G.R. No.

L-18965 October 30, 1964 All abaca shipments of Macleod, including the 1,162 bales
loaded on the carrier's LCT No. 1025, were insured with
COMPAIA MARITIMA, petitioner, the Insurance Company of North America against all losses
vs. and damages. In due time, Macleod filed a claim for the
INSURANCE COMPANY OF NORTH AMERICA, respondent. loss it suffered as above stated with said insurance
company, and after the same had been processed, the
BAUTISTA ANGELO, J.: sum of P64,018.55 was paid, which was noted down in a
document which aside from being a receipt of the amount
Sometime in October, 1952, Macleod and Company of the paid, was a subrogation agreement between Macleod and
Philippines contracted by telephone the services of the the insurance company wherein the former assigned to
Compaia Maritima, a shipping corporation, for the the latter its rights over the insured and damaged cargo.
shipment of 2,645 bales of hemp from the former's Sasa Having failed to recover from the carrier the sum of
private pier at Davao City to Manila and for their P60,421.02, which is the only amount supported by
subsequent transhipment to Boston, Massachusetts, receipts, the insurance company instituted the present
U.S.A. on board the S.S. Steel Navigator. This oral contract action on October 28, 1953. After trial, the court a
was later on confirmed by a formal and written booking quo rendered judgment ordering the carrier to pay the
issued by Macleod's branch office in Sasa and insurance company the sum of P60,421.02, with legal
handcarried to Compaia Maritima's branch office in interest thereon from the date of the filing of the
Davao in compliance with which the latter sent to complaint until fully paid, and the costs. This judgment
Macleod's private wharf LCT Nos. 1023 and 1025 on was affirmed by the Court of Appeals on December 14,
which the loading of the hemp was completed on 1960. Hence, this petition for review.
October 29, 1952. These two lighters were manned each
by a patron and an assistant patron. The patrons of both The issues posed before us are: (1) Was there a contract of
barges issued the corresponding carrier's receipts and that carriage between the carrier and the shipper even if the
issued by the patron of Barge No. 1025 reads in part: loss occurred when the hemp was loaded on a barge
owned by the carrier which was loaded free of charge and
Received in behalf of S.S. Bowline Knot in good order was not actually loaded on the S.S. Bowline Knot which
and condition from MACLEOD AND COMPANY OF would carry the hemp to Manila and no bill of lading was
PHILIPPINES, Sasa Davao, for transhipment at Manila issued therefore?; (2) Was the damage caused to the
onto S.S. Steel Navigator. cargo or the sinking of the barge where it was loaded due
to a fortuitous event, storm or natural disaster that would
FINAL DESTINATION: Boston. exempt the carrier from liability?; (3) Can respondent
insurance company sue the carrier under its insurance
contract as assignee of Macleod in spite of the fact that
Thereafter, the two loaded barges left Macleod's wharf
the liability of the carrier as insurer is not recognized in
and proceeded to and moored at the government's
this jurisdiction?; (4) Has the Court of Appeals erred in
marginal wharf in the same place to await the arrival of
regarding Exhibit NNN-1 as an implied admission by the
the S.S. Bowline Knot belonging to Compaia Maritima on
carrier of the correctness and sufficiency of the shipper's
which the hemp was to be loaded. During the night of
statement of accounts contrary to the burden of proof
October 29, 1952, or at the early hours of October 30, LCT
rule?; and (5) Can the insurance company maintain this
No. 1025 sank, resulting in the damage or loss of 1,162
suit without proof of its personality to do so?
bales of hemp loaded therein. On October 30, 1952,
Macleod promptly notified the carrier's main office in
Manila and its branch in Davao advising it of its liability. 1. This issue should be answered in the affirmative. As
The damaged hemp was brought to Odell Plantation in found by the Court of Appeals, Macleod and Company
Madaum, Davao, for cleaning, washing, reconditioning, contracted by telephone the services of petitioner to ship
and redrying. During the period from November 1-15, the hemp in question from the former's private pier at
1952, the carrier's trucks and lighters hauled from Odell to Sasa, Davao City, to Manila, to be subsequently
Macleod at Sasa a total of 2,197.75 piculs of the transhipped to Boston, Massachusetts, U.S.A., which oral
reconditioned hemp out of the original cargo of 1,162 contract was later confirmed by a formal and written
bales weighing 2,324 piculs which had a total value of booking issued by the shipper's branch office, Davao City,
116,835.00. After reclassification, the value of the in virtue of which the carrier sent two of its lighters to
reconditioned hemp was reduced to P84,887.28, or a loss undertake the service. It also appears that the patrons of
in value of P31,947.72. Adding to this last amount the sum said lighters were employees of the carrier with due
of P8,863.30 representing Macleod's expenses in checking, authority to undertake the transportation and to sign the
grading, rebating, and other fees for washing, cleaning and documents that may be necessary therefor so much so
redrying in the amount of P19.610.00, the total loss adds that the patron of LCT No. 1025 signed the receipt
up to P60,421.02. covering the cargo of hemp loaded therein as follows: .
