G. Martini Ltd. vs. Macondray & Co. (GR 13972, 28 July 1919)
En Banc, Street (J): 7 concur

Facts: In September 1916, G. Martini, Ltd. arranged with Macondray & Co. Inc., as agents of the Eastern and Australian Steamship Company, for the shipment of 219 cases or packages of chemical products from Manila, Philippine Islands, to Kobe, Japan. On 15 September 1916 (Friday), Martini applied to Macondray 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.  The mate’s receipt did not come to Martini’s hand until Monday night, but as Martini 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, Martini was required to enter into the written obligation, calling itself a “letter of guarantee.” 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% of the invoice value of the goods. The 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.  Martini says that upon seeing the stamped “on deck at shipper’s risks”, 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 the cargo. Letters by Martini, warning Macondray that it would be held liable for loss or damage if the goods were stowed on deck, were dispatched by messenger, and upon receiving it, Macondray called Codina by telephone at about 4.30 p.m. and, referring to the communication just received, told him that  Macondray could not accept the cargo for transportation otherwise than on deck and that if Martini were dissatisfied, the cargo could be discharged from the ship. The goods were embarked at Manila on the steamship Eastern and were carried to Kobe on the deck of that ship, on 16 September 1916. 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.

An action was instituted by Martini to recover the amount of the damage thereby occasioned. In the Court of First Instance judgment was rendered in favor of Martini for the sum of P34,997.56, with interest from 24 March 1917, and costs of the proceeding. From this judgment, Macondray appealed.

The Supreme Court reversed the judgment appealed from and absolved Macondray from the complaint; with no express pronouncement will be made as to the costs of either instance.

1.    Damage was caused by water
The damage was caused by water, either falling in the form of rain or splashing aboard by the action of wind and waves.

2.    Paragraph 19 of the several bills of lading issued for transportation of the cargo
Paragraph 19 of the several bills of lading issued for transportation of the cargo reads “(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. ”

3.    Shipper ordinarily produce mate’s receipt to agents of ship’s company
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 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. Herein,

4.    Contents of the “Letter of Guarantee”
The “Letter of Guarantee” dated 16 September 1916, is of the tenor “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.”

5.    Martini did nothing to discharge cargo
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 Martini’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 Martini did nothing whatever looking towards the discharge of the cargo, not even so much as to notify Macondray that the cargo must come off, the proof relative to the practicability of discharge is inconclusive. If Martini had promptly informed Macondray 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 Martini’s contention that its consent had not been given for the goods to be carried on deck. Needless to say the Court attached no weight to the statement of Codina that he was unable to get Macondray by telephone in order to communicate directions for the discharge of the cargo.

6.    Inferred reasons why Martini allowed cargo to be carried away
It is inferable that one reason why Martini 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.

7.    Cordina not deceived into signing document; Guaranty permit stowage either on or under deck at ship’s option
There was no space in the hold to take the cargo and it was 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 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 refused to issue the bills of lading upon a guaranty signed by Codina upon another form, 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.

8.    Martini duly notified as to manner in which cargo was shipped, failed to give necessary instructions manifesting acquiescence
Although Martini 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 Macondray had reserved the right to carry it on deck, and when the bills of lading were delivered to Martini they plainly showed that the cargo would be so carried. Martini was duly affected with notice as to the manner in which the cargo was shipped. No complaint was made until after the bills of lading had been negotiated at the bank. When the manager of Martini 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. Even then there was time to stop the shipment, but Martini failed to give the necessary instructions, thereby manifesting acquiescence in the accomplished fact.  Martini must thus 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.

9.    Clean bill of lading and stowage of cargo on deck without consent; The Paragon
If a clean bill of lading had been issued and Martini 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.

10.    The Paragon; Loss by fortuitous event, general average
The goods, 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.

11.    The Paragon; Loss by fortuitous event, exceptions
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. Thus, 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.

12.    Van Horn vs. Taylor; When shipper had no notice of cargo being carried on deck
Van Horn vs. 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: “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.”

13.    The Thomas P. Thorn; Risk of damage to shipper when contract is to carry upon deck
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:  “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.”

14.    Lawrence vs. Minturn; Goods stowed on deck with consent of shipper jettisoned during storm entitled to general average
Lawrence vs. 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:  “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.’”

15.    Gould vs. Oliver; Goods loaded on deck with consent of merchant, Merchant has no remedy against shipper or master
In Gould vs. Oliver (4 Bing., N. C., 132), decided in the English Court of Common Pleas in 1837, Tindal, C.J., said:  “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.”

16.    When shipper consents to have goods carried on deck, he takes risks of damage or loss
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 had not been made a term of the contract.

17.    When shipowner may be held liable
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.

18.    Ship’s company may be liable for damage that may be avoided by use of precaution
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, supposed that the persons charged with the duty of transporting the 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.

19.    Burden of proof
It is incumbent on Martini, 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.

20.    Clark vs. Barnwell; Onus probandi
In Clark vs. Barnwell (12 How. [U.S.], 272; 13 L. ed., 985), the Supreme Court distinguishes with great precision between the situation where the burden of proof is upon the shipowner to prove that the loss resulted from an excepted peril and that where the burden of proof is upon the owner of the cargo to prove that the loss was caused by negligence on the part of the persons employed in the conveyance of the goods. The first two syllabi in Clark vs. Barnwell read as follows: “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.

21.    Clark vs. Barnwell; Damage due to dampness not the fault of master or owners
Notwithstanding 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 shipowner and master 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. 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.

22.    Damage caused by rain and sea water, Macondray not liable
Herein, the damage was caused by rain and sea water — the risk of which is inherently incident to carriage on deck — Macondray 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 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.

23.    Paragraph 19 of bills of lading would not protect ship from liability for consequences of negligent acts
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. This provision would not 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. vs. Compania Transatlantica and Atlantic, Gulf & Pacific Co. (38 Phil. Rep., 875), it may be collected that the carrier would be held liable in such case, notwithstanding the exemption contained in paragraph 19. But however that may be damages certainly cannot be recovered on the ground of negligence, even from a carrier, where negligence is neither alleged nor proved.

Saludo vs. CA (GR 95536, 23 March 1992)
Second Division, Regalado (J): 4 concur

Facts: After the death of Crispina Galdo Saludo, mother of Aniceto G. Saludo Jr., Maria Salvacion Saludo, Leopoldo G. Saludo, and Saturnino G. Saludo, in Chicago, Illinois, on 23 October 1976, Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment of the remains from Chicago to the Philippines. The funeral home had the remains embalmed and secured a permit for the disposition of dead human body on 25 October 1976. Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on 26 October 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Galdo Saludo. On the same date, 26 October 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the shipment with PAL thru the carrier’s agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill 079-01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of 27 October 1976, and from San Francisco to Manila on board PAL Flight 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of 29 October 1976. In the meantime, Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines from Chicago to California, and with PAL from California to Manila. She then went to the funeral director of Pomierski Funeral Home who had her mother’s remains and she told the director that they were booked with United Airlines. But the director told her that the remains were booked with TWA flight to California. This upset her, and she and her brother had to change reservations from UA to the TWA flight after she confirmed by phone that her mother’s remains would be on that TWA flight. They went to the airport and watched from the look-out area. She saw no body being brought. So, she went to the TWA counter again, and she was told there was no body on that flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her cousin reached her that her mother was on the West Coast. Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her mother’s remains. She was told they did not know anything about it. She then called Pomierski that her mother’s remains were not at the West Coast terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that the remains were on a place to Mexico City, that there were two bodies at the terminal, and somehow they were switched; he relayed this information to Miss Saludo in California; later C.M.A.S. called and told him they were sending the remains back to California via Texas. The following day, 28 October 1976, the shipment or remains of Crispina Saludo arrived in San Francisco from Mexico on board American Airlines. This shipment was transferred to or received by PAL at 7:45 p.m. This casket bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F. Padagas for shipment to the Philippines. The shipment was immediately loaded on PAL flight for Manila that same evening and arrived in Manila on 30 October 1976, a day after its expected arrival on 29 October 1976. In a letter dated 15 December 1976, the counsel of the Saludos informed Trans World Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispina Saludo, and of the discourtesy of its employees to Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on 10 June 1977 addressed to Philippine Airlines (PAL), the Saludos stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable explanation be given.  Both TWA and PAL denied liability.

A damage suit  was filed by the Saludos before the then Court of First Instance, Branch III, Southern Leyte, praying for the award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorney’s fees and costs of suit. The trial court absolved the two airline companies of liability.

The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, denied the Saludos’ motion for reconsideration for lack of merit. Hence, the petition for review on certiorari.

The Supreme Court affirmed the appealed decision, with the modification that an award or P40,000.00 as and by way of nominal damages is granted in favor of the Saludos to be paid by TWA.

1.    Factual findings of the Court of Appeals binding upon the Supreme Court; Exceptions
Only questions of law may be raised in a petition filed in the Supreme Court to review on certiorari the decision of the Court of Appeals. This being so, the factual findings of the Court of Appeals are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee;    (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.

2.    Distinction between question of law and question of fact; Test to determine
A question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts.  One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact.

3.    Issues warrant second look at facts
Since it is the soundness of the inferences or conclusions that may be drawn from the factual issues which are being assayed, the Court finds that the issues raised in the present petition indeed warrant a second look if this litigation is to come to a reasonable denouement. A discussion seriatim of said issues will further reveal that the sequence of the events involved is in effect disputed. Likewise to be settled is whether or not the conclusions of the Court of Appeals subject of the review indeed find evidentiary and legal support.

4.    Nature of bill of lading
A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. The two-fold character of a bill of lading is all too familiar: it is a receipt as to the quantity and description of the goods shipped and a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument.

5.    Designation of bill of lading immaterial
The designation is immaterial. Such instrument may be called a shipping receipt, forwarder’s receipt and receipt for transportation. Freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading.

6.    When bill of lading issued; Inverse order not prohibited by law
Since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. However, except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill, of lading even prior to actual possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter.

7.    Receipt a prima facie evidence of delivery to carrier
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence.

8.    Bill of lading vis-à-vis estoppel
An airway bill estops the carrier from denying receipt of goods of the quantity and quality described in the bill. However, a bill of lading may contain constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. However, as between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the true facts. Between the consignor of goods and a receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital.

9.    Explanation overcoming presumption that remains were delivered and received by TWA and PAL
Herein, Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on 26 October 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Galdo Saludo. On the same date, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such as flights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the shipment with PAL thru the carrier’s agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill 079- 01180454 Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of 27 October 1976, and from San Francisco to Manila on board PAL Flight 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of 29 October 1976.

10.    PAL’s explanation
On 26 October 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight PR-107 leaving San Francisco for Manila on 27 October 1976. PAL Airway Bill 079-01180454 was issued, not as evidence of receipt of delivery of the Cargo on 26 October 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on 27 October 1976. Actually, it was not until 28 October 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 7:45 p.m. on said date.

11.    Article 1736 NCC; Period where extraordinary responsibility observed by common carrier; When delivery made
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti.

12.    PAL and TWA not liable for switching of caskets prior to their receipt of agreed cargo
While the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage; only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked. Herein, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on 28 October 1976 and it was from that date that TWA and PAL became responsible for the agreed cargo under their undertakings in PAL Airway Bill 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them., and subsequent events caused thereby, TWA and PAL cannot be held liable.

13.    TWA without authority, even prohibited, to verify contents of casket
When the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA had to rely on the information furnished by the shipper regarding the cargo’s content. Neither could Air Care International and/or TWA open the casket for further verification, since they were not only without authority to do so, but even prohibited.

14.    Pomierski & Son delivered casket to CMAS, and not to TWA
It was not to TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of Crispina Saludo. TWA would have no knowledge therefore that the remains of Crispina Saludo were not the ones inside the casket that was being presented to it for shipment. TWA would have to rely on the representations of C.M.A.S. The casket was hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have opened such sealed casket just for the purpose of ascertaining whose body was inside and to make sure that the remains inside were those of the particular person indicated to be by C.M.A.S. TWA had to accept whatever information was being furnished by the shipper or by the one presenting the casket for shipment.And so as a matter of fact, TWA carried to San Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill 079-ORD-01180454, the airway bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with PAL, that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was transshipped from Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded by PAL on its flight for Manila. The foregoing points at C.M.A.S. as the one responsible for the switching or mix-up of the two bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of Crispina Saludo and a one-day delay in the delivery thereof to its destination.

15.    Right of carrier to require good faith on part of persons delivering goods; Right of carrier to know contents when it has reasonable ground to suspect goods are dangerous or of illegal character
It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, and enter into contracts with it, and inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents to carry them; and its failure to do so cannot defeat the shipper’s right to recovery of the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the shipper. In the absence of more definite information, the carrier has the right to accept shipper’s marks as to the contents of the package offered for transportation and is not bound to inquire particularly about them in order to take advantage of a false classification and where a shipper expressly represents the contents of a package to be of a designated character, it is not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see for itself.  However, where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods.

16.    Common carrier entitled to fair representation of nature and value of goods to be carried; Right of carrier to conduct an inspection
A common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the concomitant right to rely thereon, and further noting at this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of such information.  The consequent duty to conduct an inspection thereof arises in the event that there should be reason to doubt the veracity of such representations. Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that constitutes the basis of the common carrier’s liability.

17.    CMAS classified as forwarder, is an agent of the shipper and not of the carrier
While the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for TWA and PAL would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction. It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of Saludo for shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier’s agent, Air Care International. With its functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the freight but receives compensation from the shipper as his agent.

18.    CMAS is actual culprit
The facts of the case would point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS’ liability is the Saludos’ letter to and demanding an explanation from CMAS, regarding the statement of TWA and PAL laying the blame on CMAS for the incident, clearly allude to CMAS as the party at fault. This is tantamount to an admission by the Saludos that they consider TWA and PAL without fault, or is at the very least indicative of the fact that the Saludos entertained serious doubts as to whether TWA and PAL were responsible for the unfortunate turn of events.

19.    Court cannot grant damages at expense of TWA and PAL; Possible liability of CMAS best deferred to another time and addressed to another forum
The Saludos’ grief over the death of their mother was aggravated by the unnecessary inconvenience and anxiety that attended their efforts to bring her body home for a decent burial. But, as much as the Court would like to give them consolation for their undeserved distress, the Court is barred by the inequity of allowing recovery of the damages prayed for by them at the expense of TWA and PAL whose fault or negligence in the very acts imputed to them has not been convincingly and legally demonstrated. Neither was the Court prepared to delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and adjudication of the same is not what is presently at issue and is best deferred to another time and addressed to another forum.

