EASTERN SHIPPING LINES, INC., vs.

BPI/MS INSURANCE CORP., & MITSUI SUMITOMO INSURANCE CO.,

LTD.
G.R. No. 182864, January 12, 2015
FACTS: For two separate transactions in 2004, Sumitomo Corporation, a
corporation based in Yokohama, Japan shipped on board the vessels of
petitioner Eastern Shipping Lines Inc. (ESLI) coils of various steel sheet for
transportation and delivery at the port of Manila in favor of consignee
Calamba Steel Center located in Saimsim, Calamba, Laguna. The
Shipments were insured with the respondents BPI/MS Insurance
Corporation (BPI/MS) and Mitsui Sumitomo Insurance Company (Mitsui)
against all risks. The first shipment arrived at the port of Manila in an
unknown condition and was turned over to Asian Terminals Inc. (ATI) for
safekeeping. Upon withdrawal of the shipment by Calamba Steel, it was
found out that part of the shipment was damaged and was in bad order
condition such that there was a Request for Bad Order Survey. It was
found out that the damage amounted to US$4,598.85 prompting Calamba
Steel to reject the damaged shipment for being unfit for the intended
purpose. Sumitomo Corporation again shipped on board ESLIs vessel coils
of various Steel for transportation to and delivery at the port of Manila in
favor of Calamba Steel. Again, the shipment was insured by respondents
against all risk. The second shipment arrived at the port of Manila partly
damaged and in bad order. The coils sustained further damage during the
discharge from vessel to shore until its turnover to ATIs custody for
safekeeping. Upon withdrawal from ATI and delivery to Calamba Steel, As
it did before, Calamba Steel rejected the damaged shipment for being
unfit for the intended purpose.
Calamba Steel attributed the damages on both shipments to ESLI as the
carrier and ATI as the arrastre operator in charge of the handling and
discharge of the coils and filed a claim against them. When ESLI and ATI
refused to pay, Calamba Steel filed an insurance claim for the total
amount of the cargo against BPI/MS and Mitsui as cargo insurers. As a
result, BPI/MS and Mitsui became subrogated in place of and with all the
rights and defenses accorded by law in favor of Calamba Steel. Opposing
the complaint, ATI denied the allegations and insisted that the coils in two
shipments were already damaged upon receipt from ESLIs vessels. It
likewise insisted that it exercised due diligence in the handling of the
shipments and invoked that in case of adverse decision, its liability should
not exceed P5,000.00 pursuant to Section 7.01, Article VII of the Contract
for Cargo Handling Services between Philippine Ports Authority (PPA) and
ATI.

On its part, ESLI denied the allegations of the complainants and averred
that the damage to both shipments was incurred while the same were in
the possession and custody of ATI and/or of the consignee or its
representatives. The RTC Makati City rendered a decision finding both the
ESLI and ATI liable for the damages sustained by the two shipments.
Upon appeal, Both ESLI and ATI invoked the limitation of liability of
US$500.00 per package as provided in Commonwealth Act No. 65 or the
Carriage of Goods by Sea Act (COGSA). The CA absolved ATI from liability
in its decision.

ISSUE:
1. Whether or not ESLI is liable for the damaged shipment
transported and delivered by its vessels.
2. Whether or not ESLI can invoke the limitation of liability of
US$500.00 per package as provided in Commonwealth Act No. 65
or the Carriage of Goods by Sea Act (COGSA).

HELD: Common carriers, from the nature of their business and on public
policy considerations, are bound to observe extra ordinary diligence in the
vigilance over the goods transported by them. Subject to certain
exceptions enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration of the
goods. 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. In maritime transportation, a bill of lading
is issued by a common carrier as a contract, receipt and symbol of the
goods covered by it. If it has no notation of any defect or damage in the
goods, it is considered as a "clean bill of lading." A clean bill of lading
constitutes prima facie evidence of the receipt by the carrier of the goods
as therein described. Based on the bills of lading issued, it is undisputed
that ESLI received the two shipments of coils from shipper Sumitomo
Corporation in good condition at the ports of Yokohama and Kashima,
Japan. However, upon arrival at the port of Manila, some coils from the
two shipments were partly dented and crumpled as evidenced by the Turn
Over Survey of Bad Order Cargoes prior to turnover to ATI. Mere proof of

delivery of the goods in good order to a common carrier and of their

arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. If no adequate explanation is given
as to how the deterioration, loss, or destruction of the goods happened,
the transporter shall be held responsible. From the foregoing, the fault is
attributable to ESLI.

