and sea water — the risk of which is inherently
incident to carriage on deck — the defendant cannot be held liable. It is not permissible for the
court, in the absence of any allegation or proof of negligence, to attribute negligence to the ship’s
employees in the matter of protecting the goods from rains and storms. The complaint on the
contrary clearly indicates that the damage done was due to the mere fact of carriage on deck, no
other fault or delinquency on the part of anybody being alleged.

It will be observed that by the terms of paragraph 19 of the bills of lading, the ship is not to be held
liable, in the case of goods signed for as carried on deck, for any loss or damage from any cause
whatever." We are not to be understood as holding that this provision would have protected the
ship from liability for the consequences of negligent acts, if negligence had been alleged and
proved. From the discussion in Manila Railroad Co. v. Compania Transatlantica and Atlantic, Gulf
Transpo Cases 2
Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 150255. April 22, 2005
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, Petitioners,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA
SHIPPING AND DODWELL now INCHCAPE SHIPPING SERVICES, Respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision1 of the Court of Appeals, as well as its
Resolution2 dated September 28, 2001 denying the motion for reconsideration, which affirmed that
of Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-631323 holding
petitioner Schmitz Transport Brokerage Corporation (Schmitz Transport), together with Black Sea
Shipping Corporation (Black Sea), represented by its ship agent Inchcape Shipping Inc.
(Inchcape), and Transport Venture (TVI), solidarily liable for the loss of 37 hot rolled steel sheets in
coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia
on board M/V "Alexander Saveliev" (a vessel of Russian registry and owned by Black Sea) 545
hot rolled steel sheets in coil weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little
Giant Steel Pipe Corporation (Little Giant),4 were insured against all risks with Industrial Insurance
Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-3747-TIS.5
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority
(PPA) assigned it a place of berth at the outside breakwater at the Manila South Harbor.6
Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to
receive the cargoes from the shipside, and to deliver them to its (the consignee’s) warehouse at
Cainta, Rizal,7 in turn engaged the services of TVI to send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani" towed the barge "Erika V" to
shipside.8
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the
vessel, left and returned to the port terminal.9 At 9:00 p.m., arrastre operator Ocean Terminal
Services Inc. commenced to unload 37 of the 545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due
to an approaching storm, the unloading unto the barge of the 37 coils was accomplished. 10 No
tugboat pulled the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,11 the crew of the barge abandoned
it and transferred to the vessel. The barge pitched and rolled with the waves and eventually
capsized, washing the 37 coils into the sea.12 At 7:00 a.m., a tugboat finally arrived to pull the
already empty and damaged barge back to the pier.13
Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover
the lost cargoes proved futile.14
Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of
₱5,246,113.11. Little Giant thereupon executed a subrogation receipt15 in favor of Industrial
Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through
its representative Inchcape (the defendants) before the RTC of Manila, for the recovery of the
amount it paid to Little Giant plus adjustment fees, attorney’s fees, and litigation expenses. 16
Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while
typhoon signal No. 1 was raised in Metro Manila.17
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for
unloading the cargoes outside of the breakwater notwithstanding the storm signal. 18 The
dispositive portion of the decision reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering
the defendants to pay plaintiff jointly and severally the sum of ₱5,246,113.11 with interest from the
date the complaint was filed until fully satisfied, as well as the sum of ₱5,000.00 representing the
adjustment fee plus the sum of 20% of the amount recoverable from the defendants as attorney’s
fees plus the costs of suit. The counterclaims and cross claims of defendants are hereby
DISMISSED for lack of [m]erit.19
To the trial court’s decision, the defendants Schmitz Transport and TVI filed a joint motion for
reconsideration assailing the finding that they are common carriers and the award of excessive
attorney’s fees of more than ₱1,000,000. And they argued that they were not motivated by gross
or evident bad faith and that the incident was caused by a fortuitous event. 20
Transpo Cases 2
By resolution of February 4, 1998, the trial court denied the motion for reconsideration. 21
All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed
in toto the decision of the trial court, 22 it finding that all the defendants were common carriers —
Black Sea and TVI for engaging in the transport of goods and cargoes over the seas as a regular
business and not as an isolated transaction,23 and Schmitz Transport for entering into a contract
with Little Giant to transport the cargoes from ship to port for a fee.24
In holding all the defendants solidarily liable, the appellate court ruled that "each one was essential
such that without each other’s contributory negligence the incident would not have happened and
so much so that the person principally liable cannot be distinguished with sufficient accuracy." 25
In discrediting the defense of fortuitous event, the appellate court held that "although defendants
obviously had nothing to do with the force of nature, they however had control of where to anchor
the vessel, where discharge will take place and even when the discharging will commence."26
The defendants’ respective motions for reconsideration having been denied by Resolution 27 of
September 28, 2001, Schmitz Transport (hereinafter referred to as petitioner) filed the present
petition against TVI, Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal,
consignee Little Giant, hence, the transportation contract was by and between Little Giant and
TVI.28
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI
were required to file their respective Comments.29
By its Comment, Black Sea argued that the cargoes were received by the consignee through
petitioner in good order, hence, it cannot be faulted, it having had no control and supervision
thereover.30
For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and
transferred them unto the barge upon the instruction of petitioner.31
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of
negligence on the part of petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and
TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all
liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which though foreseen, were
inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtor to comply with his obligation, must be
independent of human will; (2) it must be impossible to foresee the event which constitute the
caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be
such as to render it impossible for the debtor to fulfill his obligation in any manner; and (4) the
obligor must be free from any participation in the aggravation of the injury resulting to the
creditor.32
[T]he principle embodied in the act of God doctrine strictly requires that the act must be
occasioned solely by the violence of nature. Human intervention is to be excluded from creating or
entering into the cause of the mischief. When the effect is found to be in part the result of the
participation of man, whether due to his active intervention or neglect or failure to act, the whole
occurrence is then humanized and removed from the rules applicable to the acts of God. 33
The appellate court, in affirming the finding of the trial court that human intervention in the form of
contributory negligence by all the defendants resulted to the loss of the cargoes, 34 held that
unloading outside the breakwater, instead of inside the breakwater, while a storm signal was up
constitutes negligence.35 It thus concluded that the proximate cause of the loss was Black Sea’s
negligence in deciding to unload the cargoes at an unsafe place and while a typhoon was
approaching.36
From a review of the records of the case, there is no indication that there was greater risk in
loading the cargoes outside the breakwater. As the defendants proffered, the weather on October