20.    Carrier did not undertake to carry cargo aboard any specified aircraft
The carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway bill which provides that “It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any specified aircraft or over any particular route or routes or to make connection at any point according to any particular schedule, and Carrier is hereby authorized to select, or deviate from the route or routes of shipment, notwithstanding that the same may be stated on the face hereof. The shipper guarantees payment of all charges and advances.” Hence, when TWA shipped the body on an earlier flight and on a different aircraft, it was acting well within its rights. TWA can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions thereof.

21.    Terms clear, no interpretation needed
The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual provisions. There is no ambiguity in the terms of the airway bill to warrant the application of the rules on interpretation of contracts and documents.

22.    Interpretation of contracts
The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law between them. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. The various stipulations of a contract shall be interpreted together and such a construction is to be adopted as will give effect to all provisions thereof.  A contract cannot be construed by parts, but its clauses should be interpreted in relation to one another. The whole contract must be interpreted or read together in order to arrive at its true meaning. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily determine the character of a contract. The legal effect of the contract is not to be determined alone by any particular provision disconnected from all others, but in the ruling intention of the parties as gathered from all the language they have used and from their contemporaneous and subsequent acts.

23.    Interpretative rule in Rules of Court applies only if there is inconsistency between written and printed words
The interpretative rule in the Rules of Court that written words control printed words in documents may be considered only when there is inconsistency between the written and printed words of the contract. As previously stated, there was no ambiguity in the contract subject of this case that would call for the application of said rule. In any event, the contract has provided for such a situation by explicitly stating that the condition remains effective “notwithstanding that the same (fixed time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof.”  Herein, the typewritten specifications of the flight, routes and dates of departures and arrivals on the face of the airway bill does not constitute a special contract which modifies the printed conditions at the back thereof. The typewritten provisions of the contract are to be read and understood subject to and in view of the printed conditions, fully reconciling and giving effect to the manifest intention of the parties to the agreement.

24.    Statement on the face of the airway bill
The statement on the face of the airway bill properly and completely reads “Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof  the goods then being in apparent good order and condition except as noted hereon.”

25.    Carrier not an insurer against delay in transportation of goods in absence of a special contract
The oft-repeated rule regarding a carrier’s liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within a reasonable time, in the absence of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen.    This result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier is to be determined from the circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts.

26.    Mendoza vs. PAL; Delayed delivery of air cargo
In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: “The carrier does not obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route of the shipment without any liability therefore,” the Supreme Court ruled that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).

27.    Specification of flights does not constitute a special contract
To countenance a postulate that the specification of the flights and dates of departures and arrivals constitute a special contract (that would prevail over the printed stipulations at the back of the airway bill) would unduly burden the common carrier for that would have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract by the simple expedient of filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have been ready or willing to assume had it been timely advised thereof.

28.    Ordinary prudence required of person entering in contract
The fact that the challenged condition 5 was printed at the back of the airway bill militate against its binding effect on the Saludos as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such additional condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract would prompt even a cursory examination of any such conditions, terms and/or stipulations.

29.    Acceptance of bill of lading without dissent raises presumption that all terms brought to knowledge of shipper and agreed to by him
The acceptance of a bill of lading without dissent raises a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and acceptance, under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the conditions there to be found.

30.    When contract of adhesion void and unenforceable
A contract of adhesion may be struck down as void and unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing.

31.    Ong Yiu vs. CA; Contracts of adhesion not entirely prohibited
The case of Ong Yiu vs. Court of Appeals, et al. instructs that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. Herein, the Saludos, far from being the weaker party in the situation, duly signified their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be gainsaid that the Saludos were not without several choices as to carriers in Chicago with its numerous airways and airlines servicing the same.

32.    Condition serves as insulation to liability when flight routes and schedules change; Changes should be justified
Although Condition 5 of the airway bill is binding upon the parties to and fully operative in the present transaction, it does not mean, that the carriers can at all times whimsically seek refuge from liability in the exculpatory sanctuary of Condition 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves to insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the peculiar circumstances of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that specific routing and other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the carrier in the absence of specific routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due deference to the rights, interests and convenience of its customers.

33.    Common carrier has implicit duty to carry property within reasonable time and guard against delay; Liability of carrier for unreasonable delay
A common carrier undertaking to transport property has the implicit duty to carry and deliver it within a reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such neglect of duty. Herein, the delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of PAL and TWA.

34.    TWA knew urgency of shipment and actually carried the remains on earlier flight
Herein, TWA knew of the urgency of the shipment by reason of this notation on the lower portion of the airway bill: “All documents have been certified. Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO.” Accordingly, TWA took it upon itself to carry the remains of Crispina Saludo on an earlier flight, which it could do under the terms of the airway bill, to make sure that there would be enough time for loading said remains on the transfer flight on board PAL.

35.    No showing that personnel treated the Saludos in humiliating or arrogant manner; What constitutes rude or discourteous conduct
There was no showing of any humiliating or arrogant manner with which the personnel of both TWA and PAL treated the Saludos. Even their alleged indifference is not clearly established. The initial answer of the TWA personnel at the counter that they did not know anything about the remains, and later, their answer that they have not heard anything about the remains, and the inability of the TWA counter personnel to inform the Saludos of the whereabouts of the remains, cannot be said to be total or complete indifference to the latter. At any rate, it is any rude or discourteous conduct, malfeasance or neglect, the use of abusive or insulting language calculated to humiliate and shame passenger or bad faith by or on the part of the employees of the carrier that gives the passenger an action for damages against the carrier, and none of the above is obtaining in the present case.

36.    Although not in bad faith, actuations of TWA’s employees leave must to be desired
The manner in which TWA’s employees dealt with the Saludos was not grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay the basis for an award of the damages claimed. It must however, be pointed out that the lamentable actuations of TWA’s employees leave much to be desired, particularly so in the face of the Saludos’ grief over the death of their mother, exacerbated by the tension and anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable period of time what happened to her remains.

37.    Airline companies admonished to require personnel to be more accommodating towards customers and general public; Contract of carriage different from other contractual relations, and is not a mere contract for transportation but also treatment with courtesy and consideration
Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. A contract to transport passengers is quite different in kind and degree from any other contractual relation, and generates a relation attended with public duty. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of passengers. Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics for revenue.

38.    Apathy not legally reprehensible but is morally deplorable
Herein, the Saludos were not to be regaled with extra special attention. They were, however, entitled to the understanding and humane consideration called for by and commensurate with the extraordinary diligence required of common carriers, and not the cold insensitivity to their predicament. The airline’s counter personnel were totally helpless about the situation. Common Sense could and should have dictated that they exert a little extra effort in making a more extensive inquiry, by themselves or through their superiors, rather than just shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern communications equipment readily available to them, which could have easily facilitated said inquiry and which are used as a matter of course by airline companies in their daily operations, their apathetic stance while not legally reprehensible is morally deplorable.

39.    No attribution of discourtesy or indifference against PAL
No attribution of discourtesy or indifference has been made against PAL by the Saludos and, in fact, Maria Saludo testified that it was to PAL that they repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mother’s remains would be on the same flight to Manila with them.

40.    When moral and exemplary damages, or attorney’s fees, awarded
Moral damages may be awarded for willful or fraudulent breach of contract or when such breach is attended by malice or bad faith. However, in the absence of strong and positive evidence of fraud, malice or bad faith, said damages cannot be awarded.  Neither can, there be an award of exemplary damages nor of attorney’s fees    as an item of damages in the absence of proof that defendant acted with malice, fraud or bad faith.

41.    Censurable conduct of TWA employees do not approximate dimensions of fraud, malice or good faith
The censurable conduct of TWA’s employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or societal culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience.

42.    Award of nominal damages warranted; Articles 2221 and 2222 NCC
The facts show that the Saludos’ right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. In the exercise of the Court’s discretion, the Court find an award of P40,000.00 as nominal damages in favor of the Salufos to be a reasonable amount under the circumstances of the present case.

Eastern Shipping Lines vs. CA (GR 80936, 17 October 1990)
Third Division, Gutierrez Jr. (J): 3 concur, 1 on leave

Facts: On 24 February 1980, the Nanyo Corporation of Kobe, Japan shipped a cargo consisting of 5 packages of supplies and materials for “1200 W x 2500 LMM Apron Feeder and 200 W x 5850 LMM Apron Feeder,” covered by a bill of lading. The cargo was loaded on board the S/S Eastern Adventure destined for Manila. The vessel is operated by Eastern Shipping Lines. The bill of lading was consigned to “Shipper’s Order”, with “Address Arrival Notice to Consolidated Mines Inc. 6799 Ayala Avenue, Makati, Metro Manila, Philippines.”  The cargo arrived in Manila on 4 March  1980. A few days later, on the basis of an Undertaking for Delivery of Cargo but without the surrender of the original bill of lading presented by Consolidated Mines (CMI), Eastern Shipping released the shipment in question to CMI. In said guaranty, CMI undertook to indemnify Eastern Shipping “harmless from all demands, claiming liabilities, actions and expenses” About 5 ½ months later, or specifically on 19 August 1980, Eastern Shipping received from Hongkong and Shanghai Bank (HSBC), a letter stating that HSBC holds title to the goods and has possession of the full set of original bills of lading, and that it is unable to locate the cargo and that it appeared that Eastern Shipping has released it to CMI. Considering that there was no reply from Eastern Shipping, HSBC wrote another demand letter through counsel dated 29 October 1980 in contemplation of a legal action against Eastern Shipping should it not make good HSBC’s claim. On 23 December 1980 CMI wrote a letter to HSBC admitting that they received the shipment in question due to a guarantee executed by them, and requested HSBC that legal action be held off for at least 30 days, promising to settle its account with HSBC from the funds it was expecting from Benguet Corporation. On 14 January 1981, Eastern Shipping wrote a reply to HSBC, stating therein that it regrets releasing the cargo without the consent of HSBC’s client, but that it was constrained to release the same in view of the consignee’s strong representation and guarantee that they will settle their obligation with the bank. Eastern Shipping requested that HSBC advise the former if the consignee be unable to comply with its requirement after 30 days.

CMI having failed to fulfill its promise, HSBC filed a complaint before the then CFI of Rizal against Eastern Shipping praying for actual and compensatory damages in the amount of $168,521.16 representing the value of the goods covered by the Bill of Lading, exemplary damage in the amount deemed just by the court and P50,000 attorney’s fees plus expenses of litigation and judicial costs. On 15 August 1981, Eastern Shipping filed a third party complaint against CMI seeking reimbursement from the latter of whatever pecuniary obligations Eastern Shipping may be liable to HSBC, as well as moral damages. During trial, CMI filed a Motion to Stay Action in view of the pendency of involuntary insolvency proceedings commenced against it in the meantime by its creditors which included HSBC. This motion was denied by the trial court. On the basis of the evidence presented by HSBC and Eastern Shipping, as CMI failed to present its evidence, the court on 15 January 1985 rendered judgment in favor HSBC and against Eastern Shipping, ordering the latter to pay the sum of $168,521.16 or its equivalent in Philippine Currency representing the value of the goods covered by the Bill of Lading plus interest thereon from the filing of the complaint, until fully paid; P20,000.00 as and for attorney’s fees and to pay the costs. With respect to the Third Party Complaint, the Court rendered judgment in favor of Eastern Shipping and against the CMI ordering the latter to pay all the liabilities of the former in favor of HSBC consisting of the value of the goods covered by the Bill of Lading in the sum of $168,521.16 or its equivalent in Philippine Currency plus interest from the filing of the third party complaint until fully paid; attorney’s fees of P20,000.00 and to pay the costs.

Its motion for reconsideration having been denied, Eastern Shipping appealed to the Court of Appeals. On 30 June 1987, the Court of Appeals rendered the decision affirming the appealed decision in toto. Eastern Shipping filed a motion for reconsideration, but the same was denied on 24 November 1987. Hence, the petition for review.

The Supreme Court granted the petition, set aside the decision and order of the Court of Appeals, dismissed the complaint before the trial court for lack of merit but without prejudice to HSBC pursuing its claims against CMI in the proper proceedings.

1.    Bill of lading refer to CMI, not HSBC, as consignee
At the outset, the Bill of Lading which was issued by the carrier but contained articles furnished by the Shipper, shows on its face that the Shipment is consigned “TO SHIPPER’S ORDER” with “ADDRESS ARRIVAL NOTICE TO CONSOLIDATED MINES INC. 6799 AYALA AVE. MAKATI, METRO MANILA, PHILIPPINES.” Nowhere did the Bill of Lading refer to HSBC as the consignee or the one to be notified. The foregoing information, without more, in effect makes CMI for all practical intents and purposes the party named and ordered to receive the goods.

2.    Eastern Shipping not expected to look beyond face of bil of lading
Eastern Shipping, not being privy to any transaction between HSBC and CMI, cannot be expected to look beyond what is contained on the face of the bill of lading and guess which of the many banks in Metro Manila or some other unrevealed corporation could possibly be the consignee. To consider otherwise would not be sound business practice as Eastern Shipping would be forced to wait for the real owner of the goods to show up, perhaps in vain. The shipment consisted of machinery materials and supplies for a mining company named in the bill of lading. In the absence of contrary instructions or at least knowledge of other facts, the carrier is not ordinarily expected to deliver mining equipment to an unnamed or unknown party lurking for several months.

3.    Nature of Bill of lading; Macondray vs. Acting Commissioner of Customs, Phoenix Assurance vs. US Lines
In Macondray and Company Inc. v. Acting Commissioner of Customs (62 SCRA 427 [1975]), it was held that a bill of lading is ordinarily merely a convenient commercial instrument designed to protect the importer or consignee. And in Phoenix Assurance Co., Ltd. v. United States Lines (22 SCRA 674 [1968]), it was held that as a receipt, a bill of lading recites the place and date of shipment, describes the goods as to quantity, weight, dimensions, identification marks, condition, quality and value.