 Received in behalf of S.S. Bowline Knot in good order The claim that there can be no contract of affreightment
and condition from MACLEOD AND COMPANY OF because the hemp was not actually loaded on the ship
PHILIPPINES, Sasa Davao, for transhipment at Manila that was to take it from Davao City to Manila is of no
onto S.S. Steel Navigator. moment, for, as already stated, the delivery of the hemp
to the carrier's lighter is in line with the contract. In fact,
FINAL DESTINATION: Boston. the receipt signed by the patron of the lighter that
carried the hemp stated that he was receiving the cargo
The fact that the carrier sent its lighters free of charge to "in behalf of S.S. Bowline Knot in good order and
take the hemp from Macleod's wharf at Sasa preparatory condition." On the other hand, the authorities are to the
to its loading onto the ship Bowline Knot does not in any effect that a bill of lading is not indispensable for the
way impair the contract of carriage already entered into creation of a contract of carriage.
between the carrier and the shipper, for that preparatory
step is but part and parcel of said contract of carriage. The Bill of lading not indispensable to contract of carriage.
lighters were merely employed as the first step of the As to the issuance of a bill of lading, although article
voyage, but once that step was taken and the hemp 350 of the Code of Commerce provides that "the
delivered to the carrier's employees, the rights and shipper as well as the carrier of merchandise or goods
obligations of the parties attached thereby subjecting may mutua-lly demand that a bill of lading is not
them to the principles and usages of the maritime law. In indispensable. As regards the form of the contract of
other words, here we have a complete contract of carriage carriage it can be said that provided that there is a
the consummation of which has already begun: the meeting of the minds and from such meeting arise
shipper delivering the cargo to the carrier, and the latter rights and obligations, there should be no limitations
taking possession thereof by placing it on a lighter manned as to form." The bill of lading is not essential to the
by its authorized employees, under which Macleod contract, although it may become obligatory by reason
became entitled to the privilege secured to him by law for of the regulations of railroad companies, or as a
its safe transportation and delivery, and the carrier to the condition imposed in the contract by the agreement of
full payment of its freight upon completion of the voyage. the parties themselves. The bill of lading is juridically a
documentary proof of the stipulations and conditions
The receipt of goods by the carrier has been said to lie agreed upon by both parties. (Del Viso, pp. 314-315;
at the foundation of the contract to carry and deliver, Robles vs. Santos, 44 O.G. 2268). In other words, the
and if actually no goods are received there can be no Code does not demand, as necessary requisite in the
such contract. The liability and responsibility of the contract of transportation, the delivery of the bill of
carrier under a contract for the carriage of goods lading to the shipper, but gives right to both the
commence on their actual delivery to, or receipt by, the carrier and the shipper to mutually demand of each
carrier or an authorized agent. ... and delivery to a other the delivery of said bill. (Sp. Sup. Ct. Decision,
lighter in charge of a vessel for shipment on the vessel, May 6, 1895). (Martin, Philippine Commercial Laws,
where it is the custom to deliver in that way, is a good Vol. II, Revised Edition, pp. 12-13)
delivery and binds the vessel receiving the freight, the
liability commencing at the time of delivery to the The liability of the carrier as common carrier
lighter. ... and, similarly, where there is a contract to begins with the actual delivery of the goods for
carry goods from one port to another, and they cannot transportation, and not merely with the formal
be loaded directly on the vessel and lighters are sent by execution of a receipt or bill of lading; the
the vessel to bring the goods to it, the lighters are for issuance of a bill of lading is not necessary to
the time its substitutes, so that the bill of landing is complete delivery and acceptance. Even where it
applicable to the goods as soon as they are placed on is provided by statute that liability commences
the lighters. (80 C.J.S., p. 901, emphasis supplied) with the issuance of the bill of lading, actual
delivery and acceptance are sufficient to bind the
... The test as to whether the relation of shipper and carrier. (13 C.J.S., p. 288)
carrier had been established is, Had the control and
possession of the cotton been completely surrendered 2. Petitioner disclaims responsibility for the damage of
by the shipper to the railroad company? Whenever the the cargo in question shielding itself behind the claim
control and possession of goods passes to the carrier of force majeure or storm which occurred on the night of
and nothing remains to be done by the shipper, then it October 29, 1952. But the evidence fails to bear this out.
can be said with certainty that the relation of shipper
and carrier has been established. Railroad Co. v. Rather, it shows that the mishap that caused the damage
Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; or loss was due, not to force majeure, but to lack of
Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. adequate precautions or measures taken by the carrier to
100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. prevent the loss as may be inferred from the following
Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. findings of the Court of Appeals:
(W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).
 Aside from the fact that, as admitted by appellant's contract, and therefore cannot avail itself of any
own witness, the ill-fated barge had cracks on its defect in the policy which may constitute a valid
bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which reason for appellee, as the insurer, to reject the claim
admitted sea water in the same manner as rain of Macleod, as the insured. Anyway, whatever defect
entered "thru tank man-holes", according to the the policy contained, if any, is deemed to have been
patron of LCT No. 1023 (exh. JJJ-4) conclusively waived by the subsequent payment of Macleod's
showing that the barge was not seaworthy it claim by appellee. Besides, appellant is herein sued in
should be noted that on the night of the nautical its capacity as a common carrier, and appellee is suing
accident there was no storm, flood, or other natural as the assignee of the shipper pursuant to exhibit MM.
disaster or calamity. Certainly, winds of 11 miles per Since, as above demonstrated, appellant is liable to
hour, although stronger than the average 4.6 miles Macleod and Company of the Philippines for the los or
per hour then prevailing in Davao on October 29, damage to the 1,162 bales of hemp after these were
1952 (exh. 5), cannot be classified as storm. For received in good order and condition by the patron of
according to Beaufort's wind scale, a storm has wind appellant's LCT No. 1025, it necessarily follows that
velocities of from 64 to 75 miles per hour; and by appellant is likewise liable to appellee who, as
Philippine Weather Bureau standards winds should assignee of Macleod, merely stepped into the shoes of
have a velocity of from 55 to 74 miles per hour in and substi-tuted the latter in demanding from
order to be classified as storm (Northern Assurance appellant the payment for the loss and damage
Co., Ltd. vs. Visayan Stevedore Transportation Co., aforecited.