26, 1991 remained normal with moderate sea condition such that port operations continued and
proceeded normally.37
The weather data report,38 furnished and verified by the Chief of the Climate Data Section of PAG-
ASA and marked as a common exhibit of the parties, states that while typhoon signal No. 1 was
hoisted over Metro Manila on October 23-31, 1991, the sea condition at the port of Manila at 5:00
p.m. - 11:00 p.m. of October 26, 1991 was moderate. It cannot, therefore, be said that the
defendants were negligent in not unloading the cargoes upon the barge on October 26, 1991
inside the breakwater.
Transpo Cases 2
That no tugboat towed back the barge to the pier after the cargoes were completely loaded by
12:30 in the morning39 is, however, a material fact which the appellate court failed to properly
consider and appreciate40 — the proximate cause of the loss of the cargoes. Had the barge been
towed back promptly to the pier, the deteriorating sea conditions notwithstanding, the loss could
have been avoided. But the barge was left floating in open sea until big waves set in at 5:30 a.m.,
causing it to sink along with the cargoes.41 The loss thus falls outside the "act of God doctrine."
The proximate cause of the loss having been determined, who among the parties is/are
responsible therefor?
Contrary to petitioner’s insistence, this Court, as did the appellate court, finds that petitioner is a
common carrier. For it undertook to transport the cargoes from the shipside of "M/V Alexander
Saveliev" to the consignee’s warehouse at Cainta, Rizal. As the appellate court put it, "as long as
a person or corporation holds [itself] to the public for the purpose of transporting goods as [a]
business, [it] is already considered a common carrier regardless if [it] owns the vehicle to be used
or has to hire one."42 That petitioner is a common carrier, the testimony of its own Vice-President
and General Manager Noel Aro that part of the services it offers to its clients as a brokerage firm
includes the transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President and
General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the
company. I also handle the various division heads of the company for operation matters, and all
other related functions that the President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell the
Honorable Court if you came to know the company by the name Little Giant Steel Pipe
Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you
perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also in-
charged of the delivery of the goods to their warehouses. We also handled the clearances of their
shipment at the Bureau of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with
regards to this shipment? What work did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of [the]
cargo[es] from lighter to BASECO then to the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to
perform, what equipment do (sic) you require or did you use in order to effect this unloading,
transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to lighter,
and on this we hired or we sub-contracted with [T]ransport Ventures, Inc. which [was] in-charged
(sic) of the barges. Also, in BASECO compound we are leasing cranes to have the cargo
unloaded from the barge to trucks, [and] then we used trucks to deliver [the cargoes] to the
consignee’s warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignee’s warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to contract
for the barges of Transport Ventures Incorporated in this particular operation?
A: Firstly, we don’t own any barges. That is why we hired the services of another firm whom we
know [al]ready for quite sometime, which is Transport Ventures, Inc. (Emphasis supplied)43
It is settled that under a given set of facts, a customs broker may be regarded as a common
carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of
Appeals,44 held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier,
as defined under Article 1732 of the Civil Code, to wit,
Transpo Cases 2
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.
xxx
Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.45
And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held that as the transportation of
goods is an integral part of a customs broker, the customs broker is also a common carrier. For to
declare otherwise "would be to deprive those with whom [it] contracts the protection which the law
affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is part
and parcel of petitioner’s business."47
As for petitioner’s argument that being the agent of Little Giant, any negligence it committed was
deemed the negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In
effecting the transportation of the cargoes from the shipside and into Little Giant’s warehouse,
however, petitioner was discharging its own personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler 48 to
provide the barge and the tugboat. In their Service Contract,49 while Little Giant was named as the
consignee, petitioner did not disclose that it was acting on commission and was chartering the
vessel for Little Giant.50 Little Giant did not thus automatically become a party to the Service
Contract and was not, therefore, bound by the terms and conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it
can maintain a cause of action for negligence.51
In the case of TVI, while it acted as a private carrier for which it was under no duty to observe
extraordinary diligence, it was still required to observe ordinary diligence to ensure the proper and
careful handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and
2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that
which is expected of a good father of a family shall be required.
Was the reasonable care and caution which an ordinarily prudent person would have used in the
same situation exercised by TVI?52
This Court holds not.
TVI’s failure to promptly provide a tugboat did not only increase the risk that might have been
reasonably anticipated during the shipside operation, but was the proximate cause of the loss. A
man of ordinary prudence would not leave a heavily loaded barge floating for a considerable
number of hours, at such a precarious time, and in the open sea, knowing that the barge does not
have any power of its own and is totally defenseless from the ravages of the sea. That it was
nighttime and, therefore, the members of the crew of a tugboat would be charging overtime pay
did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article 173953 of the Civil Code,
prove that it exercised due diligence to prevent or minimize the loss, before, during and after the
occurrence of the storm in order that it may be exempted from liability for the loss of the goods.
While petitioner sent checkers54 and a supervisor55 on board the vessel to counter-check the
operations of TVI, it failed to take all available and reasonable precautions to avoid the loss. After
noting that TVI failed to arrange for the prompt towage of the barge despite the deteriorating sea
conditions, it should have summoned the same or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable56 for the loss of the cargoes. The
following pronouncement of the Supreme Court is instructive:
The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself of the services of an
outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.
Transpo Cases 2
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 2176 and related provisions, in conjunction with Article 2180 of the Civil Code.
x x x [O]ne might ask further, how then must the liability of the common carrier, on one hand, and
an independent contractor, on the other hand, be described? It would be solidary. A contractual
obligation can be breached by tort and when the same act or omission causes the injury, one
resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can
well apply. In fine, a liability for tort may arise even under a contract, where tort is that which
breaches the contract. Stated differently, when an act which constitutes a breach of contract would
have itself constituted the source of a quasi-delictual liability had no contract existed between the
parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort
to apply.57
not from the time the claim is made judicially or extrajudicially but from the date the judgment of
the court is made (at which the time the quantification of damages may be deemed to have been
reasonably ascertained).65
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage
Corporation, and Transport Venture Incorporation jointly and severally liable for the amount of
₱5,246,113.11 with the MODIFICATION that interest at SIX PERCENT per annum of the amount
due should be computed from the promulgation on November 24, 1997 of the decision of the trial
court.
Costs against petitioner.