4.    CMI owner of goods in question; Other evidences
(1)  HSBC expressly admitted in its complaint that “pursuant to the Bill of lading the shipment was issued ‘To Shipper’s Order.’” It never alleged therein that it was the consignee of the shipment in question. Similarly, by HSBC’s own documentary evidence, CMI is the buyer-owner of the shipment. (2) the Buyer referred to in the Certificate  issued by the shipper Nanyo Corporation should perforce refer to CMI, as that it certified that the Original Consular Invoice had been airmailed directly to Buyer, and certified that advance copies of Commercial Invoice Packing List and Bill of Lading were airmailed directly to Buyer. (3) HSBC has established by its own documentary evidence, more particularly, the Consular Invoice dated 25 February 1980, issued in Tokyo, Japan by the Foreign Service of the Republic of the Philippines, that the consignee of the shipment in question is CMI. Hence, in view of the admissions of HSBC, exceptional circumstances allow a deviation from the general rule regarding the surrender of the bill of lading. The rule cannot always be absolute.

5.    Section 3, Rule 128, Rules of Court; Admissibility of evidence
Section 3, Rule 128, of the Rules of Court provide that “Evidence is admissible when it is relevant to the issue and is not excluded by these rules.”

6.    Section 2, Rule 129, Rules of Court; Judicial admissions
Section 2, Rule 129, of the Rules of Court provide that “Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistakes.”

7.    Article 353 of Code of Commerce
Assuming that CMI may not be considered consignee, Eastern Shipping cannot be faulted for releasing the goods to CMI under the circumstances, due to its lack of knowledge as to who was the real consignee in view of CMI’s strong representations and letter of undertaking wherein it stated that the bill of lading would be presented later. This is precisely the situation covered by the last paragraph of Article 353 of the Code of Commerce, i.e. “If in case of loss or for any other reason whatsoever, the consignee cannot return upon receiving the merchandise the bill of lading subscribed by the carrier, he shall give said carrier a receipt of the goods delivered this receipt producing the same effects as the return of the bill of lading.”

8.    State Bonding and Insurance vs. Manila Port Service
In State Bonding and Ins. Co. Inc. v. Manila Port Service, (11 SCRA 400 [1964]), it was held that the arrival of shipment is deemed admitted by an allegation of delivery to the consignee.

9.    Eastern Shipping in good faith
Under the special circumstances of the present case, equity favors Eastern Shipping which proved that it was in good faith while both CMI and HSBC cannot claim the same. While the goods in question were released on 4 March 1980 the records show that HSBC received the original bill of lading, as per testimony of its witness Ederlina Crisostomo, only on April 1980 or long after the goods had been released. This circumstance goes against the claims of HSBC. Thus HSBC in its original demand letter stated, “We are unable to locate the cargo and it would appear that it has been released by you to Consolidated Mines, Inc.” This proves that it had fore-knowledge of the prior release to CMI. And to make things worse, HSBC, despite CMI’s admission that it received the goods, sued only Eastern Shipping while at the same time claiming for the value of the goods in the involuntary insolvency proceedings of CMI which the Bank itself, together with others, initiated. Only later developments led to the present case.

10.    Article 1736 NCC; Article uses conjunction “or”
Article 1736 of the Civil Code of the Philippines which provides that “the extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until 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.” Herein, HSBC wittingly or unwittingly overlooked the fact that the same article uses the conjunction “or” in reference to whom the goods may be delivered, that is, to the consignee, or to the person who has a right to receive them.

11.    HSBC more negligent party as against Eastern Shipping
It becomes more evident that HSBC is the more negligent party as against Eastern Shipping when aside from having allowed CMI to be designed in the bills of lading, as the party to be notified, it allowed the latter to be designated as the consignee in the Consular Invoice, the original of which was directly furnished to CMI by and as certified to by the shipper Nanyo Corporation. With such vast powers, akin to an agent of HSBC, CMI acted within its authority, and even if it acted on its own.

12.    Article 1883 NCC
“If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted, neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent.”

13.    Bad faith by both HSBC and CMI
For almost 6 months from the arrival of the goods HSBC did not do anything to claim the cargo. It could not possibly be left around lying idle when on the face of the bill of lading, there was a named owner to be notified. On the other hand, CMI secured the release of the goods through misrepresentation before Eastern Shipping without settling its account with HSBC and thereafter did not bother to present evidence before the trial court, leaving Eastern Shipping holding an empty bag as it were. These circumstances also prove bad faith on the part of CMI. Under the exceptional circumstances and applying especially strong considerations of equity, Eastern Shipping did not commit any fault sufficient to render it liable to HSBC. On the contrary, it was HSBC and CMI who were obviously in bad faith in dealing with Eastern Shipping.

De Villata vs. JS Stanley (GR 8154, 20 December 1915)
En Banc, Carson (J): 4 concur, 1 concur in result

Facts: Joaquin de Villata is the master of SS Vizcaya of the coastwise trade. As such captain, on 6 July 1912, when sailing from the port of Gubat to the port of Legaspi, Philippine Islands, he failed to notify the postmaster of the former port, in advance, of his intended sailing, and therefore failed to carry the mails between said ports. The Collector of Customs (JS Stanley, Acting Insular Collector of Customs) was threatening to suspend or revoke the license of de Villata by reason of said facts, under and by virtue of the terms of Customs Administrative Circular 627. De Villata filed an application for a writ of prohibition directed against the Collector of Customs to restrain him from enforcing Customs Administrative Circular 627 against de Villata. The case was submitted to the Supreme Court upon de Villata’s demurrer to Stanley’s answer to the complaint.

The Supreme Court held that the complaint, unless amended, must be dismissed, on the ground that no cause of action is developed by the pleadings. The Court ordered that 20 days thereafter, the complaint be dismissed at the costs of the de Villata unless amended so as to set forth a cause of action, and 10 days thereafter let the record be filed in the archives of original actions in the Supreme Court.

1.    Customs Administrative Circular 627 (Prescribing regulations for the transportation of mails on vessels engaged in the Philippine coastwise trade, 24 December 1910)
[par 1] Every vessel to which a license is granted under the provisions of section 117 of Act No. 355 to engage in the coastwise trade of the Philippine Islands . . . shall carry mail tendered for transportation in a safe and secure manner, and shall keep the same free from injury by water or otherwise. Masters, owners, or agents of vessels shall give prompt advance notice of the intended sailing thereof to the postmaster at each port of departure in ample time to permit the making up of mails for dispatch. Any changes in such sailings shall also be promptly communicated to the postmaster.  [par 2] Mails carried by vessels shall be delivered at ports of call on shore or on a wharf immediately after arrival and prior to the discharge or lading of any cargo, and shall be taken from shore or wharf just before the vessel’s sailing time, except at ports where the postal authorities have arranged for ship-side delivery. [par 3] Each vessel mentioned in the preceding paragraph shall be provided with a lock box having a slot in the top or side thereof to receive letters, papers, or other mail matter delivered on board the vessel after the mails have been closed at the post office for that particular voyage. All mail matter deposited in such box shall be delivered by the master, or his representative, to the postmaster at a port of call where a post office is located. [par 4] The master, owner, agent, or other person in charge of a vessel shall be legally liable for the loss of or damage to mail in his custody, or in the custody of his representatives or agents. [par 5] The license of the master of any vessel engaged in the coastwise trade of the Philippine Islands may be suspended or revoked by the Insular Collector of Customs for failure to comply with or strictly enforce the regulations governing the transportation of mails.  [par 6] Postmasters throughout the Islands are requested to promptly report to this office in writing any unnecessary delay in the handling of mails transported by vessels, or failure on the part of masters thereof to comply with the requirements of this circular. [par 7] Philippine customs officers shall give due publicity to the terms of this circular.”

2.    Decree of 4 August 1863
A decree dated 4 August 1863, provided as follows: “In the matter of the investigation made for the application of the provisions now in force relative to the notice to be given in advance to the post office of the sailings of ships, in the exceptional case of a ship just arrived in port and which has to sail immediately for the convenience of the interests of its owners or consignees,  Having considered the ordinances relating to packet boats and other royal orders and superior decrees imposing upon the captain of every ship the duty of giving notice to the postoffice four days in advance at least of the date they are to sail and the port of destination,  Considering that the actual application of such provisions might affect in a remarkable way the commercial interests in the very exceptional case spoken of, where the ship just anchored should have to set sail again before the period of four days referred to,  The capitamia del puerto, the administracion general de aduanas, comandancia general de carabineros and the administracion general de correos, having been heard,  This superior civil government ordains: That when a ship falls within the precise exceptional case raised by the within resolution, its captain shall only be required to give, from the very instant of determining the sailing of the ship, immediate notice to the postoffice stating the day and hour in which the sailing must be made, For the purposes that may be proper, let this decree be communicated to the comandancia general de marina, capitania del puerto de Manila and Cavite and the administracion general de correos, and let same be published in the Gazette for general information. Report to the government of H. M. and file.” (Berriz, Diccionario de la Administracion de Filipinas, 1888, vol. 1, p. 516.)

3.    Decree of 13 January 1876
A later decree dated 13 January 1876, was as follows: “Having considered the consultation made by the comandancia general de marina proposing the amendment of section 7 of the superior decree of December 18, 1868, relative to the duty imposed upon shipowners or consignees of steamers whether national or foreign, plying between this port and the other ports of the Archipelago or China and vice versa, of giving four days’ notice before the day they are to sail, to their great prejudice; and Having considered the reports submitted by the direccion general de administracion civil and the administracion general de correos:  Considering the fact that since that superior order was enforced, the fortunate increase of steamers and consequently the frequent repetition of voyages made by them, is evident, and therefore, this circumstance alone would change the object or reason which at that time made it necessary to impose the duty referred to in said section 7.  Considering the importance and value at certain times of the prompt clearance of one of its ships to a commercial firm which is at all times worthy of protection by the government.  This general government ordains as follows: (1) The period of four days prescribed by section 7 of the superior decree of December 18, 1868, is reduced to two. (2) The shipowners or consignees of steamers, whether national or foreign, plying between this port and the other ports of the archipelago or China, and vice versa, shall give notice to the captain of the port’s before midday, in order that the post office may have immediate notice of the sailing at an hour that may enable it to insert same in the Gazette of next day, and the ship may sail in the afternoon of the day next following.  (3) The office of the captain of the port will report daily to the administracion general de correos all ships that at 12 o’clock, noon, may have requested the visita de salida and in the event of there being none a report shall be sent stating that fact.  (4) The report of the captain of the port’s office must be at that administracion general before 2 o’clock, p. m., every day. (5) Captains and consignees of ships can in no case request the visita de salida without the period of forty-eight hours intervening between the time they report and the visit, so as to give opportune notice to the administracion de correos. (6) The centro de correos shall send the notices to the Gazette and other newspapers, and shall post them besides on a bulletin board at the door of the postoffice.” (Berriz, Diccionario de la Administracion de Filipinas, 1888, vol. 1, pp. 528, 529.)

4.    Vessels required to carry mails under Spanish sovereignty
An examination of its terms leaves little room for doubt that under Spanish sovereignty the Government of these Islands assumed and exercised the right to prescribe reasonable regulations requiring vessels trading in the Philippine Islands to carry the mails and to give due notice of their sailing hours to the postal authorities. Indeed it is a matter of common knowledge that, under the laws and regulations in force at the time of the change of sovereignty, all vessels engaged in the coasting trade were required to carry the mails, and to furnish the postal authorities with due notice of their sailing hours. There is no allegation in the pleadings denying the continuance in force of this practice under American sovereignty down to the date of the issuance of the above cited Customs Administrative Circular.

5.    Nothing in Philippine Bill of Rights depriving government power to make and enforce regulations
There is nothing in the Philippine Bill of Rights which deprived the Philippine Government of the power to make and enforce reasonable regulations of this nature with which it was clothed prior to the enactment of that statute.

6.    Regulations and control exercised on vessels licensed to engage in interisland trade not in contravention of Philippine Bill of Rights or US Constitution
Vessels licensed to engage in the interisland trade are common carriers; and that as to them, there is an extensive field of regulation and control which may properly be exercised by the state without contravention of the provisions of the Philippine Bill of Rights or the Constitution of the United States; and this notwithstanding the fact that the enforcement of such regulations may tend to restrict their liberty, and to control the free exercise of their discretion in the conduct of their business to a degree and in a form and manner which would not be tolerated under the constitutional guarantees with relation to the private business of a private citizen.

7.    Business of common carriers affected with public interest
Common carriers exercise a sort of public office, and have duties to perform in which the public is interested. Their business is, therefore, affected with a public interest, and is subject to public regulation.

8.    As business is of public employment, state may impose reasonable regulations
The nature of the business in which they are engaged as a public employment, is such that it is clearly within the power of the state to impose such just and reasonable regulations thereon as in the interest of the public it may deem proper. Of course such regulations must not have the effect of depriving an owner of this property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise. But aside from such constitutional limitations, the determination of the nature and extent of the regulations which should be precribed rests in the hands of the legislator. (New Jersey Steam Nav. Co. vs. Merchants’ Bank, 6 How., 344, 382; Munn vs. Illinois, 94 U. S., 113, 13().)

9.    Power to regulate not power to destroy, limitation not confiscation
The power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation. Under pretense of regulating fares and freights the state can not require a railroad corporation to carry persons or property without reward. Nor can it do that which in law amounts to a taking of private property for public use without just compensation, or without due process of law. (Chicago etc. R. Co. v.s. Minnesota, 134 U. S., 418; Minneapolis Eastern R. Co. vs. Minnesota, 134 U. S., 467.)

10.    Judicial interference does not occur unless the case presents flagrant attack upon rights and property in guise of regulation
The judiciary ought not to interfere with regulations established under legislative sanction unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for public use without such compensation as under all the circumstances is just both to the owner and to the public, that is, judicial interference should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights and property under the guise of regulations as to compel the court to say that the regulations in question will have the effect to deny just compensation for private property taken for the public use. (Chicago etc. R. Co. vs. Well- man, 143 U. S., 339; Smyth vs. Ames, 169 U. S., 466, 524; Henderson Bridge Co. vs. Henderson City, 173 U. S., 592, 614.) ” (Fisher vs. Yangco Steamship Co., 31 Phil. Rep., 1.)

11.    Regulation is reasonable
A regulation requiring all coasting vessels licensed to engage in the interisland trade to carry the mails and give prompt advance notice in all cases of intended sailings in ample time to permit dispatch of mails, and of changes of sailing hours, (manifestly with a view to make it possible for the post-office officials to tender mail for transportation at the last practicable moment prior to the hour of departure) is a reasonable regulation, made in the interests of the public, which the state has a right to impose when it grants licenses to the vessels affected thereby.