While no longer an issue, it may be nonetheless state that ATI was

correctly absolved of liability for the damage. In the issue of limitation of
liability, the law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, destruction
or deterioration. The Code takes precedence as the primary law over the
rights and obligations of common carriers with the Code of Commerce and
COGSA applying suppletorily. The New Civil Code provides that a
stipulation limiting a common carriers liability to the value of the goods
appearing in the bill of lading is binding, unless the shipper or owner
declares a greater value. In addition, 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. COGSA, on the
other hand, provides under Section 4, Subsection 5 that an amount
recoverable in case of loss or damage shall not exceed US$500.00 per
package or per customary freight unless the nature and value of such
goods have been declared by the shipper before shipment and inserted in
the bill of lading. Accordingly, the issue whether or not ESLI has limited
liability as a carrier is determined by either absence or presence of proof
that the nature and value of the goods have been declared by Sumitomo
Corporation and inserted in the bills of lading. There is no question about
the declaration of the nature, weight and description of the goods on the
first bill of lading. The bills of lading represent the formal expression of the
parties rights, duties and obligations. It is the best evidence of the
intention of the parties which is to be deciphered from the language used
in the contract, not from the unilateral post facto assertions of one of the
parties, or of third parties who are strangers to the contract. Thus, when
the terms of an agreement have been reduced to writing, it is deemed to
contain all the terms agreed upon and there can be, between the parties
and their successors in interest, no evidence of such terms other than the
contents of the written agreement. As to the non-declaration of the value
of the goods on the second bill of lading, we see no error on the part of
the appellate court when it ruled that there was a compliance of the
requirement provided by COGSA.

The declaration requirement does not require that all the details must be
written down on the very bill of lading itself. It must be emphasized that
all the needed details are in the invoice, which "contains the itemized list

of goods shipped to a buyer, stating quantities, prices, shipping charges,"

and other details which may contain numerous sheets. Compliance can be
attained by incorporating the invoice, by way of reference, to the bill of
lading provided that the former containing the description of the nature,
value and/or payment of freight charges is as in this case duly admitted as
evidence.
Wherefore, the petition for review on certiorari of ESLI was denied
and the decision of the CA was affirmed.