As for Black Sea, its duty as a common carrier extended only from the time the goods were SO ORDERED.
surrendered or unconditionally placed in its possession and received for transportation until they
were delivered actually or constructively to consignee Little Giant.58

Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the
services rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment
provides that delivery be made "to the port of discharge or so near thereto as she may safely get,
always afloat."59 The delivery of the goods to the consignee was not from "pier to pier" but from the
shipside of "M/V Alexander Saveliev" and into barges, for which reason the consignee contracted
the services of petitioner. Since Black Sea had constructively delivered the cargoes to Little Giant,
through petitioner, it had discharged its duty.60

In fine, no liability may thus attach to Black Sea.

Respecting the award of attorney’s fees in an amount over ₱1,000,000.00 to Industrial Insurance,
for lack of factual and legal basis, this Court sets it aside. While Industrial Insurance was
compelled to litigate its rights, such fact by itself does not justify the award of attorney’s fees under
Article 2208 of the Civil Code. For no sufficient showing of bad faith would be reflected in a party’s
persistence in a case other than an erroneous conviction of the righteousness of his cause. 61 To
award attorney’s fees to a party just because the judgment is rendered in its favor would be
tantamount to imposing a premium on one’s right to litigate or seek judicial redress of legitimate
grievances.62

On the award of adjustment fees: The adjustment fees and expense of divers were incurred by
Industrial Insurance in its voluntary but unsuccessful efforts to locate and retrieve the lost cargo.
They do not constitute actual damages.63