CA-G.R. No. 23167-R, March 12, 1959).
4. It should be recalled in connection with this issue that
The Court of Appeals further added: "the report of R. J. del during the trial of this case the carrier asked the lower
Pan & Co., Inc., marine surveyors, attributes the sinking of court to order the production of the books of accounts of
LCT No. 1025 to the 'non-water-tight conditions of the Odell Plantation containing the charges it made for the
various buoyancy compartments' (exh. JJJ); and this loss of the damaged hemp for verification of its
report finds confirmation on the above-mentioned accountants, but later it desisted therefrom on the claim
admission of two witnesses for appellant concerning the that it finds their production no longer necessary. This
cracks of the lighter's bottom and the entrance of the rain desistance notwithstanding, the shipper however pre-
water 'thru manholes'." We are not prepared to dispute sented other documents to prove the damage it suffered
this finding of the Court of Appeals. in connection with the cargo and on the strength thereof
the court a quo ordered the carrier to pay the sum of
3. There can also be no doubt that the insurance company P60,421.02. And after the Court of Appeals affirmed this
can recover from the carrier as assignee of the owner of award upon the theory that the desistance of the carrier
the cargo for the insurance amount it paid to the latter from producing the books of accounts of Odell Plantation
under the insurance contract. And this is so because since implies an admission of the correctness of the statements
the cargo that was damaged was insured with respondent of accounts contained therein, petitioner now contends
company and the latter paid the amount represented by that the Court of Appeals erred in basing the affirmance of
the loss, it is but fair that it be given the right to recover the award on such erroneous interpretation.
from the party responsible for the loss. The instant case,
therefore, is not one between the insured and the insurer, There is reason to believe that the act of petitioner in
but one between the shipper and the carrier, because the waiving its right to have the books of accounts of Odell
insurance company merely stepped into the shoes of the Plantation presented in court is tantamount to an
shipper. And since the shipper has a direct cause of action admission that the statements contained therein are
against the carrier on account of the damage of the correct and their verification not necessary because its
cargo, no valid reason is seen why such action cannot be main defense here, as well as below, was that it is not
asserted or availed of by the insurance company as a liable for the loss because there was no contract of
subrogee of the shipper. Nor can the carrier set up as a carriage between it and the shipper and the loss caused, if
defense any defect in the insurance policy not only any, was due to a fortuitous event. Hence, under the
because it is not a privy to it but also because it cannot carrier's theory, the correctness of the account
avoid its liability to the shipper under the contract of representing the loss was not so material as would
carriage which binds it to pay any loss that may be caused necessitate the presentation of the books in question. At
to the cargo involved therein. Thus, we find fitting the any rate, even if the books of accounts were not produced,
following comments of the Court of Appeals: the correctness of the accounts cannot now be disputed
for the same is supported by the original documents on
It was not imperative and necessary for the trial court which the entries in said books were based which were
to pass upon the question of whether or not the presented by the shipper as part of its evidence. And
disputed abaca cargo was covered by Marine Open according to the Court of Appeals, these documents alone
Cargo Policy No. MK-134 isued by appellee. Appellant sufficiently establish the award of P60,412.02 made in
was neither a party nor privy to this insurance favor of respondent.
5. Finally, with regard to the question concerning the cavans of rice 2 Appellees' claims for the value of said
personality of the insurance company to maintain this goods were rejected by the appellant.
action, we find the same of no importance, for the
attorney himself of the carrier admitted in open court On the bases of the foregoing facts, the lower court
that it is a foreign corporation doing business in the rendered a decision, the decretal portion of which reads as
Philippines with a personality to file the present action. follows:

WHEREFORE, the decision appealed from is affirmed, with WHEREFORE, judgment is rendered as follows:
costs against petitioner.
1. In case No. 7354, the defendant is hereby ordered to
G.R. No. L-36481-2 October 23, 1982 pay the plaintiff Amparo C. Servando the aggregate sum
of P1,070.50 with legal interest thereon from the date of
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs- the filing of the complaint until fully paid, and to pay the
appellees, costs.
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant- 2. In case No. 7428, the defendant is hereby ordered to
appellant. pay to plaintiff Clara Uy Bico the aggregate sum of
P16,625.00 with legal interest thereon from the date of
ESCOLIN, J.: the filing of the complaint until fully paid, and to pay the
costs.