MARINA PORT SERVICES INC vs AMERICAN HOME ASSURANCE

CORPORATION

G.R. No. 201822, August 12, 2015

Facts: On September 21, 1989, Countercorp Trading PTE., Ltd.
shipped from Singapore to the Philippines 10 container vans of soft wheat
flour with seals intact on board the vessel M/V Uni Fortune. The shipment
was insured against all risks by AHAC and consigned to MSC Distributor
(MSC).
Upon arrival at the Manila South Harbor on September 25, 1989, the
shipment was discharged in good and complete order condition and with
safety seals in place to the custody of the arrastre operator, MPSI. After
unloading and prior to hauling, agents of the Bureau of Customs officially
broke the seals, opened the container vans, and examined the shipment
for tax evaluation in the presence of MSC's broker and checker. Thereafter,
the customs inspector closed the container vans and refastened them
with safety wire seals while MSC's broker padlocked the same. MPSI then
placed the said container vans in a back-to-back arrangement at the
delivery area of the harbor's container yard where they were watched
over by the security guards of MPSI and of the Philippine Ports Authority.
On October 10, 1989, MSC's representative, AD's Customs Services (ACS),
took out five container vans for delivery to MSC. At the compound's exit,
MPSI issued to ACS the corresponding gate passes for the vans indicating
its turnover of the subject shipment to MSC. However, upon receipt of the
container vans at its warehouse, MSC discovered substantial shortages in
the number of bags of flour delivered. Hence, it filed a formal claim for
loss with MPSI.
From October 12 to 14, 1989 and pursuant to the gate passes issued by
MPSI, ACS took out the remaining five container vans from the container
yard and delivered them to MSC. Upon receipt, MSC once more discovered
substantial shortages. Thus, MSC filed another claim with MPSI.
Per MSC, the total number of the missing bags of flour was 1,650 with a
value of 257,083.00.
MPSI denied both claims of MSC. As a result, MSC sought insurance
indemnity for the lost cargoes from AHAC. AHAC paid MSC the value of the
missing bags of flour after finding the tetter's claim in order. In turn, MSC
issued a subrogation receipt in favor of AHAC.
Thereafter, AHAC filed a Complaint for damages against MPSI before the
RTC
Issue: Whether MPSI is liable for the loss of the bags of flour.
Held: At the outset, it is evident that the resolution of the instant
case requires the scrutiny of factual issues which are, however, outside
the scope of the present petition filed pursuant to Rule 45 of the Rules of

Court. The Court finds that the instant case falls under the aforementioned
second, fourth, fifth, and seventh exceptions. Hence, it shall proceed to
delve into factual matters essential to the proper determination of the
merits of this case. he relationship between an arrastre operator and a
consignee is similar to that between a warehouseman and a depositor, or
to that between a common carrier and the consignee and/or the owner of
the shipped goods. Thus, an arrastre operator should adhere to the same
degree of diligence as that legally expected of a warehouseman or a
common carrier as set forth in Section 3[b] of the Warehouse Receipts
[Act] and Article 1733 of the Civil Code. As custodian of the shipment
discharged from the vessel, the arrastre operator must take good care of
the same and turn it over to the party entitled to its possession.
In case of claim for loss filed by a consignee or the insurer as subrogee, it
is the arrastre operator that carries the burden of proving compliance with
the obligation to deliver the goods to the appropriate party. It must show
that the losses were not due to its negligence or that of its employees. It
must establish that it observed the required diligence in handling the
shipment. Otherwise, it shall be presumed that the loss was due to its
fault. In the same manner, an arrastre operator shall be liable for
damages if the seal and lock of the goods deposited and delivered to it as
closed and sealed, be broken through its fault. Such fault on the part of
the arrastre operator is likewise presumed unless there is proof to the
contrary.
Verily, the testimonies of the aforementioned employees of MPSI confirm
that the container vans, together with their padlocks and wirings, were in
order at the time the gate passes were issued up to the time the said
container vans were turned over to ACS.
AHAC justifies the failure of ACS to immediately protest the alleged loss or
pilferage upon initial pick-up of the first batch of container vans. According
to it, ACS could not have discovered the loss at that moment since the
stripping of container vans in the pier area is not allowed. The Court
cannot, however, accept such excuse. For one, AHAC's claim that stripping
of the container vans is not allowed in the pier area is a mere allegation
without proof. It is settled that "[m]ere allegations do not suffice; they
must be substantiated by clear and convincing proof."37 For another, even
assuming that stripping of the container vans is indeed not allowed at the
pier area, it is hard to believe that MSC or its representative ACS has no
precautionary measures to protect itself from any eventuality of loss or
pilferage. To recall, ACS's representative signed the gate passes without
any qualifications. This is despite the fact that such signature serves as an
acknowledgment of ACS's receipt of the goods in good order and
condition. If MSC was keen enough in protecting its interest, it (through
ACS) should have at least qualified the receipt of the goods as subject to
inspection, and thereafter arrange for such an inspection in an area where
the same is allowed to be done. However, no such action or other similar
measure was shown to have been undertaken by MSC. What is clear is
that ACS accepted the container vans on its behalf without any