As for the court a quo’s award of interest on the amount claimed, the same calls for modification
following the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals64 that when the demand
cannot be reasonably established at the time the demand is made, the interest shall begin to run
Transpo Cases 2
THIRD DIVISION
[ G.R. No. 199455, June 27, 2018 ]
FEDERAL EXPRESS CORPORATION, PETITIONER, V. LUWALHATI R. ANTONINO AND
ELIZA BETTINA RICASA ANTONINO, RESPONDENTS.
DECISION
LEONEN, J.:
The duty of common carriers to observe extraordinary diligence in shipping goods does not
terminate until delivery to the consignee or to the specific person authorized to receive the shipped
goods. Failure to deliver to the person authorized to receive the goods is tantamount to loss of the
goods, thereby engendering the common carrier's liability for loss. Ambiguities in contracts of
carriage, which are contracts of adhesion, must be interpreted against the common carrier that
prepared these contracts.
This resolves a Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules of Civil
Procedure praying that the assailed Court of Appeals August 31, 2011 Decision [2] and November
21, 2011 Resolution[3] in CA-G.R. CV No. 91216 be reversed and set aside and that Luwalhati R.
Antonino (Luwalhati) and Eliza Bettina Ricasa Antonino (Eliza) be held liable on Federal Express
Corporation's (FedEx) counterclaim.
The assailed Court of Appeals August 31, 2011 Decision denied the appeal filed by FedEx and
affirmed the May 8, 2008 Decision[4] of Branch 217, Regional Trial Court, Quezon City, awarding
moral and exemplary damages, and attorney's fees to Luwalhati and Eliza. [5] In its assailed
November 21, 2011 Resolution, the Court of Appeals denied FedEx's Motion for
Reconsideration.[6]
Eliza was the owner of Unit 22-A (the Unit) in Allegro Condominium, located at 62 West 62nd St.,
New York, United States.[7] In November 2003, monthly common charges on the Unit became due.
These charges were for the period of July 2003 to November 2003, and were for a total amount of
US$9,742.81.[8]
On December 15, 2003, Luwalhati and Eliza were in the Philippines. As the monthly common
charges on the Unit had become due, they decided to send several Citibank checks to Veronica Z.
Sison (Sison), who was based in New York. Citibank checks allegedly amounting to
US$17,726.18 for the payment of monthly charges and US$11,619.35 for the payment of real
estate taxes were sent by Luwalhati through FedEx with Account No. x2546-4948-1 and Tracking
No. 8442 4588 4268. The package was addressed to Sison who was tasked to deliver the checks
payable to Maxwell-Kates, Inc. and to the New York County Department of Finance. Sison
allegedly did not receive the package, resulting in the non-payment of Luwalhati and Eliza's
obligations and the foreclosure of the Unit.[9]
Upon learning that the checks were sent on December 15, 2003, Sison contacted FedEx on
February 9, 2004 to inquire about the non-delivery. She was informed that the package was
delivered to her neighbor but there was no signed receipt.[10]
On March 14, 2004, Luwalhati and Eliza, through their counsel, sent a demand letter to FedEx for
payment of damages due to the non-delivery of the package, but FedEx refused to heed their
demand.[11] Hence, on April 5, 2004, they filed their Complaint[12] for damages.
FedEx claimed that Luwalhati and Eliza "ha[d] no cause of action against it because [they] failed to
comply with a condition precedent, that of filing a written notice of claim within the 45 calendar
days from the acceptance of the shipment."[13] It added that it was absolved of liability as Luwalhati
and Eliza shipped prohibited items and misdeclared these items as "documents." [14] It pointed to
conditions under its Air Waybill prohibiting the "transportation of money (including but not limited to
coins or negotiable instruments equivalent to cash such as endorsed stocks and bonds)." [15]
In its May 8, 2008 Decision,[16] the Regional Trial Court ruled for Luwalhati and Eliza, awarding
them moral and exemplary damages, and attorney's fees.[17]
The Regional Trial Court found that Luwalhati failed to accurately declare the contents of the
package as "checks."[18] However, it ruled that a check is not legal tender or a "negotiable
instrument equivalent to cash," as prohibited by the Air Waybill.[19] It explained that common
carriers are presumed to be at fault whenever goods are lost.[20] Luwalhati testified on the non-
delivery of the package. FedEx, on the other hand, claimed that the shipment was released
without the signature of the actual recipient, as authorized by the shipper or recipient. However, it
failed to show that this authorization was made; thus, it was still liable for the loss of the
package.[21]
On non-compliance with a condition precedent, it ruled that under the Air Waybill, the prescriptive
period for filing an action was "within two (2) years from the date of delivery of the shipment or
from the date on which the shipment should have been delivered."[22] Luwalhati and Eliza's
demand letter made on March 11, 2004 was within the two (2)-year period sanctioned by the Air
Waybill.[23] The trial court also noted that they were given a "run-around" by FedEx employees,
and thus, were deemed to have complied with the filing of the formal claim.[24]
The dispositive portion of the Regional Trial Court May 8, 2008 Decision read:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs Luwalhati R. Antonino and Eliza
Bettina Ricasa Antonino ordering the following:
1) The amount of P200,000.00 by way of moral damages;
2) The amount of P100,000.00 by way of exemplary damages; and
[3]) The amount of P150,000.00 as and for attorney's fees. Costs against defendant.
The counterclaim is ordered dismissed.
SO ORDERED.[25]
In its assailed August 31, 2011 Decision,[26] the Court of Appeals affirmed the ruling of the
Regional Trial Court.[27] According to it, by accepting the package despite its supposed defect,
FedEx was deemed to have acquiesced to the transaction. Thus, it must deliver the package in
good condition and could not subsequently deny liability for loss. [28] The Court of Appeals
sustained the Regional Trial Court's conclusion that checks are not legal tender, and thus, not
Transpo Cases 2
covered by the Air Waybill's prohibition.[29] It further noted that an Air Waybill is a contract of
adhesion and should be construed against the party that drafted it.[30]
The dispositive portion of the Court of Appeals August 31, 2011 Decision read:
WHEREFORE, premises considered, the present appeal is hereby DENIED. The assailed May 08,
2008 Decision of the Regional Trial Court, Branch 217, Quezon City in Civil case No. Q-04-52325
is AFFIRMED. Costs against the herein appellant.
SO ORDERED.[31]
Following the Court of Appeals' denial[32] of its Motion for Reconsideration, FedEx filed the present
Petition.
For resolution of this Court is the sole issue of whether or not petitioner Federal Express
Corporation may be held liable for damages on account of its failure to deliver the checks shipped
by respondents Luwalhati R. Antonino and Eliza Bettina Ricasa Antonino to the consignee
Veronica Sison.
I ruled that there was substantial compliance with the period because of the zealous efforts
Petitioner disclaims liability because of respondents' failure to comply with a condition precedent,
that is, the filing of a written notice of a claim for non-delivery or misdelivery within 45 days from
acceptance of the shipment.[33] The Regional Trial Court found the condition precedent to have
been substantially complied with and attributed respondents' noncompliance to FedEx for giving
them a run-around.[34] This Court affirms this finding.
A provision in a contract of carriage requiring the filing of a formal claim within a specified period is
a valid stipulation. Jurisprudence maintains that compliance with this provision is a legitimate
condition precedent to an action for damages arising from loss of the shipment:
More particularly, where the contract of shipment contains a reasonable requirement of giving
notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the
action for loss or injury or the right to enforce the carrier's liability. Such requirement is not an
empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the
carrier from just liability, but reasonably to inform it that the shipment has been damaged and that
it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of
the injury. This protects the carrier by affording it an opportunity to make an investigation of a
claim while the matter is fresh and easily investigated so as to safeguard itself from false and
fraudulent claims.[35] (Citation omitted)
Petitioner's Air Waybill stipulates the following on filing of claims:
Claims for Loss, Damage, or Delay. All claims must be made in writing and within strict time limits.
See any applicable tariff, our service guide or our standard conditions for carriage for details.
The right to damages against us shall be extinguished unless an action is brought within two (2)
years from the date of delivery of the shipment or from the date on which the shipment should
have been delivered.
Within forty-five (45) days after notification of the claim, it must be documented by sending to us
[all the] relevant information about it.[36]
For their claim to prosper, respondents must, thus, surpass two (2) hurdles: first, the filing of their
formal claim within 45 days; and second, the subsequent filing of the action within two (2) years.
There is no dispute on respondents' compliance with the second period as their Complaint was
filed on April 5, 2004.[37]
In appraising respondents' compliance with the first condition, this Court is guided by settled
standards in jurisprudence.
In Philippine Airlines, Inc. v. Court of Appeals,[38] Philippine Airlines alleged that shipper Gilda
Mejia (Mejia) failed to file a formal claim within the period stated in the Air Waybill. [39] This Court
demonstrated by Mejia in following up her claim.[40] These efforts coupled with Philippine Airlines'
"tossing around the claim and leaving it unresolved for an indefinite period of time" led this Court
to deem the requisite period satisfied.[41] This is pursuant to Article 1186 of the New Civil Code
which provides that "[t]he condition shall be deemed fulfilled when the obligor voluntarily prevents
its fulfillment":[42]
Considering the abovementioned incident and private respondent Mejia's own zealous efforts in
following up the claim, it was clearly not her fault that the letter of demand for damages could only
be filed, after months of exasperating follow-up of the claim, on August 13, 1990. If there was any
failure at all to file the formal claim within the prescriptive period contemplated in the air waybill,
this was largely because of PAL's own doing, the consequences of which cannot, in all fairness,
be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal claim, 'under Article
1186 of the Civil Code that condition was deemed fulfilled, considering that the collective action of
PAL's personnel in tossing around the claim and leaving it unresolved for an indefinite period of
time was tantamount to "voluntarily preventing its fulfillment." On grounds of equity, the filing of the
baggage freight claim, which sufficiently informed PAL of the damage sustained by private
respondent's cargo, constituted substantial compliance with the requirement in the contract for the
filing of a formal claim.[43] (Citations omitted)
Here, the Court of Appeals detailed the efforts made by respondent Luwalhati and consignee
Sison. It also noted petitioner's ambiguous and evasive responses, nonchalant handling of
respondents' concerns, and how these bogged down respondents' actions and impaired their
compliance with the required 45-day period:
Transpo Cases 2
Anent the issues concerning lack of cause of action and their so-called "run-around" matter, We "A Yes, Sir.
uphold the lower court's finding that the herein appellees complied with the requirement for the
immediate filing of a formal claim for damages as required in the Air Waybill or, at least, We find
that there was substantial compliance therewith. Luwalhati testified that the addressee, Veronica
Z. Sison promptly traced the whereabouts of the said package, but to no avail. Her testimony "Q Now what else did you do after that?
narrated what happened thereafter, thus:

". . .
"A And then I asked my friend Mrs. Veronica Sison to trace it, Sir.

"COURT: All right. She was informed that it was lost. What steps did you take to find out or to
recover back this package?
". . .

"ATTY. ALENTAJAN:
"Q What did she report to you?
"Q What did you do to Fedex?

". . .
"A She reported to me that first, she checked with the Fedex and the first answer was they
were going to trace it. The second answer was that, it was delivered to the lady, her
neighbor and the neighbor completely denied it and as they show a signature that is
WITNESS: First, I asked the secretary here to call Fedex Manila and they said, the record show
not my signature, so the next time she called again, another person answered. She
that it was sent to New York, Your Honor.
called to say that the neighbor did not receive and the person on the other line I think
she got his name, said that, it is because it is December and we usually do that just
leave it and then they cut the line and so I asked my friend to issue a sworn statement
". . . in the form of affidavit and have it notarized in the Philippine Embassy or Consulate,
Sir. That is what she did.
ATTY. ALENTAJAN:

"Q After calling Fedex, what did Fedex do?