This appeal, originally brought to the Court of Appeals,
seeks to set aside the decision of the Court of First Article 1736 of the Civil Code imposes upon common
Instance of Negros Occidental in Civil Cases Nos. 7354 and carriers the duty to observe extraordinary diligence from
7428, declaring appellant Philippine Steam Navigation the moment the goods are unconditionally placed in their
liable for damages for the loss of the appellees' cargoes as possession "until the same are delivered, actually or
a result of a fire which gutted the Bureau of Customs' constructively, by the carrier to the consignee or to the
warehouse in Pulupandan, Negros Occidental. person who has a right to receive them, without prejudice
to the provisions of Article 1738. "
The Court of Appeals certified the case to Us because only
pure questions of law are raised therein. The court a quo held that the delivery of the shipment in
question to the warehouse of the Bureau of Customs is not
The facts culled from the pleadings and the stipulations the delivery contemplated by Article 1736; and since the
submitted by the parties are as follows: burning of the warehouse occurred before actual or
constructive delivery of the goods to the appellees, the
On November 6, 1963, appellees Clara Uy Bico and loss is chargeable against the appellant.
Amparo Servando loaded on board the appellant's vessel,
FS-176, for carriage from Manila to Pulupandan, Negros It should be pointed out, however, that in the bills of
Occidental, the following cargoes, to wit: lading issued for the cargoes in question, the parties
agreed to limit the responsibility of the carrier for the loss
Clara Uy Bico or damage that may be caused to the shipment by
inserting therein the following stipulation:
1,528 cavans of rice valued at P40,907.50;
Clause 14. Carrier shall not be responsible for loss or
Amparo Servando damage to shipments billed 'owner's risk' unless such
loss or damage is due to negligence of carrier. Nor shall
44 cartons of colored paper, toys and general carrier be responsible for loss or damage caused by
merchandise valued at P1,070.50; force majeure, dangers or accidents of the sea or other
waters; war; public enemies; . . . fire . ...
as evidenced by the corresponding bills of lading issued by
the appellant. 1 We sustain the validity of the above stipulation; there is
nothing therein that is contrary to law, morals or public
policy.
Upon arrival of the vessel at Pulupandan, in the morning of
November 18, 1963, the cargoes were discharged,
complete and in good order, unto the warehouse of the Appellees would contend that the above stipulation does
Bureau of Customs. At about 2:00 in the afternoon of the not bind them because it was printed in fine letters on the
same day, said warehouse was razed by a fire of unknown back-of the bills of lading; and that they did not sign the
origin, destroying appellees' cargoes. Before the fire, same. This argument overlooks the pronouncement of this
however, appellee Uy Bico was able to take delivery of 907 Court in Ong Yiu vs. Court of Appeals, promulgated June
29, 1979, 3 where the same issue was resolved in this wise:
 While it may be true that petitioner had not signed demanded that the same be withdrawn. In fact, pursuant
the plane ticket (Exh. '12'), he is nevertheless bound to such demand, appellee Uy Bico had taken delivery of
by the provisions thereof. 'Such provisions have been 907 cavans of rice before the burning of the warehouse.
held t o be a part of the contract of carriage, and
valid and binding upon the passenger regardless of Nor can the appellant or its employees be charged with
the latter's lack of knowledge or assent to the negligence. The storage of the goods in the Customs
regulation'. It is what is known as a contract of warehouse pending withdrawal thereof by the appellees
'adhesion', in regards which it has been said that was undoubtedly made with their knowledge and consent.
contracts of adhesion wherein one party imposes a Since the warehouse belonged to and was maintained by
ready made form of contract on the other, as the the government, it would be unfair to impute negligence
plane ticket in the case at bar, are contracts not to the appellant, the latter having no control whatsoever
entirely prohibited. The one who adheres to the over the same.
contract is in reality free to reject it entirely; if he
adheres, he gives his consent." (Tolentino, Civil Code, The lower court in its decision relied on the ruling laid
Vol. IV, 1962 Ed., p. 462, citing Mr. Justice J.B.L. down in Yu Biao Sontua vs. Ossorio 6, where this Court
Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49). held the defendant liable for damages arising from a fire
caused by the negligence of the defendant's employees
Besides, the agreement contained in the above quoted while loading cases of gasoline and petroleon products.
Clause 14 is a mere iteration of the basic principle of law But unlike in the said case, there is not a shred of proof in
written in Article 1 1 7 4 of the Civil Code: the present case that the cause of the fire that broke out
in the Custom's warehouse was in any way attributable to
Article 1174. Except in cases expressly specified by the the negligence of the appellant or its employees. Under
law, or when it is otherwise declared by stipulation, or the circumstances, the appellant is plainly not responsible.
when the nature of the obligation requires the
assumption of risk, no person shall be responsible for WHEREFORE, the judgment appealed from is hereby set
those events which could not be foreseen, or which, aside. No costs. SO ORDERED.
though foreseen, were inevitable.

Thus, where fortuitous event or force majeure is the

immediate and proximate cause of the loss, the obligor is
exempt from liability for non-performance. The
Partidas, 4 the antecedent of Article 1174 of the Civil Code, G.R. No. 149019 August 15, 2006
defines 'caso fortuito' as 'an event that takes place by
accident and could not have been foreseen. Examples of DELSAN TRANSPORT LINES, INC., Petitioner,
this are destruction of houses, unexpected fire, shipwreck, vs.
violence of robbers.' AMERICAN HOME ASSURANCE
CORPORATION, Respondent.