qualification. As regards the value of the thing deposited, the statement

of the depositor shall be accepted, when the forcible opening is imputable
to the depositary, should there be no proof to the contrary. However, the
courts may pass upon the credibility of the depositor with respect to the
value claimed by him.
When the seal or lock is broken, with or without the depositary's fault, he
shall keep the secret of the deposit.
However, no such presumption arises in this case considering that it was
not sufficiently shown that the container vans were re-opened or that their
locks and seals were broken for the second time. As may be recalled, the
container vans were opened by a customs official for examination of the
subject shipment and were thereafter resealed with safety wires. While
this fact is not disputed by both parties, AHAC alleges that the container
vans were re-opened and this gave way to the alleged pilferage. The Court
notes, however, that AHAC based such allegation solely on the survey
report of the Manila Adjuster & Surveyors Company (MASCO).
At any rate, MPSI cannot just the same be held liable for the missing bags
of flour since the consigned goods were shipped under "Shipper's Load
and Count" arrangement. "This means that the shipper was solely
responsible for the loading of the container, while the carrier was oblivious
to the contents of the shipment. Protection against pilferage of the
shipment was the consignee's lookout. The arrastre operator was, like any
ordinary depositary, duty-bound to take good care of the goods received
from the vessel and to turn the same over to the party entitled to their
possession, subject to such qualifications as may have validly been
imposed in the contract between the parties. The arrastre operator was
not required to verify the contents of the container received and to
compare them with those declared by the shipper because, as earlier
stated, the cargo was at the shipper's load and count. The arrastre
operator was expected to deliver to the consignee only the container
received from the carrier."

G.V. FLORIDA TRANSPORT, INC., vs HEIRS OF ROMEO L.

BATTUNG, JR., REPRESENTED BY ROMEO BATTUNG, SR
Facts: Respondents alleged that in the evening of March 22, 2003,
Romeo L. Battung, Jr. (Battung) boarded petitioner's bus with body number
037 and plate number BVJ-525 in Delfin Albano, Isabela, bound for
Manila.Battung was seated at the first row behind the driver and slept
during the ride. When the bus reached the Philippine Carabao Center in
Muoz, Nueva Ecija, the bus driver, Duplio, stopped the bus and alighted
to check the tires. At this point, a man who was seated at the fourth row
of the bus stood up, shot Battung at his head, and then left with a
companion. The bus conductor, Daraoay, notified Duplio of the incident
and thereafter, brought Romeo to the hospital, but the latter was
pronounced dead on arrival. Hence, respondents filed a complaint on July
15, 2008 for damages in the aggregate amount of P1,826,000.00 based
on a breach of contract of carriage against petitioner, Duplio, and Baraoay
(petitioner, et al.) before the RTC, docketed as Civil Case No. 22-1103.
Respondents contended that as a common carrier, petitioner and its
employees are bound to observe extraordinary diligence in ensuring the
safety of passengers; and in case of injuries and/or death on the part of a
passenger, they are presumed to be at fault and, thus, responsible
therefor. As such, petitioner, et al. should be held civilly liable for
Battung's death.
In their defense, petitioner, et al. maintained that they had exercised the
extraordinary diligence required by law from common carriers. In this
relation, they claimed that a common carrier is not an absolute insurer of
its passengers and that Battung's death should be properly deemed a
fortuitous event. Thus, they prayed for the dismissal of the complaint, as
well as the payment of their counterclaims for damages and attorney's
fees
Issue: whether or not the CA correctly affirmed the ruling of the RTC
finding petitioner liable for damages to respondent arising from culpa
contractual.
Held: The law exacts from common carriers (i.e., those persons,
corporations, firms, or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public) the highest degree of
diligence (i.e.,extraordinary diligence) in ensuring the safety of its
passengers. Articles 1733 and 1755 of the Civil Code state:

Art. 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
Art. 1755. 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.
On the other hand, since Battung's death was caused by a copassenger, the applicable provision is Article 1763 of the Civil Code,
which states that "a common carrier is responsible for injuries suffered by
a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier's employees through
the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission." Notably, for this obligation, the
law provides a lesser degree of diligence, i.e., diligence of a good father of
a family, in assessing the existence of any culpability on the common
carrier's part.
Case law states that the concept of diligence of a good father of a family
"connotes reasonable care consistent with that which an ordinarily
prudent person would have observed when confronted with a similar
situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is
guilty of negligence."