"Q On your part here in the Philippines after doing that, after instructing Veronica Sison,
what else did you do because of this violation?

"A None, sir. They washed their hands because according to them it is New York because
they have sent it. Their records show that New York received it, Sir.
"A I think the next step was to issue a demand letter because any way I do not want to go
to Court, it is so hard, Sir."

"Q New York Fedex? The foregoing event show Luwalhati's own ardent campaign in following up the claim. To the
Court's mind, it is beyond her control why the demand letter for damages was only sent
subsequent to her infuriating follow-ups regarding the whereabouts of the said package. We can
surmise that if there was any omission at all to file the said claim within the prescriptive period
Transpo Cases 2
provided for under the Air Waybill it was mostly due to herein appellant's own behavior, the
outcome thereof cannot, by any chance, be imputed to the herein appellees. [44] (Grammatical
errors in the original)
Petitioner has been unable to persuasively refute Luwalhati's recollection of the efforts that she
and Sison exerted, and of the responses it gave them. It instead insists that the 45-day period
stated in its Air Waybill is sacrosanct. This Court is unable to bring itself to sustaining petitioner's
appeal to a convenient reprieve. It is one with the Regional Trial Court and the Court of Appeals in
stressing that respondents' inability to expediently file a formal claim can only be attributed to
petitioner hampering its fulfillment. Thus, respondents must be deemed to have substantially
complied with the requisite 45-day period for filing a formal claim.
II
The Civil Code mandates common carriers to observe extraordinary diligence in caring for the
goods they are transporting:
Article 1733. Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of each case.
"Extraordinary diligence is that extreme measure of care and caution which persons of unusual
prudence and circumspection use for securing and preserving their own property or
rights."[45] Consistent with the mandate of extraordinary diligence, the Civil Code stipulates that in
case of loss or damage to goods, common carriers are presumed to be negligent or at
fault,[46] except in the following instances:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act or competent public authority.[47]
In all other cases, common carriers must prove that they exercised extraordinary diligence in the
performance of their duties, if they are to be absolved of liability.[48]
The responsibility of common carriers to exercise extraordinary diligence lasts from the time the
goods are unconditionally placed in their possession until they are delivered "to the consignee, or
to the person who has a right to receive them."[49] Thus, part of the extraordinary responsibility of
common carriers is the duty to ensure that shipments are received by none but "the person who
has a right to receive them."[50] Common carriers must ascertain the identity of the recipient.
Failing to deliver shipment to the designated recipient amounts to a failure to deliver. The
shipment shall then be considered lost, and liability for this loss ensues.
Petitioner is unable to prove that it exercised extraordinary diligence in ensuring delivery of the
package to its designated consignee. It claims to have made a delivery but it even admits that it
was not to the designated consignee. It asserts instead that it was authorized to release the
package without the signature of the designated recipient and that the neighbor of the consignee,
one identified only as "LGAA 385507," received it.[51] This fails to impress.
The assertion that receipt was made by "LGAA 385507" amounts to little, if any, value in proving
petitioner's successful discharge of its duty. "LGAA 385507" is nothing but an alphanumeric code
that outside of petitioner's personnel and internal systems signifies nothing. This code does not
represent a definite, readily identifiable person, contrary to how commonly accepted identifiers,
such as numbers attached to official, public, or professional identifications like social security
numbers and professional license numbers, function. Reliance on this code is tantamount to
reliance on nothing more than petitioner's bare, self-serving allegations. Certainly, this cannot
satisfy the requisite of extraordinary diligence consummated through delivery to none but "the
person who has a right to receive"[52] the package.
Given the circumstances in this case, the more reasonable conclusion is that the package was not
delivered. The package shipped by respondents should then be considered lost, thereby
engendering the liability of a common carrier for this loss.
Petitioner cannot but be liable for this loss. It failed to ensure that the package was delivered to
the named consignee. It admitted to delivering to a mere neighbor. Even as it claimed this, it failed
to identify that neighbor.
III
Petitioner further asserts that respondents violated the terms of the Air Waybill by shipping checks.
It adds that this violation exempts it from liability.[53]
This is untenable.
Petitioner's International Air Waybill states:
Items Not Acceptable for Transportation. We do not accept transportation of money (including
but not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
bonds). We exclude all liability for shipments of such items accepted by mistake. Other items may
be accepted for carriage only to limited destinations or under restricted conditions. We reserve the
right to reject packages based upon these limitations or for reasons of safety or security. You may
consult our Service Guide, Standard Conditions of Carriage, or any applicable tariff for specific
details.[54] (Emphasis in the original)
The prohibition has a singular object: money. What follows the phrase "transportation of money" is
a phrase enclosed in parentheses, and commencing with the words "including but not limited to."
The additional phrase, enclosed as it is in parentheses, is not the object of the prohibition, but
merely a postscript to the word "money." Moreover, its introductory words "including but not limited
Transpo Cases 2
to" signify that the items that follow are illustrative examples; they are not qualifiers that are Items Not Acceptable for Transportation. We do not accept transportation of money (including
integral to or inseverable from "money." Despite the utterance of the enclosed phrase, the singular but not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
prohibition remains: money. bonds). ... (Emphasis in the original)[69]
Money is "what is generally acceptable in exchange for goods." [55] It can take many forms, most What this Court's protracted discussion reveals is that petitioner's Air Waybill lends itself to a great
commonly as coins and banknotes. Despite its myriad forms, its key element is its general deal of confusion. The clarity of its terms leaves much to be desired. This lack of clarity can only
acceptability.[56] Laws usually define what can be considered as a generally acceptable medium of militate against petitioner's cause.
exchange.[57] In the Philippines, Republic Act No. 7653, otherwise known as The New Central
Bank Act, defines "legal tender" as follows: The contract between petitioner and respondents is a contract of adhesion; it was prepared solely
All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of by petitioner for respondents to conform to.[70] Although not automatically void, any ambiguity in a
the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public contract of adhesion is construed strictly against the party that prepared it.[71] Accordingly, the
and private: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall prohibition against transporting money must be restrictively construed against petitioner and
be legal tender in amounts not exceeding Fifty pesos (P50.00) for denomination of Twenty-five liberally for respondents. Viewed through this lens, with greater reason should respondents be
centavos and above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of exculpated from liability for shipping documents or instruments, which are reasonably understood
Ten centavos or less.[58] as not being money, and for being unable to declare them as such.
It is settled in jurisprudence that checks, being only negotiable instruments, are only substitutes for Ultimately, in shipping checks, respondents were not violating petitioner's Air Waybill. From this, it
money and are not legal tender; more so when the check has a named payee and is not payable follows that they committed no breach of warranty that would absolve petitioner of liability.
to bearer. In Philippine Airlines, Inc. v. Court of Appeals,[59] this Court ruled that the payment of a