In its dissertation of the phrase 'caso fortuito' the
Enciclopedia Juridicada Espanola 5 says: "In a legal sense DECISION
and, consequently, also in relation to contracts, a 'caso
fortuito' presents the following essential characteristics:
GARCIA, J.:
(1) the cause of the unforeseen and unexpected
occurrence, or of the failure of the debtor to comply with
By this petition for review on certiorari under Rule 45 of
his obligation, must be independent of the human will; (2)
the Rules of Court, petitioner Delsan Transport Lines, Inc.
it must be impossible to foresee the event which
(Delsan hereafter) assails and seeks to set aside the
constitutes the 'caso fortuito', or if it can be foreseen, it
Decision, 1 dated July 16, 2001, of the Court of Appeals
must be impossible to avoid; (3) the occurrence must be
(CA) in CA-G.R. CV No. 40951 affirming an earlier decision
such as to render it impossible for the debtor to fulfill his
of the Regional Trial Court (RTC) of Manila, Branch IX, in
obligation in a normal manner; and (4) the obligor must be
two separate complaints for damages docketed as Civil
free from any participation in the aggravation of the injury
Case No. 85-29357 and Civil Case No. 85-30559.
resulting to the creditor." In the case at bar, the burning of
the customs warehouse was an extraordinary event which
happened independently of the will of the appellant. The The facts:
latter could not have foreseen the event.
Delsan is a domestic corporation which owns and operates
There is nothing in the record to show that appellant the vessel MT Larusan. On the other hand, respondent
carrier ,incurred in delay in the performance of its American Home Assurance Corporation (AHAC for brevity)
obligation. It appears that appellant had not only notified is a foreign insurance company duly licensed to do
appellees of the arrival of their shipment, but had business in the Philippines through its agent, the
American-International Underwriters, Inc. (Phils.). It is suffered in the amount of P652,432.57 plus legal interest
engaged, among others, in insuring cargoes for thereon.
transportation within the Philippines.
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC
On August 5, 1984, Delsan received on board MT Larusan a instituted Civil Case No. 85-30559 against Delsan for the
shipment consisting of 1,986.627 k/l Automotive Diesel Oil loss caused by the backflow. It likewise prayed that it be
(diesel oil) at the Bataan Refinery Corporation for awarded the amount of P1,939,575.37 for damages and
transportation and delivery to the bulk depot in Bacolod reasonable attorneys fees. As counterclaim in both cases,
City of Caltex Phils., Inc. (Caltex), pursuant to a Contract of AHAC prayed for attorneys fees in the amount
Afreightment. The shipment was insured by respondent of P200,000.00 and P500.00 for every court appearance.
AHAC against all risks under Inland Floater Policy No. AH-
IF64-1011549P and Marine Risk Note No. 34-5093-6. Since the cause of action in both cases arose out of the
same incident and involved the same issues, the two were
On August 7, 1984, the shipment arrived in Bacolod City. consolidated and assigned to Branch 9 of the court.
Immediately thereafter, unloading operations
commenced. The discharging of the diesel oil started at On August 31, 1989, the trial court rendered its
about 1:30 PM of the same day. However, at about 10:30 decision 2 in favor of AHAC holding Delsan liable for the
PM, the discharging had to be stopped on account of the loss of the cargo for its negligence in its duty as a common
discovery that the port bow mooring of the vessel was carrier. Dispositively, the decision reads:
intentionally cut or stolen by unknown persons. Because
there was nothing holding it, the vessel drifted westward, WHEREFORE, judgment is hereby rendered:
dragged and stretched the flexible rubber hose attached
to the riser, broke the elbow into pieces, severed A). In Civil Case No. 85-30559:
completely the rubber hose connected to the tanker from
the main delivery line at sea bed level and ultimately (1) Ordering the defendant (petitioner Delsan) to pay
caused the diesel oil to spill into the sea. To avoid further plaintiff (respondent AHAC) the sum of P1,939,575.37 with
spillage, the vessels crew tried water flushing to clear the interest thereon at the legal rate from November 21, 1984
line of the diesel oil but to no avail. In the meantime, the until fully paid and satisfied; and
shore tender, who was waiting for the completion of the
water flushing, was surprised when the tanker signaled a
(2) Ordering defendant to pay plaintiff the sum
"red light" which meant stop pumping. Unaware of what
of P10,000.00 as and for attorneys fees.
happened, the shore tender, thinking that the vessel
would, at any time, resume pumping, did not shut the
For lack of merit, the counterclaim is hereby dismissed.
storage tank gate valve. As all the gate valves remained
open, the diesel oil that was earlier discharged from the
vessel into the shore tank backflowed. Due to non- B). In Civil Case No. 85-29357:
availability of a pump boat, the vessel could not send
somebody ashore to inform the people at the depot about (1) Ordering defendant to pay plaintiff the sum
what happened. After almost an hour, a gauger and an of P479,262.57 with interest thereon at the legal rate from
assistant surveyor from the Caltexs Bulk Depot Office February 6, 1985 until fully paid and satisfied;
boarded the vessel. It was only then that they found out
what had happened. Thereafter, the duo immediately (2) Ordering defendant to pay plaintiff the sum
went ashore to see to it that the shore tank gate valve was of P5,000.00 as and for attorneys fees.
closed. The loss of diesel oil due to spillage was placed at
113.788 k/l while some 435,081 k/l thereof backflowed For lack of merit, the counterclaim is hereby dismissed.
from the shore tank.
Costs against the defendant.