Aboitiz vs CA
Facts: On 27 February 1981, Equitable Insurance Corporation
(Equitable) filed an action for damages against Aboitiz to recover by way
of subrogation the value of the cargoes insured by Equitable that were lost
in the sinking of M/V P. Aboitiz. The complaint, which was docketed as Civil
Case No. 138395, was later amended to implead Seatrain Pacific Services
S.A. and Citadel Lines, Inc. as party defendants. The complaint against the
latter defendants was subsequently dismissed upon motion in view of the
amicable settlement reached by the parties.
On 7 September 1989, the RTC of Manila, Branch 7, rendered
judgment ordering Aboitiz to pay Equitable the amount of P87,633.81,
plus legal interest and attorneys fees. It found that Aboitiz was guilty of
contributory negligence and, therefore, liable for the loss.
In its appeal, docketed as CA-G.R. CV No. 43458, Aboitiz invoked the
doctrine of limited liability and claimed that the typhoon was the
proximate cause of the loss. On 27 November 1998, the Court of Appeals
rendered a decision, affirming the RTC decision.
The Court of Appeals (Fifteenth Division) ruled that the loss of the
cargoes and the sinking of the vessel were due to its unseaworthiness and
the failure of the crew to exercise extraordinary diligence. Said findings
were anchored on the 1990 GAFLAC case and on this Courts resolution
dated November 13, 1989 in G.R. No. 88159, dismissing Aboitizs petition
and

affirming

the

findings

of

the

appellate

vessels unseaworthiness and the crews negligence.

court

on

the

Its motion for reconsideration having been denied, Aboitiz filed

before this Court a petition for review on certiorari, docketed as G.R. No.
137801
Issue: Whether Aboitiz can avail limited liability on the basis of the
real and hypothecary doctrine of maritime law
Held: A perusal of the decisions of the courts below in all three
petitions reveals that there is a categorical finding of negligence on the
part of Aboitiz. For instance, in G.R. No. 121833, the RTC therein expressly
stated that the captain of M/V P. Aboitiz was negligent in failing to take a
course of action that would prevent the vessel from sailing into the
typhoon. In G.R. No. 130752, the RTC concluded that Aboitiz failed to show
that it had exercised the required extraordinary diligence in steering the
vessel before, during and after the storm. In G.R. No. 137801, the RTC
categorically stated that the sinking of M/V P. Aboitiz was attributable to
the negligence or fault of Aboitiz. In all instances, the Court of Appeals
affirmed the factual findings of the trial courts. Events have supervened
during the pendency of the instant petitions. On two other occasions, the
Court

ruled

on

separate

petitions

involving

monetary

claims

against Aboitiz as a result of the 1980 sinking. However, on 02 May 2006,

the Court rendered a decision in Aboitiz Shipping Corporation v. New India
Assurance Company, Ltd (New India), reiterating the well-settled principle
that the exception to the limited liability doctrine applies when the
damage is due to the fault of the shipowner or to the concurrent
negligence of the shipowner and the captain. Where the shipowner fails to
overcome the presumption of negligence, the doctrine of limited liability
cannot be applied. In New India, the Court clarified that the earlier
pronouncement in Monarch Insurance was not an abandonment of the
doctrine of limited liability and that the circumstances therein still made
the doctrine applicable.
In New India, the Court declared that Aboitiz failed to discharge its
burden of showing that it exercised extraordinary diligence in the
transport of the goods it had on board in order to invoke the limited

liability doctrine. Thus, the Court rejected Aboitizs argument that the
award of damages to respondent therein should be limited to its pro
rata share in the insurance proceeds from the sinking of M/V P. Aboitiz.