12.    Governments incur considerable expenditures to secure safety of vessels plying in Philippine waters
Considerable expenditures of public money have been made in the past and continue to be made annually for the purpose of securing the safety of vessels plying in Philippine waters. To this end lighthouses have been erected; wharfs and docks constructed; and buoys, bells and other warning signals maintained at points of danger. Largely for the purpose of conveying timely warnings of threatening weather to those that go down into the sea in ships, appropriations are made for the support of a Weather Bureau. Coast and geodetic surveys are conducted to keep them informed as to the dangers hidden beneath the treacherous sea. Licensed pilots are provided to insure safe entry into the dangerous ports and harbors throughout the Islands. Maps, charts and general information as to conditions affecting travel by water are kept up to date, and furnished all vessels having need for them. In a word, the Government unhesitatingly spends a considerable part of the public funds wherever and whenever it appears that the safety and even the convenience of the shipping in Philippine waters will be advanced thereby. Can it be fairly contended that a regulation is unreasonable which requires vessels licensed to engage in the interisland trade, in whose behalf the public funds are so lavishly expended, to hold themselves in readiness to carry the public mails when duly tendered for transportation, and to give such reasonable notice of their sailing hours as will insure the prompt dispatch of all mails ready for delivery at the hours thus designated?

13.    Regulations only begin to affect business of shipowner when it enters into employment as common carrier
It is only when the owner of a vessel enters the quasi-public employment of a common carrier that regulations of this kind begin to affect or control the conduct of his business, and he cannot be heard to complain that he is deprived of his property without due process of law when he elects, of his own free will and accord, to secure a license as a common carrier in Philippine waters, and to engage in a business, one of the conditions of which is that he will comply with such regulations. Under the law in force in these Islands at the time of the change of sovereignty, and of the enactment of the Act of Congress the owners of all licensed coasting vessels were required to comply with regulations of this character, as one of the conditions upon which they were permitted to engage in the quasi-public employment of carriers in the interisland trade. No one is compelled to comply with these regulations unless he voluntarily enters upon the business which they affect, and if he does enter such business he cannot; claim that he is unlawfully deprived, without due process of law, of that which he voluntarily agrees to surrender.

14.    Uniformity of taxes (assuming)
If regulations of this kind be regarded as in the nature of a tax upon the vessels affected thereby, the tax cannot be attacked for lack of uniformity so long as it is laid uniformly upon all the members of the class to which it extends. The only limitation upon the authority conferred is uniformity in laying the tax, and uniformity does not require the equal application of the tax to all persons or corporations who may come within its operation, but it is limited to geographical uniformity.

15.    Distinction between “equality” and “uniformity”
The distinction between “equality” and “uniformity” in taxation is thus stated in Black on Constitutional Law, page 392, citing Miller, Const., 241: “In practice, therefore, ‘equality’ in taxation means to be called upon to pay taxes, which taxes shall be strictly proportioned to the relative value of their taxable property. And ‘uniformity’ in taxation means that all taxable articles or kinds of property, of the same class, shall be taxed at the same rate. It does not mean that lands, chattels, securities, incomes, occupations, franchises, privileges, necessities, and luxuries shall all be assessed at the same rate. Different articles may be taxed at different amounts, provided the rate is uniform on the same class everywhere, with all people, and at all times. “

16.    Power to impose taxes unlimited in force
The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is sub.iect to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. It reaches to every trade or occupation; to every object of industry, use, or enjoyment; to every species of possession; and it imposes a burden which, in case of failure to discharge it, may be followed by seizure and sale or confiscation of property. No attribute of sovereignty is more pervading, and at no point does the power of the Government affect more constantly and intimately all the relations of life than through the exactions made under it. . . .

17.    Power to tax rests upon necessity, and is inherent in every sovereignty
The power to tax rests upon necessity, and is inherent in every sovereignty. The legislature of every free State will possess it under the general grant of legislative power, whether particularly specified in the constitution among the powers to be exercised by it or not. No constitutional government can exist without it, and no arbitrary government without regular and steady taxation could be anything but an oppressive and vexatious despotism, since the only alterative to taxation would be a forced extortion for the needs of government from such persons or objects as the men in power might select as victims. Chief Justice Marshall has said of this power: ‘The power of taxing the people and their property is essential to the very existence of government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the government may choose to carry it.

18.    Security against abuse of power of taxation
The only security against the abuse of this power is found in the structure of the government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. The people of a State, therefore, give to their government a right of taxing themselves and their property; and as the exigencies of the government cannot be limited, they prescribe no limits to the exercise of this right, resting confidently on the interest of the legislator, and on the influence of the constituents over their representative, to guard them against its abuse.’

19.    Scope of power of legislation and taxation
The power of legislation, and consequently of taxation, operates on all persons and property belonging to the body politic. This is an original principle, which has its foundation in society itself. It is granted by all for the benefit of all. It resides in the government as part of itself, and need not be reserved where property of any description, or the right to use it in any manner, is granted to individuals or corporate bodies. However absolute the right of an individual may be, it is still in the nature of that right that it must bear a portion of the public burdens, and that portion must be determined by the legislature. This vital power may be abused; but the interest, wisdom, and justice of the representative body, and its relations with its constituents, furnish the only security where there is no express contract against unjust and excessive taxation, as well as against unwise legislation generally.

20.    Judicial department unfit to inquire on degree of taxation
It is unfit for the judicial department to inquire what degree of taxation is the legitimate use, and what degree may amount to the abuse, of the power. The judicial cannot prescribe to the legislative department of the government limitations upon the exercise of its acknowledged powers. The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts, but to the people by whom its members are elected. So if a particular tax bears heavily upon a corporation or a class of corporations, it cannot, for that reason only, be pronounced contrary to the Constitution. (Veazie Bank vs. Fenno, 8 Wall., 533, 548.)

21.    Judicial department charged with duty of enforcing constitution; Separation of powers
As a result of our written constitution, it is axiomatic that the judicial department of the government is charged with the solemn duty of enforcing the Constitution, and therefore in cases properly presented, of determining whether a given manifestation of authority has exceed the power conferred by that instrument, no instance is afforded from the foundation of the government where an act, which was within a power conferred, was declared to be repugnant to the Constitution, because it appeared to the judicial mind that the particular exertion of constitutional power was either unwise or unjust. To announce such a principle would amount to declaring that in our constitutional system the judiciary was not only charged with the duty of upholding the Constitution but also with the responsibility of correcting every possible abuse arising from the exercise by the other departments of their conceded authority. So to hold would be to overthrow the entire distinction between the legislative, judicial and executive departments of the government, upon which our system is founded, and would be a mere act of judicial usurpation. (McCray vs. U. S., 195 U. S., 27.)

22.    Presumed intention of Collector in circular
The provisions of paragraph I require trading vessels to carry mails tendered for transportation in a safe and secure manner. This does not necessarily require these vessels to accept and to carry mail free of charge. It is only when goods are lawfully tendered that common carriers may be compelled to carry them, and it must be presumed that the author of the circular had in mind a lawful tender of mails when he wrote this paragraph. If a vessels may not be required to carry mail without direct compensation, or a contract providing for such compensation, it must be presumed that the Collector did not intend to require vessels to accept mail without tender of reasonable compensation for such services or provision for payment by contract or otherwise, and that this paragraph was intended merely as a regulation requiring the acceptance of all mail thus lawfully tendered and the safe transportation of such mail when accepted for transportation.

23.    No fact or allegation in pleading that Collector of Customs is compelling vessel’s master to carry mail free of charge
There is absence of the necessary allegations setting forth that the Collector of Customs has compelled and is threatening to compel the master of the Viscaya to carry mails free of charge. It does not appear from the pleadings, nor in fact, that any attempt has been made or is being made by the Collector to compel the master of the Vizcaya, over his protest, to carry mail without compensation. The allegations of the complaint disclose merely that he threatened to enforce the regulations of the circular requiring the master of the Vizcaya to make provision for the transportation of the mails when tendered, and for the giving of reasonable notice as to sailing hours upon which such tender might be based.

24.    Section 3 of Act 355
Section 3 of Act 355 provides that the customs service shall embrace, among other things, (1) the documenting of vessels built or owned in the Philippine Islands, etc.; (2) the exclusion of foreign vessels from the coastwise trade; (3) the entry and clearance of vessels; (4) the enforcement of such regulation of commerce, foreign and coastwise, as shall be established by competent authority; and (5) the regulation of the carriage of passengers by water and the licensing of vessels therefor.

25.    Section 7 of Act 355
Section 7 of Act 355 provides, in part, as follows: “The Insular Collector shall have general authority throughout the Philippine Islands in all matters embraced within the jurisdiction of the Customs Service.”

26.    Section 19 of Act 355
Section 19 of Act 355 provides, in part, as follows: “The Insular Collector shall, from time to time, make and promulgate general rules and regulations, not inconsistent withlaw, subject to the approval of the Secretary of Finance and Justice:  (1) Directing the manner of execution of the customs law and laws relating to commerce, navigation. and immigration. xxx (7) Prescribing the method of loading and unloading merchandise and the transportation thereof by bonded carriers, railways, vessels, bonded lighters, carts, or otherwise”

27.    Section 73 of Act 355
Section 73 of Act 355 provides as follows: “In the coasting trade, the admeasurement, documenting, enrollment and licensing of vessels built or owned in the Philippine Archipelago and in the making and recording of all documents relating thereto, the Insular Collector shall observe, promulgate, and enforce such orders and regulations respecting the same as have been heretofore or shall hereafter be prescribed by the proper authority. In the absence of such regulations or orders he shall observe and follow the laws of the United States and the regulations of the Treasury Department of the United States so far as the same may be, in his sound judgment, applicable. Certificates of protection shall hereafter be signed by the collector of customs at ports where issued and countersigned by the Insular Collector.”

28.    Section 134 of Act 355
Section 134 of Act 355 is as follows: “The coastwise trade shall be under the general control and supervision of the Insular Collector, and under the direct supervision of collectors of customs at the subports of entry within their respective collection districts.”

29.    Section 1 of Act 780, as amended by Section 1 of Act 1602
Section 1 of Act  780, as amended by section 1 of Act 1602, provides, in part, as follows: “A board is hereby created, to consist of the Insular Collector of Customs, the supervising inspector of hulls and boilers, and assistant inspector of hulls, one person holding an unexpired license as master in the Philippine coastwise trade, and one other competent person, whose duty it shall be to examine and certify for licenses all applicants for licenses as watch officers and engineers upon vessels of the Philippine Islands.”

30.    Section 2 of Act 780
Section 2 of Act 780 is as follows: “Whenever any person applies for license as master, mate, patron, or engineer of a Philippine coastwise vessel it shall be the duty of the Board on Philippine Marine Examinations to make a thorough inquiry as to his character and carefully to examine the applicant, the evidence he presents in support of his application, and such other evidence as it may deem proper or desirable, and if satisfied that his capacity, experience, habits of life, and character are such as to warrant the belief that he can be safely intrusted with the duties and responsibilities of the position for which he makes application, it shall so certify to the Insular Collector of Customs, who shall issue a license authorizing such applicant to act as master, mate, patron, or engineer, as the case may be.”

31.    Section 6 of Act 780
Section 6 of Act 780 is as follows: “Every license authorized to be issued as above set forth shall be operative and in force until July first, nineteen hundred and four, but the Insular Collector of Customs may at any time suspend or revoke any license upon satisfactory proof of misconduct, intemperate habits, incapacity, or inattention to duty on the part of the licensee.”

32.    Section 2 of Act 1025
Section 2 of Act 1025 is as follows: “Upon the expiration of the license authorized to be issued by said Act Numbered Seven Hundred and eighty, the said Board is further authorized and empowered to renew such license from year to year upon due application being made as prescribed in said Act, but each renewal shall be operative for only one year. In case of renewal of license the written examination required by section three of said Act shall not be had but the applicant for renewal shall only be required to submit to an examination, if deemed necessary by the Board, to test his physical soundness, but the Board is authorized to refuse any application for renewal upon satisfactory evidence of misconduct, intemperate habits, incapacity, or inattention to duty on the part of the licensee and also to revoke any such renewal license, when granted, for the same reasons, or any of them.”

33.    Duties of captain of the port devolved upon Insular Collector of Customs and his subordinates
The duties of the captain of the port, as that office formerly existed and as provided in the Spanish laws, now devolve upon the Insular Collector of Customs and his subordinates as he may direct, pursuant to the provisions of section 1 of Act No. 625.  Any duties which the captain of the port was required to perform under the decrees and similar regulations issued under the Spanish Administration of the Government of these Islands, devolved upon the Collector of Customs at the date of the promulgation of Circular 627, so far as those decrees and similar regulations continued in force at that time.

34.    Insular collector clothed with necessary authority to prepare, promulgate, and enforce Customs Administrative Circular 627
Insofar as Customs Administrative Circular 627 consists of a body of reasonable regulations controlling and prescribing the conduct of vessels licensed to engage in the coastwise trade, and of licensed officers aboard such vessels, with reference to the transportation of mail, the Insular Collector was clothed with the necessary authority at the date of the circular for its preparation, promulgation and enforcement. The circular is, when correctly construed, such a body of reasonable regulations, touching the conduct of coastwise vessels and their officers with reference to the transportation of mails.

Sea-land Service vs. IAC (GR 75118, 31 August 1987)
First Division, Narvasa (J): 4 concur

Facts: On 8 January 1981, Sea-Land Service, Inc., a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing, the business name used by Paulino Cue in the wholesale and retail trade which he operated out of an establishment located on Borromeo and Plaridel Streets, Cebu City. The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The bill described the shipment only as “8 CTNS on 2 SKIDS-FILES.” Based on volume measurements Sea-land charged the shipper the total amount of US$209.28 for freightage and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port of Cebu. The shipment arrived in Manila on 12 February 1981, and there discharged in Container 310996 into the custody of the arrastre contractor and the customs and port authorities. Sometime between February 13 and 16, 1981, after the shipment had been transferred, along with other cargoes to Container 40158 near Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered. On 10 March 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00. asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading.

Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then Court of First Instance of Cebu, Branch X. Said Court, after trial, rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the Philippine currency value of the lost cargo, P55,814.00 for unrealized profit with 1% monthly interest from the filing of the complaint until fully paid, P25,000.00 for attorney’s fees and P2,000.00 as litigation expenses.