check to the sheriff did not satisfy the judgment debt as checks are not considered legal tender. WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed August 31, 2011
This has been maintained in other cases decided by this Court. In Cebu International Finance
Decision and November 21, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 91216
Corporation v. Court of Appeals,[60] this Court held that the debts paid in a money market
are AFFIRMED.
transaction through the use of a check is not a valid tender of payment as a check is not legal SO ORDERED.
tender in the Philippines. Further, in Bank of the Philippine Islands v. Court of Appeals,[61] this
Court held that "a check, whether a manager's check or ordinary check, is not legal tender."[62]
The Air Waybill's prohibition mentions "negotiable instruments" only in the course of making an
example. Thus, they are not prohibited items themselves. Moreover, the illustrative example does
not even pertain to negotiable instruments per se but to "negotiable instruments equivalent to
cash."[63]
The checks involved here are payable to specific payees, Maxwell-Kates, Inc. and the New York
County Department of Finance.[64] Thus, they are order instruments. They are not payable to their
bearer, i.e., bearer instruments. Order instruments differ from bearer instruments in their manner
of negotiation:
Under Section 30 of the [Negotiable Instruments Law], an order instrument requires an
indorsement from the payee or holder before it may be validly negotiated. A bearer instrument, on
the other hand, does not require an indorsement to be validly negotiated.[65]
There is no question that checks, whether payable to order or to bearer, so long as they comply
with the requirements under Section 1 of the Negotiable Instruments Law, are negotiable
instruments.[66] The more relevant consideration is whether checks with a specified payee
are negotiable instruments equivalent to cash, as contemplated in the example added to the Air
Waybill's prohibition.
This Court thinks not. An order instrument, which has to be endorsed by the payee before it may
be negotiated,[67] cannot be a negotiable instrument equivalent to cash. It is worth emphasizing
that the instruments given as further examples under the Air Waybill must be endorsed to be
considered equivalent to cash:[68]
Transpo Cases 2
THIRD DIVISION
G.R. No. 147246 August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,
vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.
PUNO, J.:
1
On appeal is the Court of Appeals' May 11, 2000 Decision in CA-G.R. CV No. 49195 and
February 21, 2001 Resolution2 affirming with modification the April 6, 1994 Decision3 of the
Regional Trial Court of Manila which found petitioner liable to pay private respondent the amount
of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.354 was shipped by Marubeni American Corporation of Portland, Oregon on board
the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation
in Manila, evidenced by Bill of Lading No. PTD/Man-4.5 The shipment was insured by the private
respondent Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75
under Marine Cargo Risk Note RN 11859/90.6
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the
consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced
by Lighterage Receipt No. 03647 for delivery to consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of
an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to
Engineering Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied
down to other barges which arrived ahead of it while weathering out the storm that night. A few
days after, the barge developed a list because of a hole it sustained after hitting an unseen
protuberance underneath the water. The petitioner filed a Marine Protest on August 28, 1990. 8 It
likewise secured the services of Gaspar Salvaging Corporation which refloated the barge. 9 The
hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's
wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran
aground due to strong current. To avoid the complete sinking of the barge, a portion of the goods
was transferred to three other barges.10
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting
in the total loss of the remaining cargo.11 A second Marine Protest was filed on September 7,
1990.12
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and
loaded on the three other barges.13 The total proceeds from the sale of the salvaged cargo
was P201,379.75.14
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and
another letter dated September 18, 1990 to the private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount
of P4,104,654.22.15 Thereafter, as subrogee, it sought recovery of said amount from the petitioner,
but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the
amount of indemnity, attorney's fees and cost of suit.16 Petitioner filed its answer with
counterclaim.17
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its
Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant
Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance
Co., Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July
3, 1991 until fully satisfied plus 10% of the amount awarded as and for attorney's fees.
Defendant's counterclaim is hereby DISMISSED. With costs against defendant.18
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate
court affirmed the decision of the trial court with modification. The dispositive portion of its decision
reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the
sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.
Transpo Cases 2
SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate
court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate
court, viz:19
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A
QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE
TO COMMON CARRIERS, "THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY
THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED."
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER
FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE
AND CUSTODY OF THE CONSIGNEE'S CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary
diligence in its care and custody of the consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as 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.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed
and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not
obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents.
In short, it does not hold out its services to the general public.20
We disagree.
In De Guzman vs. Court of Appeals,21 we held that the definition of common carriers in Article
1732 of the Civil Code 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.
We also did not distinguish 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. Further, we ruled that Article 1732 does not distinguish between a carrier
offering its services to the general public, and one who offers services or solicits business only
from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage22 and it
offers its barges to the public for carrying or transporting goods by water for compensation.
Petitioner is clearly a common carrier. In De Guzman, supra,23 we considered private respondent
Ernesto Cendaña to be a common carrier even if his principal occupation was not the carriage of
goods for others, but that of buying used bottles and scrap metal in Pangasinan and selling these
items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common carrier need
not have fixed and publicly known routes. Neither does it have to maintain terminals or issue
tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.24 The test to determine a common carrier is "whether the given undertaking is a part of
the business engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." 25 In the case at bar, the
petitioner admitted that it is engaged in the business of shipping and lighterage, 26 offering its
barges to the public, despite its limited clientele for carrying or transporting goods by water for
compensation.27
On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.28 They are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated.29 To overcome the presumption of negligence in the
case of loss, destruction or deterioration of the goods, the common carrier must prove that it
Transpo Cases 2
exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the q - You said there was another accident, can you tell the court the nature of the
Civil Code enumerates the instances when the presumption of negligence does not attach: second accident?

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of a - The sinking, sir.
the goods, unless the same is due to any of the following causes only:
q - Can you tell the nature . . . can you tell the court, if you know what caused the
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; sinking?