As a result of spillage and backflow of diesel oil, Caltex
sought recovery of the loss from Delsan, but the latter SO ORDERED.
refused to pay. As insurer, AHAC paid Caltex the sum
of P479,262.57 for spillage, pursuant to Marine Risk Note In time, Delsan appealed to the CA whereat its recourse
No. 34-5093-6, and P1,939,575.37 for backflow of the was docketed as CA-G.R. CV No. 40951.
diesel oil pursuant to Inland Floater Policy No. AH-1F64-
1011549P. In the herein challenged decision, 3 the CA affirmed the
findings of the trial court. In so ruling, the CA declared that
On February 19, 1985, AHAC, as Caltexs subrogee, Delsan failed to exercise the extraordinary diligence of a
instituted Civil Case No. 85-29357 against Delsan before good father of a family in the handling of its cargo.
the Manila RTC, Branch 9, for loss caused by the spillage. It Applying Article 1736 4 of the Civil Code, the CA ruled that
likewise prayed that it be indemnified for damages since the discharging of the diesel oil into Caltex bulk
depot had not been completed at the time the losses 2) Act of the public enemy in war, whether international or
occurred, there was no reason to imply that there was civil;
actual delivery of the cargo to Caltex, the consignee. We
quote the fallo of the CA decision: 3) Act or omission of the shipper or owner of the goods;

WHEREFORE, premises considered, the appealed Decision 4) The character of the goods or defects in the packing or
of the Regional Trial Court of Manila, Branch 09 in Civil in the containers;
Case Nos. 85-29357 and 85-30559 is hereby AFFIRMED
with a modification that attorneys fees awarded in Civil 5) Order or act of competent public authority.
Case Nos. 85-29357 and 85-30559 are hereby DELETED.
Both the trial court and the CA uniformly ruled that Delsan
SO ORDERED. failed to prove its claim that there was a contributory
negligence on the part of the owner of the goods Caltex.
Delsan is now before the Court raising substantially the We see no reason to depart therefrom. As aptly pointed
same issues proffered before the CA. out by the CA, it had been established that the proximate
cause of the spillage and backflow of the diesel oil was due
Principally, Delsan insists that the CA committed reversible to the severance of the port bow mooring line of the
error in ruling that Article 1734 of the Civil Code cannot vessel and the failure of the shore tender to close the
exculpate it from liability for the loss of the subject cargo storage tank gate valve even as a check on the drain cock
and in not applying the rule on contributory negligence showed that there was still a product on the pipeline. To
against Caltex, the shipper-owner of the cargo, and in not the two courts below, the actuation of the gauger and the
taking into consideration the fact that the loss due to escort surveyor, both personnel from the Caltex Bulk
backflow occurred when the diesel oil was already Depot, negates the allegation that Caltex was remiss in its
completely delivered to Caltex. duties. As we see it, the crew of the vessel should have
promptly informed the shore tender that the port mooring
We are not persuaded. line was cut off. However, Delsan did not do so on the
lame excuse that there was no available banca. As it is,
In resolving this appeal, the Court reiterates the oft-stated Delsans personnel signaled a "red light" which was not a
doctrine that factual findings of the CA, affirmatory of sufficient warning because such signal only meant that the
those of the trial court, are binding on the Court unless pumping of diesel oil had been finished. Neither did the
there is a clear showing that such findings are tainted with blowing of whistle suffice considering the distance of more
arbitrariness, capriciousness or palpable error. 5 than 2 kilometers between the vessel and the Caltex Bulk
Depot, aside from the fact that it was not the agreed
Delsan would have the Court absolve it from liability for signal. Had the gauger and the escort surveyor from Caltex
the loss of its cargo on two grounds. First, the loss through Bulk Depot not gone aboard the vessel to make inquiries,
spillage was partly due to the contributory negligence of the shore tender would have not known what really
Caltex; and Second, the loss through backflow should not happened. The crew of the vessel should have exerted
be borne by Delsan because it was already delivered to utmost effort to immediately inform the shore tender that
Caltexs shore tank. the port bow mooring line was severed.

Common carriers are bound to observe extraordinary To be sure, Delsan, as the owner of the vessel, was obliged
diligence in the vigilance over the goods transported by to prove that the loss was caused by one of the excepted
them. They are presumed to have been at fault or to have causes if it were to seek exemption from
acted negligently if the goods are lost, destroyed or responsibility. 7 Unfortunately, it miserably failed to
deteriorated. 6 To overcome the presumption of discharge this burden by the required quantum of proof.
negligence in case of loss, destruction or deterioration of
the goods, the common carrier must prove that it Delsans argument that it should not be held liable for the
exercised extraordinary diligence. There are, however, loss of diesel oil due to backflow because the same had
exceptions to this rule. Article 1734 of the Civil Code already been actually and legally delivered to Caltex at the
enumerates the instances when the presumption of time it entered the shore tank holds no water. It had been
negligence does not attach: settled that the subject cargo was still in the custody of
Delsan because the discharging thereof has not yet been
Art. 1734. Common carriers are responsible for the loss, finished when the backflow occurred. Since the
destruction, or deterioration of the goods, unless the same discharging of the cargo into the depot has not yet been
is due to any of the following causes only: completed at the time of the spillage when the backflow
occurred, there is no reason to imply that there was actual
1) Flood storm, earthquake, lightning, or other natural delivery of the cargo to the consignee. Delsan is straining
disaster or calamity; the issue by insisting that when the diesel oil entered into
the tank of Caltex on shore, there was legally, at that
moment, a complete delivery thereof to Caltex. To be UCPB GENERAL INSURANCE CO., INC. and ASIAN
sure, the extraordinary responsibility of common carrier TERMINALS INC., Respondents.