Sea-Land appealed to the Intermediate Appellate Court. That Court however affirmed the decision of the Trial Court in toto. Sea-Land thereupon filed the present petition for review.

The Supreme Court reversed and set aside the Decision of the Intermediate Appellate Court complained of, holding that (1) the stipulation in the questioned bill of lading limiting Sea-Land’s liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is valid and binding on Paulino Cue; (2) Sea-Land is liable in the aggregate amount of US$4,000.00 as there was no question of the fact that the lost shipment consisted of 8 cartons or packages; (3) Sea-Land was discharged of that obligation by paying Cue the sum of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against Cue.

1.    Consignee in bill of lading has right to recover from carrier although document drawn by consignor and carrier
In principle, a consignee in a bill of lading has the right to recover from the carrier or shipper for loss of, or damage to, goods being transported under said bill, although that document may have been — as in practice it oftentimes is — drawn up only by the consignor and the carrier without the intervention of the consignee.

2.    Mendoza vs. PAL; When consignee becomes party to contract
Therein, even if the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza for the time being, made Mendoza as consignee, a stranger to the contract if that is possible, nevertheless when he, Mendoza appeared at the Phil Air Port armed with the copy of the Air Way Bill demanding the delivery of the shipment to him, he thereby made himself a party to the contract of transportation. The right of the shipper to countermand the shipment terminates when the consignee or legitimate holder of the bill of lading appears with such bill of lading before the carrier and makes himself a party to the contract. Prior to that time he is a stranger to the contract.

3.    Mendoza vs. PAL; Common carriers not obligated to make prompt delivery, unless such obligation is assumed
Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties.

4.    Mendoza vs. PAL; Article 1357 paragraph 2 of old Civil Code, now Article 1311, second paragraph NCC
Article 1257, paragraph 2, of the old Civil Code (now Article 1311, second paragraph) reads “Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment provided he has given notice of his acceptance to the person bound before the stipulation has been revoked.”

5.    Liability of common carrier governed by laws of country of destination
Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is governed by the laws of the country of destination and the goods in question were shipped from the United States to the Philippines, the liability of Sea-Land to the consignee is governed primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not determined thereby, by the Code of Commerce and special laws. One of these suppletory special laws is the Carriage of Goods by Sea Act, U.S. Public Act No. 521 which was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by Commonwealth Act 65, approved on 22 October 1936.

6.    Section 4 (5) of COGSA
Section 4(5) of Commonwealth Act 65, in part, reads “(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided; That such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained. xxx”

7.    Clause 22, first paragraph of the long-form bill of lading
Clause 22, first paragraph, of the long-form bill of lading customarily issued by Sea-Land to its shipping clients is a virtual copy of the first paragraph of the foregoing provision. It says: “(22) VALUATION. In the event of any loss, damage or delay to or in connection with goods exceeding in actual value $500 per package, lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, the value of the goods shall be deemed to be $500 per package or per customary freight unit, as the case may be, and the carrier’s liability, if any, shall be determined on the basis of a value of $500 per package or customary freight unit, unless the nature and a higher value shall be declared by the shipper in writing before shipment and inserted in this Bill of Lading.”

8.    Clause 22, second paragraph of the long-form bill of lading
And in its second paragraph, the bill states that “If a value higher than $500 shall have been declared in writing by the shipper upon delivery to the carrier and inserted in this bill of lading and extra freight paid, if required and in such case if the actual value of the goods per package or per customary freight unit shall exceed such declared value, the value shall nevertheless be deemed to be declared value and the carrier’s liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value.”

9.    Nothing in Civil Code which prohibits agreements as to limitation of carrier’s liability
Article 1766 of the Civil Code expressly subjects the rights and obligations of common carriers to the provisions of the Code of Commerce and of special laws in matters not regulated by said (Civil) Code. There is nothing in the Civil Code which absolutely prohibits agreements between shipper and carrier limiting the latter’s liability for loss of or damage to cargo shipped under contracts of carriage; it is also quite clear that said Code in fact has agreements of such character in contemplation in providing, in its Articles 1749 and 1750.

10.    Article 1749 NCC
Article 1749 of the Civil Code provides that “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.”

11.    Article 1750 NCC
Article 1750 of the Civil Code provides that “A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.”

12.    Nothing in Section 4 (5) of COGSA is repugnant or inconsistent with Articles 1749 and 1750 NCC
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act is repugnant to or inconsistent with any of the provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather general terms of Article 1719 (without doing any violence to the plain intent thereof) and of Article 1750, to give effect to just agreements limiting carriers’ liability for loss or damage which are freely and fairly entered into.

13.    Limited liability clause valid even without Section 4 (5) of COGSA
Even if 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 are nevertheless fully sustainable on the basis alone of the Civil Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Article 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 justice and fairness of that law itself.

14.    Determination of just and reasonable character of stipulation as to liability limitation clause
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. And since the shipper here has not been heard to complaint of having been “rushed,” imposed upon or deceived in any significant way into agreeing to ship the cargo under a bill of lading carrying such a stipulation — in fact, it does not appear that said party has been heard from at all insofar as this dispute is concerned — there is simply no ground for assuming that its agreement thereto was not as the law would require, freely and fairly sought and given.

15.    Right of consignee springs from either relation of agency with consignor, or status as a stranger in whose favor some stipulation is made in said contract
Herein, Cue had no direct part or intervention in the execution of the contract of carriage between the shipper and the carrier as set forth in the bill of lading in question. As pointed out in Mendoza vs. PAL, the right of a party to recover for loss of a shipment consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may exist between him and the shipper or consignor, or his status as a stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when he demands fulfillment of that stipulation, i.e. the delivery of the goods or cargo shipped.

16.    Free agreement not vitiated by fine printed provisions
In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case  where the Court found that a similar package limitation clause was “(printed in the smallest type on the back of the bill of lading,” it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed therein by agreement of the parties.

17.    Agreed limited liability of carrier valid and enforceable
There can be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill. This proposition, moreover, rests upon an almost uniform weight of authority.   17

18.    Clause 13 of Bill of Lading
Clause 13 of the bill of lading which expressly authorizes transshipment of the goods at any point in the voyage in these terms: “13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the exercise of its or his discretion and although transshipment or forwarding of the goods may not have been contemplated or provided for herein, may at port of discharge or any other place whatsoever transship or forward the goods or any part thereof by any means at the risk and expense of the goods and at any time, whether before or after loading on the ship named herein and by any route, whether within or outside the scope of the voyage or beyond the port of discharge or destination of the goods and without notice to the shipper or consignee. The carrier or master may delay such transshipping or forwarding for any reason, including but not limited to awaiting a vessel or other means of transportation whether by the carrier or others.”

19.    Agreements as to transshipment (deviation) recognized by law
Clause 13 of the bill of lading obviates the necessity to offer any other justification for off loading the shipment in question in Manila for transshipment to Cebu City, the port of destination stipulated in the bill of lading. Nonetheless, the Court takes note of Sea-Land’s explanation that it only directly serves the Port of Manila from abroad in the usual course of voyage of its carriers, hence its maintenance of arrangements with a local forwarder. Aboitiz and Company, for delivery of its imported cargo to the agreed final point of destination within the Philippines, such arrangements not being prohibited, but in fact recognized, by law.

20.    COGSA applicable up to final port of destination
The Carriage of Goods by Sea Act is applicable up to the final port of destination and that the fact that transshipment was made on an interisland vessel did not remove the contract of carriage of goods from the operation of said Act.

21.    Provisions of COGSA on package limitation a part of bill of lading although placed actually therein by the parties
The provisions of the Carriage of Goods by Sea Act on package limitation [sec. 4(5) of the Act] are as much a part of a bill of lading as though actually placed therein by agreement of the parties.

22.    Cue bound by stipulations in bill of lading
Cue, by making claim for loss on the basis of the bill of lading, to all intents and purposes accepted said bill. Having done so, he becomes bound by all stipulations contained therein whether on the front or the back thereof. He cannot elude its provisions simply because they prejudice him and take advantage of those that are beneficial. Secondly, the fact that he shipped his goods on board the ship of Sea-Land and paid the corresponding freight thereon shows that he impliedly accepted the bill of lading which was issued in connection with the shipment in question, and so it may be said that the same is finding upon him as if it had been actually signed by him or by any other person in his behalf.

23.    Sea-Land’s dollar obligation should be convertible at the rate of P8 to $1
Herein, Cue admits that as early as on 22 April 1981, Sea-Land had offered to settle his claim for US$4,000.00, the limit of said carrier’s liability for loss of the shipment under the bill of lading. Said sum is all that is justly due Cue, it does not appear just or equitable that Sea-Land, which offered that amount in good faith as early as 6 years ago, should, by being made to pay at the current conversion rate of the dollar to the peso, bear for its own account all of the increase in said rate since the time of the offer of settlement. The decision of the Regional Trial Court awarding Cue P186,048.00 as the peso value of the lost shipment is clearly based on a conversion rate of P8.00 to US$1.00, Cue having claimed a dollar value of $23,256.00 for said shipment. All circumstances considered, it is just and fair that Sea-Land’s dollar obligation be convertible at the same rate.

Fortune Express vs. CA (GR 119756, 18 March 1999)
Second Division, Mendoza (J): 3 concur, 1 abroad on official business

Facts: Fortune Express Inc. is a bus company in northern Mindanao. On 18 November 1989, Fortune Express’ bus figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional Security Unit (X), conducted an investigation of the accident. He found that the owner of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and that certain Maranaos were planning to take revenge on Fortune Express by burning some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa he went to see Diosdado Bravo, operations manager of petitioner, at its main office in Cagayan de Oro City. Bravo assured him that the necessary precautions to insure the safety of lives and property would be taken. At about 6:45 p.m. on 22 November 1989, 3 armed Maranaos who pretended to be passengers, seized a bus of Fortune Express at Linamon, Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Talib Caorong. The leader of the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot Cabatuan on the arm, which caused him to slump on the steering wheel. Then one of the companions of Mananggolo started pouring gasoline inside the bus, as the other held the passengers at bay with a handgun. Mananggolo then ordered the passengers to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus and went behind the bushes in a field some distance from the highway. However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. At that time, one of the armed men was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living. The armed men were, however, adamant as they repeated their warning that they were going to burn the bus along with its driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing operation.

Paulie Caorong, the widow of Atty. Caorong, and their minor children Yasser King, Rose Heinni, and Prince Alexander brought a suit for breach of contract of carriage in the Regional Trial Court of Iligan City (Branch VI). In its decision, dated 28 December 1990, the trial court dismissed the complaint, and the corresponding counterclaim; without costs.

On appeal, however, and on 29 July 1994, the Court of Appeals reversed the decision of the trial court, and rendered another one ordering Fortune Express to pay the Caorongs (1) P3,399,649.20 as death indemnity; (2) P50,000.00 and P500.00 per appearance as attorney’s fees; and costs against Fortune Express. Hence, the appeal by petition for review on certiorari.

The Supreme Court affirmed the decision of the Court of Appeals with modification that Fortune Express is ordered to pay Paulie, Yasser King, Rose Heinni, and Prince Alexander Caorong (1) death indemnity in the amount of P50,000.00; (2) actual damages in the amount of P30,000.00; (3) moral damages in the amount of P100,000.00; (4) exemplary damages in the amount of P100,000.00; (5) attorney’s fees in the amount of P50,000.00; (6) compensation for loss of earning capacity in the amount of P2,121,404.90; and (7) costs of suits.

1.    Article 1763 NCC; Common carrier liable for injuries suffered by passenger on account of willful acts of other passenger
Article 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of the wilful acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family.

2.    Fortune Express negligent; No precautions was undertaken
Herein, it is clear that because of the negligence of Fortune Express’ employees, the seizure of the bus by Mananggolo and his men was made possible. Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on Fortune Express by burning some of its buses and the assurance of petitioner’s operation manager, Diosdado Bravo, that the necessary precautions would be taken, Fortune Express did nothing to protect the safety of its passengers. Had Fortune Express and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been employed without violating the passenger’s constitutional rights. As the Court intimated in Gacal v. Philippine Air Lines, Inc., a common carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggages.

3.    Article 1174 of the Civil Code (Fortuitous event defined); Yobido vs. CA, when unforeseen event considered a force majeure
Article 1174 of the Civil Code defines a fortuitous event as an occurrence which could not be foreseen or which though foreseen, is inevitable. In Yobido v. Court of Appeals, the Court held that to be considered as force majeure, it is necessary that: (1) the cause of the breach of the obligation must be independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurrence must be such as to tender it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be free of participation in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above would prevent the obligor from being excused from liability.

4.    Vasquez vs. CA; Common carrier liable for failure to take necessary precautions
In Vasquez v. Court of Appeals, it was held that the common carrier was liable for its failure to take the necessary precautions against an approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers. The event was foreseeable, and, thus, the second requisite mentioned above was not fulfilled. This ruling applies by analogy to the present case. Herein, despite the report of PC agent Generalao that the Maranaos were going to attack its buses, Fortune Express took no steps to safeguard the lives and properties of its passengers. The seizure of the bus of Fortune Express was foreseeable and, therefore, was not a fortuitous event which would exempt Fortune Express from liability.

5.    Article 1755 NCC
Article 1755 of the Civil Code provides that “a common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.”

6.    Pilapil vs. CA and De Guzman vs. CA do not apply
In Pilapil v. Court of Appeals, it was held that a common carrier is not liable for failing to install window grills on its buses to protect passengers from injuries caused by rocks hurled at the bus by lawless elements. On the other hand, in De Guzman v. Court of Appeals, it was ruled that a common carrier is not responsible for goods lost as a result of a robbery which is attended by grave or irresistible threat, violence, or force. It is clear that the cases of Pilapil and De Guzman do not apply to the present case. In Pilapil and De Guzman, the respondents therein were not negligent in failing to take special precautions against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third persons. Herein, this factor of unforeseeability (the second requisite for an event to be considered force majeure) is lacking, i.e. despite the report of PC agent Generalao that the Maranaos were planning to burn some of petitioner’s buses and the assurance of Fortune Express’ operations manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by Fortune Express to protect the safety of passengers.