(2) Act of the public enemy in war, whether international or civil; a - Mostly it was related to the first accident because there was already a
whole (sic) on the bottom part of the barge.
(3) Act or omission of the shipper or owner of the goods;
xxx xxx xxx
(4) The character of the goods or defects in the packing or in the containers;
This is not all. Petitioner still headed to the consignee's wharf despite knowledge of an incoming
(5) Order or act of competent public authority. typhoon. During the time that the barge was heading towards the consignee's wharf on September
5, 1990, typhoon "Loleng" has already entered the Philippine area of responsibility. 32 A part of the
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:
of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable
for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and DIRECT-EXAMINATION BY ATTY. LEE:33
only cause of the loss of the goods, and that it has exercised due diligence before, during and
after the occurrence of the typhoon to prevent or minimize the loss. 30 The evidence show that, xxx xxx xxx
even before the towing bits of the barge broke, it had already previously sustained damage when
it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge
could not be solely attributed to the typhoon. The partly-submerged vessel was refloated but its to lie where she was instead of towing it?
hole was patched with only clay and cement. The patch work was merely a provisional remedy,
not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the a - Since that time that the Barge was refloated, GMC (General Milling Corporation,
voyage, it recklessly exposed the cargo to further damage. A portion of the cross-examination of the consignee) as I have said was in a hurry for their goods to be delivered at their Wharf
Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states: since they needed badly the wheat that was loaded in PSTSI-3. It was needed badly by
the consignee.
CROSS-EXAMINATION BY ATTY. DONN LEE:31
q - And this is the reason why you towed the Barge as you did?
xxx xxx xxx
a - Yes, sir.
q - Can you tell us what else transpired after that incident?
xxx xxx xxx
a - After the first accident, through the initiative of the barge owners, they tried to pull
out the barge from the place of the accident, and bring it to the anchor terminal for safety, CROSS-EXAMINATION BY ATTY. IGNACIO:34
then after deciding if the vessel is stabilized, they tried to pull it to the consignee's
warehouse, now while on route another accident occurred, now this time the barge totally xxx xxx xxx
hitting something in the course.
Transpo Cases 2
q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am SO ORDERED.
I correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I have
stated.

q - Despite of the threats of an incoming typhoon as you testified a while ago?

a - It is already in an inner portion of Pasig River. The typhoon would be coming and
it would be dangerous if we are in the vicinity of Manila Bay.

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.

q - And yet as a standard operating procedure of your Company, you have to secure
a sort of Certification to determine the weather condition, am I correct?

a - Yes, sir.

q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you
are already inside the vicinity or inside Pasig entrance, it is a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-
on falls short of due diligence required from a common carrier. More importantly, the
officers/employees themselves of petitioner admitted that when the towing bits of the vessel broke
that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it was no
longer affected by the typhoon. The typhoon then is not the proximate cause of the loss of the
cargo; a human factor, i.e., negligence had intervened.