lasts from the time the goods are unconditionally placed in
the possession of, and received by, the carrier for DECISION
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to a PERALTA, J.:
person who has the right to receive them. 8 The
discharging of oil products to Caltex Bulk Depot has not yet These two consolidated cases challenge, by way of petition
been finished, Delsan still has the duty to guard and to for certiorari under Rule 45 of the 1997 Rules of Civil
preserve the cargo. The carrier still has in it the Procedure, September 13, 2011 Decision1 and January 19,
responsibility to guard and preserve the goods, a duty 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R.
incident to its having the goods transported. CV No. 86752, which reversed and set aside the January
27, 2006 Decision3 of the Manila City Regional Trial Court
To recapitulate, common carriers, from the nature of their Branch (RTC) 30. The facts, as established by the records,
business and for reasons of public policy, are bound to are as follows:
observe extraordinary diligence in vigilance over the goods
and for the safety of the passengers transported by them, On August 23, 1993, Kinsho-Mataichi Corporation shipped
according to all the circumstances of each case. 9 The mere from the port of Kobe, Japan, 197 metal containers/skids
proof of delivery of goods in good order to the carrier, and of tin-free steel for delivery to the consignee, San Miguel
their arrival in the place of destination in bad order, make Corporation (SMC). The shipment, covered by Bill of Lading
out a prima facie case against the carrier, so that if no No. KBMA-1074,4 was loaded and received clean on board
explanation is given as to how the injury occurred, the M/V Golden Harvest Voyage No. 66, a vessel owned and
carrier must be held responsible. It is incumbent upon the operated by Westwind Shipping Corporation (Westwind).
carrier to prove that the loss was due to accident or some
other circumstances inconsistent with its liability.10 SMC insured the cargoes against all risks with UCPB
General Insurance Co., Inc. (UCPB) for US Dollars: One
All told, Delsan, being a common carrier, should have Hundred Eighty-Four Thousand Seven Hundred Ninety-
exercised extraordinary diligence in the performance of its Eight and Ninety-Seven Centavos (US$184,798.97), which,
duties. Consequently, it is obliged to prove that the at the time, was equivalent to Philippine Pesos: Six Million
damage to its cargo was caused by one of the excepted Two Hundred Nine Thousand Two Hundred Forty-Five and
causes if it were to seek exemption from Twenty-Eight Centavos (6,209,245.28).
responsibility. 11 Having failed to do so, Delsan must bear
the consequences. The shipment arrived in Manila, Philippines on August 31,
1993 and was discharged in the custody of the arrastre
WHEREFORE, petition is DENIED and the assailed decision operator, Asian Terminals, Inc. (ATI), formerly Marina Port
of the CA is AFFIRMED in toto. Services, Inc.5 During the unloading operation, however,
six containers/skids worth Philippine Pesos: One Hundred
Cost against petitioner. SO ORDERED. Seventeen Thousand Ninety-Three and Twelve Centavos
(117,093.12) sustained dents and punctures from the
forklift used by the stevedores of Ocean Terminal Services,
Inc. (OTSI) in centering and shuttling the containers/skids.
As a consequence, the local ship agent of the vessel,
Baliwag Shipping Agency, Inc., issued two Bad Order Cargo
Receipt dated September 1, 1993.

G.R. No. 200289 November 25, 2013 On September 7, 1993, Orient Freight International, Inc.
(OFII), the customs broker of SMC, withdrew from ATI the
WESTWIND SHIPPING CORPORATION, Petitioner, 197 containers/skids, including the six in damaged
vs. condition, and delivered the same at SMCs warehouse in
UCPB GENERAL INSURANCE CO., INC. and ASIAN Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It
TERMINALS INC., Respondents. was discovered upon discharge that additional nine
containers/skids valued at Philippine Pesos: One Hundred
x-----------------------x Seventy-Five Thousand Six Hundred Thirty-Nine and Sixty-
Eight Centavos (175,639.68) were also damaged due to
G.R. No. 200314 the forklift operations; thus, making the total number of
15 containers/skids in bad order.
ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
vs. Almost a year after, on August 15, 1994, SMC filed a claim
against UCPB, Westwind, ATI, and OFII to recover the
amount corresponding to the damaged 15 While the CA sustained the RTC judgment that the claim
containers/skids. When UCPB paid the total sum of against ATI already prescribed, it rendered a contrary view
Philippine Pesos: Two Hundred Ninety-Two Thousand as regards the liability of Westwind and OFII. For the
Seven Hundred Thirty-Two and Eighty Centavos appellate court, Westwind, not ATI, is responsible for the
(292,732.80), SMC signed the subrogation receipt. six damaged containers/skids at the time of its unloading.