7.    Deceased not guilty of contributory negligence, let alone recklessness
Herein, Atty. Caorong did not act recklessly. The intended targets of the violence were Fortune Express and its employees, not its passengers. The assailant’s motive was to retaliate for the loss of life of two Maranaos as a result of the collision between Fortune Express’ bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot be considered an act of negligence, let alone recklessness.

8.    Fortune Express liable for damages (Indemnity for death); Article 1764 in relation to Article 2206 NCC
Article 1764 of the Civil Code, in relation to Article 2206 thereof, provides for the payment of indemnity for the death of passengers caused by the breach of contract of carriage by a common carrier. Initially fixed in Article 2206 at P3,000.00, the amount of the said indemnity for death has through the years been gradually increased in view of the declining value of the peso. It is presently fixed at P50,000.00. The Caorongs are entitled to this amount.

9.    Fortune Express liable for damages (Actual damages); Article 2199 NCC
Article 2199 of the Civil Code provides that “except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved.” The trial court found that the Caorongs spent P30,000.00 for the wake and burial of Atty. Caorong. Since Fortune Express does not question said finding of the trial court, it is liable to the Caorongs in the said amount as actual damages.

10.    Fortune Express liable for damages (Moral damages); Article 2206 NCC
Under Article 2206 of the Civil Code, the “spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.” The trial court found that Paulie Caorong suffered pain from the death of her husband and worry on how to provide support for their minor children, Yasser King, Rose Heinni, and Prince Alexander. Fortune Express likewise does not question said finding of the trial court. Thus, in accordance with recent decisions of the Court, the Court hold that Fortune Express is liable to the Caorongs in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.

11.    Fortune Express liable for damages (Exemplary damages); Article 2232 NCC
Article 2232 of the Civil Code provides that “in contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.” Herein, Fortune Express acted in a wanton and reckless manner. Despite warning that the Maranaos were planning to take revenge against Fortune Express by burning some of its buses, and contrary to the assurance made by its operations manager that the necessary precautions would be taken, Fortune Express and its employees did nothing to protect the safety of passengers. Under the circumstances, the Court deems it reasonable to award private respondents exemplary damages in the amount of P100,000.00.

12.    Fortune Express liable for damages (Attorney’s fees); Article 2208 NCC
Pursuant to Article 2208, attorney’s fees may be recovered when exemplary damages are awarded. n the recent case of Sulpicio Lines, Inc. v. Court of Appeals, the Court held an award of P50,000.00 as attorney’s fees to be reasonable. Hence, the Caorongs are entitled to attorney’s fees in that amount.

13.    Fortune Express liable for damages (Compensation for loss of earning capacity); Article 1764 in relation to Article 2206 NCC
Article 1764 of the Civil Code, in relation to Article 2206 thereof, provides that in addition to the indemnity for death arising from the breach of contract of carriage by a common carrier, the “defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter.”

14.    Formula for computing net earning capacity
Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of 80 and the age of the deceased. Herein, Since Atty. Caorong was 37 years old at the time of his death, he had a life expectancy of 28 2/3 more years. His projected gross annual income, computed based on his monthly salary of P11,385.00 23 as a lawyer in the Department of Agrarian Reform at the time of his death, was P148,005.00. Allowing for necessary living expenses of 50% of his projected gross annual income, his total earning capacity amounts to P2,121,404.90. Hence, Fortune Express is liable to the Caorongs in the said amount as compensation for loss of earning capacity.

National Steel vs. CA (GR 112287, 12 December 1997)
Vlasons Shipping vs. CA (GR 112350)
Third Division, Panganiban (J): 4 concur

Facts: The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the general public. Its services are available only to specific persons who enter into a special contract of charter party with its owner. The ship is a private carrier, and it is in this capacity that its owner, Vlasons Shipping, Inc. (VSA), entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation (NSC) on 17 July 1974, whereby NSC hired VSI’s vessel, the MV ‘VLASONS I’ to make 1 voyage to load steel products at Iligan City and discharge them at North Harbor, Manila, under the following terms and conditions, viz: “xxx (2) Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Master’s option. xxx  (4) Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon presentation of Bill of Lading within fifteen (15) days. (5) Laydays/Cancelling: July 26, 1974/Aug. 5, 1974. (6) Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours, Sundays and Holidays Included). (7) Demurrage/Dispatch: P8,000.00/P4,000.00 per day. xxx  (9) Cargo Insurance: Charterer’s and/or Shipper’s must insure the cargoes. Shipowners not responsible for losses/damages except on proven willful negligence of the officers of the vessel. (10) Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter Party Agreement shall form part of this Contract. xxx” On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV ‘VLASONS I’ loaded at NSC’s pier at Iligan City, the NSC’s shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to Manila. The shipment was placed in the 3 hatches of the ship. Chief Mate Gonzalo Sabando, acting as agent of the vessel, acknowledged receipt of the cargo on board and signed the corresponding bill of lading, BLPP  0233 on 8 August 1974. The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on 12 August 1974. The following day, when the vessel’s 3 hatches containing the shipment were opened by NSC’s agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on 24 August 1974 after incurring a delay of 11 days due to the heavy rain which interrupted the unloading operations. To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated 17 March 1975, MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that container/metal casings of the skids were rusting all over. MASCO’s surveyors drew at random samples of bad order packing materials of the tinplates and delivered the same to the MIT Testing Laboratories for analysis. On 31 August 1974, the MIT Testing Laboratories issued Report 1770 which in part, states, “The analysis of bad order samples of packing materials . . . shows that wetting was caused by contact with sea water.” On 6 September 1974, on the basis of Report 1770, NSC filed with VSI its claim for damages suffered due to the downgrading of the damaged tinplates in the amount of P941,145.18. Then on 3 October 1974, NSC formally demanded payment of said claim but VSI refused and failed to pay.

NSC filed its complaint against VSI on 21 April 1976 (Civil Case 23317) before the CFI of Rizal. The trial court rendered judgment in favor of VSI and against NSC dismissing the complaint with costs against NSC, and ordering NSC to pay VSI on the counterclaim for the sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal rate on both amounts from April 7, 1976 until the same shall have been fully paid; attorney’s fees and expenses of litigation in the sum of P100,000.00; and cost of suit.

On appeal, and on 12 August 1993, the Court of Appeals modified the decision of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution dated 20 October 1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review before the Supreme Court. On motion of VSI, the Court ordered on 14 February 1994 the consolidation of the petitions.

The Supreme Court denied the consolidated petitions; and affirmed the questioned Decision of the Court of Appeals with the modification that the demurrage awarded to VSI is deleted. No pronouncement as to costs.

1.    The term “FIOST”; Paragraph 5 of the NANYOZAI Charter Party
The terms ‘F.I.O.S.T.’ which is used in the shipping business is a standard provision in the NANYOZAI Charter Party which stands for ‘Freight In and Out including Stevedoring and Trading’, which means that the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, “Charterers to load, stow and discharge the cargo free of risk and expenses to owners. . . .”

2.    Paragraph 10 of the NANYOZAI Charter Party
Under paragraph 10 of the NANYOZAI Charter Party, it is provided that “owners shall, before and at the beginning of the voyage, exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and preservation; . . ; perils, dangers and accidents of the sea or other navigable waters; . . ; wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of packing; . . .; latent defects not discoverable by due diligence; any other cause arising without the actual fault or privity of Owners or without the fault of the agents or servants of owners.”

3.    Paragraph 12 of the NANYOZAI Charter Party
Paragraph 12 of said NANYOZAI Charter Party also provides that “owners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master and crew.”

4.    Common carriers defined (Article 1732); Test of common carrier
Article 1732 of the Civil Code defines a common carrier 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.” It has been held that the true test of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee.

5.    Private Carrier; Charter party
A carrier which does not qualify under the test of a common carrier is deemed a private carrier. “Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. The most typical, although not the only form of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages.”

6.    VSI a private carrier; Rights and obligations of VSI and NSC are determined by stipulations in charter party
Herein, VSI did not offer its services to the general public. It carried passengers or goods only for those it chose under a “special contract of charter party.” The MV Vlasons I “was not a common but a private carrier.” Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party.

7.    Contract of private carriage; Valenzuela Hardwood vs. CA
In Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, the Court ruled that “in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers.”

8.    Extent of VSI’s Responsibility and Liability Over NSC’s Cargo
From the parties’ Contract of Voyage Charter Hire, dated 17 July 1974, VSI “shall not be responsible for losses except on proven willful negligence of the officers of the vessel.” The NANYOZAI Charter Party, which was incorporated in the parties’ contract of transportation further provided that the shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the same was “properly manned, equipped and supplied,” and to “make the holds and all other parts of the vessel in which cargo was carried, fit and safe for its reception, carriage and preservation.” The NANYOZAI Charter Party also provided that “owners shall not be responsible for split, chafing and/or any damage unless caused by the negligence or default of the master or crew.”

9.    Burden of Proof (parties’ agreement)
Herein, NSC must prove that the damage to its shipment was caused by VSI’s willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was placed on NSC by the parties’ agreement.

10.    Article 361 of the Code of Commerce
Article 361 of the Code of Commerce provides that “Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of the shipper. The burden of proof of these accidents is on the carrier.”

11.    Article 362 of the Code of Commerce
Article 362 of the Code of Commerce provides that “The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding article if proofs against him show that they occurred on account of his negligence or his omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, making him to believe that the goods were of a class or quality different from what they really were.”

12.    Private carrier; Shipowner’s obligation governed by Code of Commerce, not Civil Code
As the MV Vlasons I was a private carrier, the shipowner’s obligations are governed by the foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence on a common carrier.

13.    Burden of proof in action against private carrier for loss of cargo; Plaintiff entitled to benefit of presumptions and inferences
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the carrier’s custody does not put the burden of proof on the carrier. Since a private carrier is not an insurer but undertakes only to exercise due care in the protection of the goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier’s possession does not cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause in the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and inferences by which the law aids the bailor in an action against a bailee, and since the carrier is in a better position to know the cause of the loss and that it was not one involving its liability, the law requires that it come forward with the information available to it, and its failure to do so warrants an inference or presumption of its liability. However, such inferences and presumptions, while they may affect the burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage, the burden of going forward with the evidence is again on plaintiff.

14.    Burden of proof in action based on shipowner’s warranty of seaworthiness; Where contract of carriage exempts carrier from liability for unseaworthiness not discoverable by due diligence
Where the action is based on the shipowner’s warranty of seaworthiness, the burden of proving a breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the goods were lost or damaged while in the carrier’s possession does not cast on it the burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due diligence to make the vessel seaworthy.

15.    Findings of the trial court, subsequently affirmed by the Court of Appeals, binding upon the Supreme Court
Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on the Supreme Court. The Court stresses that, subject to some exceptional instances, only questions of law — not questions of fact — may be raised before the Supreme Court in a petition for review under Rule 45 of the Rules of Court. Herein, after a thorough review of the case, the Court finds no reason to disturb the lower courts’ factual findings.

16.    MV Vlasons I  was seaworthy
VSI exercised due diligence to make the ship seaworthy and fit for the carriage of NSC’s cargo of steel and tinplates. This is shown by the fact that it was drydocked and harbored by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the contract of voyage charter hire. The vessel’s voyage from Iligan to Manila was the vessel’s first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel.

17.    Due diligence exercised by officers and crew of MV Vlasons I; Use of old tarpaulin an addition to new one used to make hatch waterproof
Due diligence was exercised by the officers and the crew of the MV Vlasons I. This was further demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give way and the ship’s hatches and cargo holds remained waterproof. Herein, the ship used the old tarpaulin, only in addition to the new one used primarily to make the ship’s hatches watertight. The foregoing are clear from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ship’s boatswain, Jose Pascua, where it was stated that every time the strong winds and big waves caused the first layer of the canvass covering to give way, the new canvass covering still hold on.  NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I,

18.    Stevedores of NSC negligent in unloading cargo form ship; Reason for delay in pointing out stevedores’ negligence to NSC
It was the stevedores of NSC who were negligent in unloading the cargo from the ship. The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a passing typhoon disrupted the loading of the cargo. This tent-like covering, however, was clearly inadequate for keeping rain and seawater away from the hatches of the ship. NSC attempts to discredit the testimony of Vicente Angliongto, an officer of VSI, by questioning his failure to complain immediately about the stevedores’ negligence on the first day of unloading, pointing out that he wrote his letter to NSC only 7 days later. 7 days lapsed because he first called the attention of the stevedores, then the NSC’s representative, about the negligent and defective procedure adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with common sense and ordinary human experience. Angliongto could not be blamed for calling the stevedores’ attention first and then the NSC’s representative on location before formally informing NSC of the negligence he had observed, because he was not responsible for the stevedores or the unloading operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the stevedores it had hired and the performance of their task to unload the cargo.

19.    NSC has cause of action against stevedoring company, and not against VSI
The fact that NSC actually accepted and proceeded to remove the cargo from the ship during unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be noted that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring company at fault in the discharge operations.

20.    Duty of a stevedore company
A stevedore company engaged in discharging cargo has the duty to load the cargo in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence and where the officers and members and crew of the vessel do nothing and have no responsibility in the discharge of cargo by stevedores, the vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the stevedores.

21.    Effect of NSC’s Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I . Clearly, therefore, NSC’s failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action against VSI for damages caused by the latter’s willful negligence. Nothing in the charter party would make the liability of VSI for damage to the cargo contingent on or affected in any manner by NSC’s obtaining an insurance over the cargo.

22.    Admissibility of certificates proving seaworthiness; Exhibits 3-9 and 12 inadmissible
The certificates of seaworthiness offered in evidence by VSI include the (1) Certificate of Inspection of the Philippine Coast Guard at Cebu, (2) Certificate of Inspection from the Philippine Coast Guard, (3) International Load Line Certificate from the Philippine Coast Guard, (4) Coastwise License from the Board of Transportation, and (5) Certificate of Approval for Conversion issued by the Bureau of Customs. Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by private parties, but they have not been proven by one who saw the writing executed, or by evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are photocopies, but their admission under the best evidence rule have not been demonstrated.

23.    Exhibit 11 admissible as exception to hearsay rule
Herein, Exhibit 11 is admissible under a well-settled exception to the hearsay rule per Section 44 of Rule 130 of the Rules of Court, which provides that “(e)ntries in official records made in the performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated.” Exhibit 11 is an original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect that “the vessel ‘VLASONS I’, was drydocked and PCG Inspectors were sent on board for inspection. After completion of drydocking and duly inspected by PCG Inspectors, the vessel ‘VLASONS I’, a cargo vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974.” (sic) NSC’s Claim, therefore, is obviously misleading and erroneous.