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV
No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner.
Transpo Cases 2
Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 161745 September 30, 2005
LEA MER INDUSTRIES, INC., Petitioners,
vs.
MALAYAN INSURANCE CO., INC.,* Respondent.
DECISION
PANGANIBAN, J.:
ommon carriers are bound to observe extraordinary diligence in their vigilance over the goods
entrusted to them, as required by the nature of their business and for reasons of public policy.
Consequently, the law presumes that common carriers are at fault or negligent for any loss or
damage to the goods that they transport. In the present case, the evidence submitted by petitioner
to overcome this presumption was sorely insufficient.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the October 9,
2002 Decision2 and the December 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR
CV No. 66028. The challenged Decision disposed as follows:
"WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial
Court of Manila, Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET ASIDE.
[Petitioner] is ordered to pay the [herein respondent] the value of the lost cargo in the amount of
₱565,000.00. Costs against the [herein petitioner]."4
The assailed Resolution denied reconsideration.
The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment
of 900 metric tons of silica sand valued at ₱565,000.5 Consigned to Vulcan Industrial and Mining
Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991, the
silica sand was placed on board Judy VII, a barge leased by Lea Mer.6 During the voyage, the
vessel sank, resulting in the loss of the cargo.7
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. 8 To recover the
amount paid and in the exercise of its right of subrogation, Malayan demanded reimbursement
from Lea Mer, which refused to comply. Consequently, Malayan instituted a Complaint with the
Regional Trial Court (RTC) of Manila on September 4, 1992, for the collection of ₱565,000
representing the amount that respondent had paid Vulcan.9
On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the
loss was a fortuitous event.10 The RTC noted that the vessel had sunk because of the bad weather
condition brought about by Typhoon Trining. The court ruled that petitioner had no advance
knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast
Guard to travel from Palawan to Manila.11
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for Manila.
Thus, the loss of the cargo was occasioned by petitioner’s fault, not by a fortuitous event.12
Hence, this recourse.13
The Issues
Petitioner states the issues in this wise:
"A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been
presented as a witness of the said report during the trial of this case before the lower court can be
admitted in evidence to prove the alleged facts cited in the said report.
"B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of
fact of the Regional Trial Court which clearly and unequivocally held that the loss of the cargo
subject of this case was caused by fortuitous event for which herein petitioner could not be held
liable.
"C. Whether or not the respondent, Court of Appeals, had committed serious error and grave
abuse of discretion in disregarding the testimony of the witness from the MARINA, Engr. Jacinto
Lazo y Villegal, to the effect that the vessel ‘Judy VII’ was seaworthy at the time of incident and
further in disregarding the testimony of the PAG-ASA weather specialist, Ms. Rosa Barba y
Saliente, to the effect that typhoon ‘Trining’ did not hit Metro Manila or Palawan."14
In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and
(2) whether the survey report of Jesus Cortez is admissible in evidence.
Transpo Cases 2
The Court’s Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous
event. This issue involves primarily a question of fact, notwithstanding petitioner’s claim that it
pertains only to a question of law. As a general rule, questions of fact may not be raised in a
petition for review.15 The present case serves as an exception to this rule, because the factual
findings of the appellate and the trial courts vary.16 This Court meticulously reviewed the records,
but found no reason to reverse the CA.
Rule on Common Carriers
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 -- when this service
is offered to the public for compensation.17 Petitioner is clearly a common carrier, because it offers
to the public its business of transporting goods through its vessels.18
Thus, the Court corrects the trial court’s finding that petitioner became a private carrier when
Vulcan chartered it.19 Charter parties are classified as contracts of demise (or bareboat) and
affreightment, which are distinguished as follows:
"Under the demise or bareboat charter of the vessel, the charterer will generally be considered as
owner for the voyage or service stipulated. The charterer mans the vessel with his own people and
becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish
possession, command and navigation thereof to the charterer; anything short of such a complete
transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all."20
The distinction is significant, because a demise or bareboat charter indicates a business
undertaking that is private in character. 21 Consequently, the rights and obligations of the parties to
a contract of private carriage are governed principally by their stipulations, not by the law on
common carriers.22
The Contract in the present case was one of affreightment, as shown by the fact that it was
petitioner’s crew that manned the tugboat M/V Ayalit and controlled the barge Judy
VII.23 Necessarily, petitioner was a common carrier, and the pertinent law governs the present
factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their vigilance over the goods
and the safety of the passengers they transport, as required by the nature of their business and for
reasons of public policy.24 Extraordinary diligence requires rendering service with the greatest skill
and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery. 25
Common carriers are presumed to have been at fault or to have acted negligently for loss or
damage to the goods that they have transported.26 This presumption can be rebutted only by proof
that they observed extraordinary diligence, or that the loss or damage was occasioned by any of
the following causes:27
"(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
"(2) Act of the public enemy in war, whether international or civil;
"(3) Act or omission of the shipper or owner of the goods;
"(4) The character of the goods or defects in the packing or in the containers;
"(5) Order or act of competent public authority."28
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that "no person shall be responsible for a fortuitous event
which could not be foreseen, or which, though foreseen, was inevitable." Thus, if the loss or
damage was due to such an event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a "fortuitous event" as follows: (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.29
Transpo Cases 2
To excuse the common carrier fully of any liability, the fortuitous event must have been the
proximate and only cause of the loss.30 Moreover, it should have exercised due diligence to
prevent or minimize the loss before, during and after the occurrence of the fortuitous event.31
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the present case. As the common
carrier, petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid
the loss, or that the loss had been occasioned by a fortuitous event -- an exempting circumstance.
It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the
loss of the cargo was due to the bad weather condition brought about by Typhoon
Trining.32 Evidence was presented to show that petitioner had not been informed of the incoming
typhoon, and that the Philippine Coast Guard had given it clearance to begin the voyage. 33 On
October 25, 1991, the date on which the voyage commenced and the barge sank, Typhoon
Trining was allegedly far from Palawan, where the storm warning was only "Signal No. 1."34
The evidence presented by petitioner in support of its defense of fortuitous event was sorely
insufficient. As required by the pertinent law, it was not enough for the common carrier to show
that there was an unforeseen or unexpected occurrence. It had to show that it was free from any
fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize or prevent the loss
before, during or after the alleged fortuitous event.35 Its witness, Joey A. Draper, testified that he
could no longer remember whether anything had been done to minimize loss when water started
entering the barge.36 This fact was confirmed during his cross-examination, as shown by the
following brief exchange:
"Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other precautionary measure[s] exercised by
you and the crew of Judy VII so as to prevent the los[s] or sinking of barge Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the officers and crew of tugboat
Ayalit and barge Judy VII x x x to prevent the sinking of barge Judy VII?
xxxxxxxxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on how to save the barge Judy
VII?
Joey Draper:
I can no longer remember sir, because that happened [a] long time ago."37
Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a
preponderance of evidence that the barge was not seaworthy when it sailed for
Manila.38 Respondent was able to prove that, in the hull of the barge, there were holes that might
have caused or aggravated the sinking.39 Because the presumption of negligence or fault applied
to petitioner, it was incumbent upon it to show that there were no holes; or, if there were, that they
did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna,
testified that the barge was in "tip-top" or excellent condition,40 but that he had not personally
inspected it when it left Palawan.41
The submission of the Philippine Coast Guard’s Certificate of Inspection of Judy VII, dated July 31,
1991, did not conclusively prove that the barge was seaworthy.42 The regularity of the issuance of
the Certificate is disputably presumed.43 It could be contradicted by competent evidence, which
respondent offered. Moreover, this evidence did not necessarily take into account the actual
condition of
the vessel at the time of the commencement of the voyage.44
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report45 prepared by Jesus Cortez, the cargo surveyor, should
not have been admitted in evidence. The Court partly agrees. Because he did not testify during
the trial,46 then the Report that he had prepared was hearsay and therefore inadmissible for the
purpose of proving the truth of its contents.
The Survey Report Not the Sole Evidence
The facts reveal that Cortez’s Survey Report was used in the testimonies of respondent’s
witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-
president of Toplis and Harding Company.47 Soriano testified that the Survey Report had been
Transpo Cases 2
used in preparing the final Adjustment Report conducted by their company. 48 The final Report
showed that the barge was not seaworthy because of the existence of the holes. Manlapig
testified that he had prepared that Report after taking into account the findings of the surveyor, as
well as the pictures and the sketches of the place where the sinking occurred. 49 Evidently, the
existence of the holes was proved by the testimonies of the witnesses, not merely by Cortez’
Survey Report.

Rule on Independently

Relevant Statement

That witnesses must be examined and presented during the trial,50 and that their testimonies must
be confined to personal knowledge is required by the rules on evidence, from which we quote:

"Section 36. Testimony generally confined to personal knowledge; hearsay excluded. –A witness
can testify only to those facts which he knows of his personal knowledge; that is, which are
derived from his own perception, except as otherwise provided in these rules."51

On this basis, the trial court correctly refused to admit Jesus Cortez’s Affidavit, which respondent
had offered as evidence.52 Well-settled is the rule that, unless the affiant is presented as a
witness, an affidavit is considered hearsay.53

An exception to the foregoing rule is that on "independently relevant statements." A report made
by a person is admissible if it is intended to prove the tenor, not the truth, of the
statements.54 Independent of the truth or the falsity of the statement given in the report, the fact
that it has been made is relevant. Here, the hearsay rule does not apply.55

In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of
the testimonies of respondent’s witnesses. The referral to Cortez’s Report was in relation to
Manlapig’s final Adjustment Report. Evidently, it was the existence of the Survey Report that was
testified to. The admissibility of that Report as part of the testimonies of the witnesses was
correctly ruled upon by the trial court.

At any rate, even without the Survey Report, petitioner has already failed to overcome the
presumption of fault that applies to common carriers.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED.
Costs against petitioner.

SO ORDERED.