24.    Assailing genuineness of certificate of seaworthiness not sufficient proof of unseaworthiness
NSC has the burden of proving that MV Vlasons I was not seaworthy. The vessel was a private carrier and, as such, it did not have the obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy.

25.    Demurrage defined
The Court defined demurrage in its strict sense as the compensation provided for in the contract of affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for loading and unloading of cargo. 40 It is given to compensate the shipowner for the nonuse of the vessel.

26.    How laytime runs
Laytime runs according to the particular clause of the charter party. If laytime is expressed in “running days,” this means days when the ship would be run continuously, and holidays are not excepted. A qualification of “weather permitting” excepts only those days when bad weather reasonably prevents the work contemplated.

27.    Laytime for four days, and qualified as WWDSHINC, in present case
Herein, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime as WWDSHINC or weather working days Sundays and holidays included. The running of laytime was thus made subject to the weather, and would cease to run in the event unfavorable weather interfered with the unloading of cargo. Consequently, NSC may not be held liable for demurrage as the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC qualification agreed upon by the parties. Clearly, it was error for the trial court and the Court of Appeals to have found and affirmed respectively that NSC incurred 11 days of delay in unloading the cargo.

28.    Attorney’s fees not justified
While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award of attorney’s fees under Article 2208 of the Civil Code when “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.” Moreover, attorney’s fees may not be awarded to a party for the reason alone that the judgment rendered was favorable to the latter, as this is tantamount to imposing a premium on one’s right to litigate or seek judicial redress of legitimate grievances.

Planters Products vs. CA (GR 101503, 15 September 1993)
First Division, Bellosillo (J): 2 concur, 1 on leave, 1 took no part

Facts: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation of New York, USA, 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V “Sun Plum” owned by Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, USA, to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading KP-1 signed by the master of the vessel and issued on the date of departure. On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V “Sun Plum” pursuant to the Uniform General Charter was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. Riders to the aforesaid charter-party starting from paragraph 16 to 40 were attached to the pre-printed agreement. Addenda 1, 2, 3 and 4 to the charter-party were also subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively. Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by the charterer’s representative and found fit to take a load of urea in bulk pursuant to paragraph 16 of the charter-party. After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with 3 layers of tarpaulin, then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage. Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with the use of the vessel’s boom. PPI unloaded the cargo from the holds into its steel-bodied dump trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-party (which provided for an FIOS clause). The hatches remained open throughout the duration of the discharge. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee’s warehouse located some 50 meters from the wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale where they were individually weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. PPI’s warehouse was made of corrugated galvanized iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the fertilizer. It took 11 days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th and 18th).  A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the “outturn” of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt.  SSA explained that they were not able to respond to the consignee’s claim for payment because, according to them, what they received was just a request for shortlanded certificate and not a formal claim, and that this “request” was denied by them because they “had nothing to do with the discharge of the shipment.”

On 18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila. The court a quo however sustained the claim of PPI against the carrier for the value of the goods lost or damaged.

On appeal, the Court of Appeals reversed the lower court and absolved the carrier from liability for the value of the cargo that was lost or damaged.  PPI appealed by way of petition for review.

The Supreme Court dismissed the petition; affirmed the assailed decision of the Court of Appeals, which reversed the trial court; and consequently, dismissed Civil Case 98623 of the then CFI, now RTC, of Manila; with costs against PPI.

1.    Charter party defined
A “charter-party” is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use;  a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight.

2.    Types of charter parties
Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants.

3.    Kinds of contract of affreightment
Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage.  In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship’s stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship.

4.    Common or public carrier defined; Scope of definition
The term “common or public carrier” is defined in Article 1732 of the Civil Code. The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual occupation.

5.    Distinction between common or public carrier, and private or special carrier
The distinction between a “common or public carrier” and a “private or special carrier” lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier.

6.    Extraordinary diligence required of common carriers (Article 1733); Ordinary diligence required of private carriers
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry.  In the case of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice.

7.    Common carriers presumed negligent in case of loss, etc. of goods; No presumption in private carriers
In case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier.

8.    Kyosei Kisen Kabushiki Kaisha a common carrier, remained as so in charter party
Kyosei Kisen Kabushiki Kaisha, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When PPI chartered the vessel M/V “Sun Plum”, the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner, the charterer is a stranger to the crew and to the ship. Thus, a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer.

9.    When charter party converts common carrier to private carrier
It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned.

10.    Reliance on case of Home Insurance vs. American Steamship misplaced
The carrier’s heavy reliance on the case of Home Insurance Co. v. American Steamship Agencies is misplaced for the reason that the meat of the controversy therein was the validity of a stipulation in the charter-party exempting the shipowner from liability for loss due to the negligence of its agent, and not the effects of a special charter on common carriers.

11.    American rule as to shipper carrying special cargo not applicable in the Philippines; Stricter interpretation of admiralty laws
The rule in the United States that a ship chartered by a single shipper to carry special cargo is not a common carrier, does not find application in Philippine jurisdiction, for the Court has observed that the growing concern for safety in the transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of admiralty laws, more particularly, the rules governing common carriers.

12.    Observations of Raoul Colinvaux, the learned barrister-at-law
“As a matter of principle, it is difficult to find a valid distinction between cases in which a ship is used to convey the goods of one and of several persons. Where the ship herself is let to a charterer, so that he takes over the charge and control of her, the case is different; the shipowner is not then a carrier. But where her services only are let, the same grounds for imposing a strict responsibility exist, whether he is employed by one or many. The master and the crew are in each case his servants, the freighter in each case is usually without any representative on board the ship; the same opportunities for fraud or collussion occur; and the same difficulty in discovering the truth as to what has taken place arises . . .”

13.    Burden of proof in an action for recovery of damages against a common carrier
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous event, or some other circumstances inconsistent with its liability.

14.    Carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence
(1) The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was loaded, the 4 hatches of the vessel were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in the ship’s holds, the steel pontoon hatches were closed and sealed with iron lids, then covered with 3 layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to open without the use of the ship’s boom. (2) It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. When M/V “Sun Plum” docked at its berthing place, representatives of the consignee boarded, and in the presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the whole operation on rotation basis. Verily, the presumption of negligence on the part of respondent carrier has been efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo.

15.    Period which carrier was to observe degree of diligence; Limitation clause of FIOS meaning
The period during which the carrier was to observe the degree of diligence required of it as a public carrier began from the time the cargo was unconditionally placed in its charge after the vessel’s holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the consignee, but prior to unloading. This is clear from the limitation clause agreed upon by the parties in the Addendum to the standard “GENCON” time charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the cargo was to be done by the charterer, free from all risk and expense to the carrier. Moreover, a shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter.
16.    When common carriers not liable for loss, destruction or deterioration of goods
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the character of the goods or defects in the packaging or in the containers. The Code of Commerce also provides that all losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these accidents is incumbent upon the carrier. The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons.

17.    Characteristics of urea
Urea is a chemical compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage, provided that the temperature inside the hull does not exceed 80 degrees centigrade.

18.    Expected risks of bulk shipping
(1) In unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation amounting to one percent (1%) against the bill of lading is deemed “normal” or “tolerable.” The primary cause of these spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process. (2) The dissipation of quantities of fertilizer, or its deterioration in value, is caused either by an extremely high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in its original market value. (3) The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the fact that the fertilizer was transported in “bulk,” thereby exposing it to the inimical effects of the elements and the grimy condition of the various pieces of equipment used in transporting and hauling it.

19.    Hull of vessel in good condition; Improbable that sea water seep in vessel’s hold
It was highly improbable for sea water to seep into the vessel’s holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V “Sun Plum” in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee’s warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged “bad order cargo” as contained in their report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and segregated from the rest of the cargo.

20.    Variable weather condition a risk of loss or damage which owner or shipper of goods has to face
Herein, it was in the month of July when the vessel arrived port and unloaded her cargo. It rained from time to time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee’s warehouse. Bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage; more so, with a variable weather condition prevalent during its unloading. This is a risk the shipper or the owner of the goods has to face.

Aboitiz Shipping Corp. vs. CA (GR 84458, 6 November 1989)
Second Division, Regalado (J): 4 concur

Facts: Anacleto Viana was only 40 years old and was in good health. His average annual income as a farmer or a farm supervisor was 400 cavans of palay annually. His parents, Antonio and Gorgonia Viana, had been recipient of 20 cavans of palay as support or P120.00 monthly. On 11 May 1975, Anacleto Viana boarded the vessel M/V Antonia, owned by Aboitiz Shipping Corp., at the port at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket (117392) in the sum of P23.10. On 12 May 1975, said vessel arrived at Pier 4, North Harbor, Manila, and the passengers therein disembarked, a gangplank having been provided connecting the side of the vessel to the pier. Instead of using said gangplank, Viana disembarked on the third deck which was on the level with the pier. After said vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of Agreement dated 26 July 1975 between the Pioneer Stevedoring Corporation and Aboitiz. The crane owned by Pioneer and operated by its crane operator Alejo Figueroa was placed alongside the vessel and 1 hour after the passengers of said vessel had disembarked, it started operation by unloading the cargoes from said vessel. While the crane was being operated, Viana who had already disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the said vessel to the place where his cargoes were loaded that the crane hit him, pinning him between the side of the vessel and the crane. He was thereafter brought to the hospital where he later expired 3 days thereafter, on 15 May 1975, the cause of his death according to the Death Certificate being “hypostatic pneumonia secondary to traumatic fracture of the pubic bone lacerating the urinary bladder.” For his hospitalization, medical, burial and other miscellaneous expenses, Anacleto’s wife, Lucila C. Viana, spent a total of P9,800.00. Because of Anacleto’s death, the deceased’s parents and spouse suffered mental anguish and extreme worry or moral damages. For the filing of the case, they had to hire a lawyer for an agreed fee of P10,000.00.

The Vianas filed a complaint for damages against Aboitiz for breach of contract of carriage. Aboitiz, on the other hand, filed a third-party complaint against Pioneer. In a decision rendered on 17 April 1980 by the trial court, Aboitiz was ordered to pay the Vianas for damages incurred (the sum of P12,000.00 for the death of Anacleto Viana; P9,800.00 as actual damages; P533,200.00 value of the 10,664 cavans of palay computed at P50.00 per cavan; P10,000.00 as attorney’s fees; P5,000.00, value of the 100 cavans of palay as support for 5 years for deceased’s parents, Antonio and Gorgonia Viana computed at P50.00 per cavan; P7,200.00 as support for deceased’s parents computed at P120.00 a month for 5 years pursuant to Article 2206 [2] of the Civil Code; P20,000.00 as moral damages, and costs), and Pioneer was ordered to reimburse Aboitiz for whatever amount the latter paid the Vianas.  Both Aboitiz and Pioneer filed separate motions for reconsideration. In an order dated 27 October 1982,  the trial court absolved Pioneer from liability for failure of the Vianas and Aboitiz to preponderantly establish a case of negligence against the crane operator. The court thus ordered Aboitiz to pay the Vianas the damages incurred.

Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to the Court of Appeals which affirmed the findings of the trial court except as to the amount of damages awarded to the Vianas.  The Court therein ordered Aboitiz to pay the Vianas the amount of P30,000.00 for the death of Anacleto Viana; actual damages of P9,800.00; P160,000.00 for unearned income; P7,200.00 as support for deceased’s parents;-P20,000.00 as moral damages; P10,000.00 as attorney’s fees; and to pay the costs. Hence, the appeal by certiorari.

The Supreme Court denied the petition, and affirmed the judgment appealed from in toto.

1.    Until when contract of carriage subsists
The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner’s dock or premises. Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier’s conveyance or had a reasonable opportunity to leave the carrier’s premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier’s premises to claim his baggage.

2.    Doctrine in the case of La Mallorca
It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier’s vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier’s premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger. So also, where a passenger has alighted at his destination and is proceeding by the usual way to leave the company’s premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad company and its agents.

3.    Determination of reasonableness of time; Existence of reasonable cause a primary factor
Reasonableness of time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors. In La Mallorca, It is of no moment that there was no appreciable interregnum for the passenger therein to leave the carrier’s premises. Herein, an interval of 1 hour had elapsed before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near Aboitiz’ vessel.

4.    A carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage
It is of common knowledge that, by the very nature of Aboitiz’ business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, Aboitiz cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger’s cargoes, that the ruling in La Mallorca is inapplicable to the present case. On the contrary, if the doctrine enunciated therein is applied to the present petition, the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from Aboitiz’ vessel.

5.    Victim not proved to have disembarked from vessel; Victim deemed passenger at time of death
It is not definitely shown that 1 hour prior to the incident, the victim had already disembarked from the vessel. Aboitiz failed to prove this. What is clear is that at the time the victim was taking his cargoes, the vessel had already docked an hour earlier. In consonance with common shipping procedure as to the minimum time of 1 hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the vessel when he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in Aboitiz’ premises was not without cause. The victim had to claim his baggage which was possible only 1 hour after the vessel arrived since it was admittedly standard procedure in the case of Aboitiz’ vessels that the unloading operations shall start only after that time. Consequently, under the foregoing circumstances, the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death.

6.    Common carriers bound to observe extraordinary diligence as to goods, utmost diligence of very cautious persons as to passengers
Under the law, common carriers are, from the nature of their business and for reasons of public policy, 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. More particularly, a common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

7.    Common carrier presumed negligent when passenger dies or injured; Proof required of plaintiff
Where a passenger dies or is injured, the common carrier is presumed to have been at fault or to have acted negligently. This gives rise to an action for breach of contract of carriage where all that is required of plaintiff is to prove the existence of the contract of carriage and its non-performance by the carrier, that is, the failure of the carrier to carry the passenger safely to his destination, which, in the present case, necessarily includes its failure to safeguard its passenger with extraordinary diligence while such relation subsists.

8.    Burden of proof to negate presumption
The presumption is established by law that in case of a passenger’s death or injury the operator of the vessel was at fault or negligent, having failed to exercise extraordinary diligence, and it is incumbent upon it to rebut the same. This is in consonance with the avowed policy of the State to afford full protection to the passengers of common carriers which can be carried out only by imposing a stringent statutory obligation upon the latter. Concomitantly, the Supreme Court has likewise adopted a rigid posture in the application of the law by exacting the highest degree of care and diligence from common carriers, bearing utmost in mind the welfare of the passengers who often become hapless victims of indifferent and profit-oriented carriers. Herein, Aboitiz failed to rebut the presumption against it.

9.    Aboitiz had inadequately complied with the required degree of diligence to prevent the accident from happening
The evidence does not show that there was a cordon of drums around the perimeter of the crane. The fact that the alleged presence of visible warning signs in the vicinity was disputable and not indubitably established. The victim and other passengers were not sufficiently warned that merely venturing into the area in question was fraught with serious peril. Even assuming the existence of the supposed cordon of drums loosely placed around the unloading area and the guard’s admonitions against entry therein, these were at most insufficient precautions which pale into insignificance if considered vis-a-vis the gravity of the danger to which the deceased was exposed. There is no showing that Aboitiz was extraordinarily diligent in requiring or seeing to it that said precautionary measures were strictly and actually enforced to subserve their purpose of preventing entry into the forbidden area.

10.    Aboitiz’ negligence proximate and direct cause of victim’s death
While the victim was admittedly contributorily negligent, still Aboitiz’s failure to exercise extraordinary diligence was the proximate and direct cause of, because it could definitely have prevented, the former’s death.

11.    Pioneer absolved of liability
No excepting circumstance being present, the Court is bound by lower court’s declaration that there was no negligence on the part of Pioneer Stevedoring Corporation, a confirmation of the trial court’s finding to that effect, hence the Court’s conformity to Pioneer’s being absolved of any liability. Pioneer had taken the necessary safeguards insofar as its unloading operations were concerned, a fact which appears to have been accepted by the Vianas by not impleading Pioneer as a defendant, and likewise inceptively by Aboitiz by filing its third-party complaint only after 10 months from the institution of the suit against it. Parenthetically, Pioneer is not within the ambit of the rule on extraordinary diligence required of, and the corresponding presumption of negligence foisted on, common carriers like Aboitiz. This, of course, does not detract from what the Court has said that no negligence can be imputed to Pioneer but, that on the contrary, the failure of Aboitiz to exercise extraordinary diligence for the safety of its passenger is the rationale for the Court’s finding on its liability.

Eastern Shipping Lines vs. IAC (GR L-69044, 29 May 1987)
Eastern Shipping Lines vs. Nisshin Fire and Marine Insurance Co. (GR L-71478)
First Division, Melencio-Herrera (J): 4 concur

Facts: In GR 69044, sometime in or prior to June 1977, the M/S ASIATICA, a vessel operated by Eastern Shipping Lines loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated value with Development Insurance and Surety Corporation. In GR 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in 2 containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated value by Nisshin Fire & Marine Insurance Co., for US$46,583.00, and the 2 cases by Dowa Fire & Marine Insurance Co., Ltd., for US$11,385.00. Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured.

[GR 69044] On 11 May 1978, Development Insurance, having been subrogated unto the rights of the two insured companies, filed suit against Eastern Shipping for the recovery of the amounts it had paid to the insured before the then Court of First Instance of Manila (Branch XXX, Civil Case 116087). Eastern Shipping denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable under the law. On 31 August 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney’s fees and costs. Eastern Shipping took an appeal to the then Court of Appeals which, on 14 August 1984, affirmed the decision of the trial court. Eastern Shipping filed a petition for review on certiorari.

[GR 71478] On 16 June 1978, Nisshin, and Dowa, as subrogees of the insured, filed suit against Eastern Shipping for the recovery of the insured value of the cargo lost with the then Court of First Instance of Manila (Branch II, Civil Case 116151), imputing unseaworthiness of the ship and non-observance of extraordinary diligence by Eastern Shipping. Eastern Shipping denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. On 15 September 1980, the Trial Court rendered judgment in favor of Nisshin and Dowa in the amounts of US$46,583.00 and US$11,385.00, respectively, with legal interest, plus attorney’s fees of P5,000.00 and costs. On appeal by Eastern Shipping, the then Court of Appeals on 10 September 1984, affirmed with modification the Trial Court’s judgment by decreasing the amount recoverable by Dowa to US$1,000.00 because of $500 per package limitation of liability under the COGSA. Hence, the petition for review on certiorari by Eastern Shipping.

Both Petitions were initially denied for lack of merit. GR 69044 on 16 January 1985 by the First Division, and GR 71478 on 25 September 1985 by the Second Division. Upon Eastern Shipping’s Motion for Reconsideration, however, GR 69044 was given due course on 25 March 1985, and the parties were required to submit their respective Memoranda, which they have done. On the other hand, in GR 71478, Eastern Shipping sought reconsideration of the Resolution denying the Petition for Review and moved for its consolidation with GR 69044, which was then pending resolution with the First Division. The same was granted; the Resolution of the Second Division of 25 September 1985 was set aside and the Petition was given due course.

The Supreme Court modified the judgment in GR 69044, in that Eastern Shipping shall pay the Development Insurance the amount of P256,039 for the 28 packages of calorized lance pipes, and P71,540 for the 7 cases of spare parts, with interest at the legal rate from the date of the filing of the Complaint on 13 June  1978, plus P5,000 as attorney’s fees, and the costs. The Court, on the other hand, in GR 71478, affirmed the judgment.

1.    Admission of Eastern Shipping as operator of vessel
As a general rule, the facts alleged in a party’s pleading are deemed admissions of that party and binding upon it.  And an admission in one pleading in one action may be received in evidence against the pleader or his successor-in-interest on the trial of another action to which he is a party, in favor of a party to the latter action.  Herein, although Eastern Shipping claimed that it is not the operator of the M/S Asiatica but merely a charterer thereof, it, in fact, stated in its petition in GR 69044 that “there are about 22 cases of the ‘ASIATICA’ pending in various courts where various plaintiffs are represented by various counsel representing various consignees or insurance companies. The common defendant in these cases is petitioner herein, being the operator of said vessel.” Eastern Shipping should thus be held bound to said admission.

2.    Law Applicable
The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. Herein, as the cargoes in question were transported from Japan to the Philippines, the liability of Eastern Shipping is governed primarily by the Civil Code. However, in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code.

3.    Common carriers liable for loss; Natural disaster or calamity an exception
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. Common carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning or other natural disaster or calamity; xxx”

4.    Fire not a natural disaster or calamity
Easter Shipping claims that the loss of the vessel by fire exempts it from liability under the phrase “natural disaster or calamity.” However, fire may not be considered a natural disaster or calamity, 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 lightning   or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier.

5.    Construction of Article 1680 as to fire as an extraordinary fortuitous event
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of 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.

6.    Fire not comprehended within exceptions in Article 1734; Carrier presumed at fault unless it proves otherwise
As the peril of fire is not comprehended within the exceptions in Article 1734, 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. Herein, the respective Insurers, as subrogees of the cargo shippers, have proven that the transported goods have been lost. Eastern Shipping has also proven that the loss was caused by fire. The burden then is upon Eastern Shipping to prove that it has exercised the extraordinary diligence required by law. Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Eastern Shipping cannot escape liability for the loss of the cargo.

7.    Natural disaster must be proximate and only cause of the loss, and that carrier has exercised due diligence to prevent or minimize loss
Even if fire were to be considered a “natural disaster” within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that the “natural disaster” must have been the “proximate and only cause of the loss,” and that the carrier has “exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster.” Herein, Eastern Shipping has also failed to establish satisfactorily.

8.    Section 4 (2) of COGSA; Relief in COGSA unavailing as Eastern shipping actually at fault due to lack of diligence
Section 4(2) of COGSA provides that “Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from. xxx (b) Fire, unless caused by the actual fault or privity of the carrier. xxx” Herein, there was “actual fault” of the carrier shown by “lack of diligence” in that “when the smoke was noticed, the fire was already big; that the fire must have started 24 hours before the same was noticed;” and that “after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage.” The foregoing suffices to show that the circumstances under which the fire originated and spread are such as to show that Eastern Shipping or its servants were negligent in connection therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Eastern Shipping.

9.    Section 4(5) of COGSA
Section 4(5) of the COGSA, reads:”(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in bill of lading. This declaration if embodied in the bill of lading shall be prima facie evidence, but all be conclusive on the carrier. By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained. xxx”

10.    Article 1749 NCC
Article 1749 of the New Civil Code also allows the limitations of liability in this wise, “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.”

11.    Civil Code does not limit liability of common carrier; COGSA suppletory to provisions of Civil Code
The Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA, which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier’s liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of the Carriage of Goods by Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties.

12.    Eastern Shipping’s liability should not exceed US$500 per package
In GR 69044, there is no stipulation in the respective Bills of Lading limiting the carrier’s liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Eastern Shipping’s liability should not exceed US$500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case “more than the amount of damage actually sustained.”

13.    Actual liability of Eastern Shipping in GR 69044
In GR 69044, (1) the actual total loss for the 5,000 pieces of calorized lance pipes was P256,039, which was exactly the amount of the insurance coverage by Development Insurance, and the amount affirmed to be paid by the Court. The goods were shipped in 28 packages. Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current exchange rate of P20.44 to US$1, would be P286,160, or “more than the amount of damage actually sustained.” Consequently, the amount of P256,039 should be upheld.  (2) With respect to the 7 cases of spare parts, their actual value was P92,361.75, which is likewise the insured value of the cargo  and which amount was affirmed to be paid by the Court. However, multiplying 7 cases by $500 per package at the present prevailing rate of P20.44 to US$1 (US$3,500 x P20.44) would yield P71,540 only, which is the amount that should be paid by Eastern Shipping for those spare parts, and not P92,361.75.

14.    Actual liability of Eastern Shipping in GR 71478
In GR 71478, in so far as the 2 cases of surveying instruments are concerned, the amount awarded to Dowa which was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order. In respect of the shipment of 128 cartons of garment fabrics in 2 containers and insured with Nisshin, the Appellate Court also limited Eastern Shipping’s liability to $500 per package and affirmed the award of $46,583 to Nisshin. It multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained that “since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons, which amount is less than the maximum limitation of the carrier’s liability. The 128 cartons and not the 2 containers should be considered as the shipping unit.

15.    Mitsui vs. American Export Lines
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel-supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified and affirmed holding that: “When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the ‘package’ referred to in liability limitation provision of Carriage of Goods by Sea Act. [Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5)]. Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers whose contents are disclosed should be treated as packages, the interest in securing international uniformity would suggest that they should not be so treated. [Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5)]. After quoting the statement in Leather’s Best, supra, 451 F 2d at 815, that treating a container as a package is inconsistent with the congressional purpose of establishing a reasonable minimum level of liability [Judge Beeks wrote, 414 F. Supp. at 907].

16.    Courts to construe and apply statute as enacted; Congress alone must be the one to modernize or reconstitute it
The approach gives needed recognition to the responsibility of the courts to construe and apply the statute as enacted, however great might be the temptation to ‘modernize’ or reconstitute it by artful judicial gloss. If COGSA’s package limitation scheme suffers from internal illness, Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit’s conclusion in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators, do not warrant a distortion or artificial construction of the statutory term ‘package.’ A ruling that these large reusable metal pieces of transport equipment qualify as COGSA packages — at least where they were carrier-owned and supplied — would amount to just such a distortion.

17.    Individual crates or cartons considered packages although in a carrier’s containers
If the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered ‘packages’ standing by themselves, they do not suddenly lose that character upon being showed in a carrier’s container. These containers are likened to detachable stowage compartments of the ship. They simply serve to divide the ship’s overall cargo stowage space into smaller, more serviceable loci. Shippers’ packages are quite literally ’stowed’ in the containers utilizing stevedoring practices and materials analogous to those employed in traditional on board stowage.

18.    Yeramex Internation vs. SS Tando (US)
In Yeramex International v. S.S. Tando, 1977 A.M.C. 1807 (E.D. Va.), rev’d on other grounds, 595 F 2d 943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks’ reasoning in Matsushita and similarly rejected the functional economics test. Judge Kellam held that when rolls of polyester goods are packed into cardboard cartons which are then placed in containers, the cartons and not the containers are the packages.

19.    Smithgreyhound vs. M/V Eurygenes (US)
The case of Smithgreyhound v. M/V Eurygenes  followed the Mitsui test, holding therein “Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a carrier-furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per container if the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in clear and unambiguous language, an agreement to treat the container as the package.”

20.    Bill of lading disclosed contents of containers; Mitsui and Eurygenes cases applied
Considering that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the 2 containers should be considered as the shipping unit subject to the $500 limitation of liability.

21.    “Say: Two (2) Containers Only” construed; Obscure words or stipulations in contract construed against party who caused obscurity, especially in a contract of adhesion
In light of the stipulation in fine print in the dorsal side of the Bill of lading (“[Use of Container] Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into container[s] at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container[s]”), the use of the estimate “Say: Two (2) Containers Only” in the Bill of Lading, means that the goods could probably fit in 2 containers only. It cannot mean that the shipper had furnished the containers for if so, “Two (2) Containers” appearing as the first entry would have sufficed and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party merely adheres to it, like the Bill of Lading, which is drawn up by the carrier.

22.    No Denial of Opportunity to Present Deposition of Its Witnesses (in GR 69044 only); What due process abhors
Herein, Eastern Shipping was given full opportunity to present its evidence but it failed to do so. Since after 6 November 1978, to 27 August 1979, not to mention the time from 27 June 1978, when its answer was prepared and filed in Court, until 26 September 1978, when the pre-trial conference was conducted for the last time, Eastern Shipping had more than 9 months to prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon Development Insurance on August 25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11th that the deposition of the witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of Eastern Shipping’s motion for postponement, for which reason it deserves no sympathy from the Court in that regard. Eastern Shipping has told the Court since 16 February 1979, that it was going to take the deposition of its witnesses in Japan. Why did it take until 25 August 1979, or more than 6 months, to prepare its written interrogatories. Only Eastern Shipping itself is to blame for its failure to adduce evidence in support of its defenses. Thus, Eastern Shipping was afforded ample time to present its side of the case.  It cannot complain now that it was denied due process when the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be heard.

23.     Award of Attorney’s Fees
Courts being vested with discretion in fixing the amount of attorney’s fees, it is believed that the amount of P5,000.00 would be more reasonable in GR 69044. The award of P5,000.00 in GR 71478 was affirmed.