Thereafter, in the exercise of its right of subrogation, UCPB In its rationale, which substantially followed Philippines
instituted on August 30, 1994 a complaint for damages First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it
against Westwind, ATI, and OFII.6 concluded that the common carrier, not the arrastre
operator, is responsible during the unloading of the
After trial, the RTC dismissed UCPBs complaint and the cargoes from the vessel and that it is not relieved from
counterclaims of Westwind, ATI, and OFII. It ruled that the liability and is still bound to exercise extraordinary
right, if any, against ATI already prescribed based on the diligence at the time in order to see to it that the cargoes
stipulation in the 16 Cargo Gate Passes issued, as well as under its possession remain in good order and condition.
the doctrine laid down in International Container Terminal The CA also considered that OFII is liable for the additional
Services, Inc. v. Prudential Guarantee & Assurance Co. nine damaged containers/skids, agreeing with UCPBs
Inc.7 that a claim for reimbursement for damaged goods contention that OFII is a common carrier bound to observe
must be filed within 15 days from the date of consignees extraordinary diligence and is presumed to be at fault or
knowledge. With respect to Westwind, even if the action have acted negligently for such damage. Noting the
against it is not yet barred by prescription, conformably testimony of OFIIs own witness that the delivery of the
with Section 3 (6) of the Carriage of Goods by Sea Act shipment to the consignee is part of OFIIs job as a cargo
(COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court of forwarder, the appellate court ruled that Article 1732 of
Appeals, et al.8 and Belgian Overseas Chartering and the New Civil Code (NCC) does not distinguish between
Shipping N.V. v. Phil. First Insurance Co., Inc.,9 the court a one whose principal business activity is the carrying of
quo still opined that Westwind is not liable, since the persons or goods or both and one who does so as an
discharging of the cargoes were done by ATI personnel ancillary activity. The appellate court further ruled that
using forklifts and that there was no allegation that it OFII cannot excuse itself from liability by insisting that JBL
(Westwind) had a hand in the conduct of the stevedoring undertook the delivery of the cargoes to SMCs
operations. Finally, the trial court likewise absolved OFII warehouse. It opined that the delivery receipts signed by
from any liability, reasoning that it never undertook the the inspector of SMC showed that the containers/skids
operation of the forklifts which caused the dents and were received from OFII, not JBL. At the most, the CA said,
punctures, and that it merely facilitated the release and JBL was engaged by OFII to supply the trucks necessary to
delivery of the shipment as the customs broker and deliver the shipment, under its supervision, to SMC.
representative of SMC.
Only Westwind and OFII filed their respective motions for
On appeal by UCPB, the CA reversed and set aside the trial reconsideration, which the CA denied; hence, they
court. The fallo of its September 13, 2011 Decision elevated the case before Us via petitions docketed as G.R.
directed: Nos. 200289 and 200314, respectively.

WHEREFORE, premises considered, the instant appeal is Westwind argues that it no longer had actual or
hereby GRANTED. The Decision dated January 27, 2006 constructive custody of the containers/skids at the time
rendered by the court a quo is REVERSED AND SET ASIDE. they were damaged by ATIs forklift operator during the
Appellee Westwind Shipping Corporation is hereby unloading operations. In accordance with the stipulation
ordered to pay to the appellant UCPB General Insurance of the bill of lading, which allegedly conforms to Article
Co., Inc., the amount of One Hundred Seventeen Thousand 1736 of the NCC, it contends that its responsibility already
and Ninety-Three Pesos and Twelve Centavos ceased from the moment the cargoes were delivered to
(Php117,093.12), while Orient Freight International, Inc. is ATI, which is reckoned from the moment the goods were
hereby ordered to pay to UCPB the sum of One Hundred taken into the latters custody. Westwind adds that ATI,
Seventy-Five Thousand Six Hundred Thirty-Nine Pesos and which is a completely independent entity that had the
Sixty-Eight Centavos (Php175,639.68). Both sums shall right to receive the goods as exclusive operator of
bear interest at the rate of six (6%) percent per annum, stevedoring and arrastre functions in South Harbor,
from the filing of the complaint on August 30, 1994 until Manila, had full control over its employees and stevedores
the judgment becomes final and executory. Thereafter, an as well as the manner and procedure of the discharging
interest rate of twelve (12%) percent per annum shall be operations.
imposed from the time this decision becomes final and
executory until full payment of said amounts. As for OFII, it maintains that it is not a common carrier, but
only a customs broker whose participation is limited to
SO ORDERED.10 facilitating withdrawal of the shipment in the custody of
ATI by overseeing and documenting the turnover and
counterchecking if the quantity of the shipments were in
tally with the shipping documents at hand, but without immunities set forth in the Act. Section 3 (2) thereof then
participating in the physical withdrawal and loading of the states that among the carriers responsibilities are to
shipments into the delivery trucks of JBL. Assuming that it properly and carefully load, handle, stow, carry, keep, care
is a common carrier, OFII insists that there is no need to for, and discharge the goods carried.
rely on the presumption of the law that, as a common
carrier, it is presumed to have been at fault or have acted xxxx
negligently in case of damaged goods considering the
undisputed fact that the damages to the containers/skids On the other hand, the functions of an arrastre operator
were caused by the forklift blades, and that there is no involve the handling of cargo deposited on the wharf or
evidence presented to show that OFII and Westwind were between the establishment of the consignee or shipper
the owners/operators of the forklifts. It asserts that the and the ship's tackle. Being the custodian of the goods
loading to the trucks were made by way of forklifts owned discharged from a vessel, an arrastre operator's duty is to
and operated by ATI and the unloading from the trucks at take good care of the goods and to turn them over to the
the SMC warehouse was done by way of forklifts owned party entitled to their possession.
and operated by SMC employees. Lastly, OFII avers that
neither the undertaking to deliver nor the Handling cargo is mainly the arrastre operator's principal
acknowledgment by the consignee of the fact of delivery work so its drivers/operators or employees should observe
makes a person or entity a common carrier, since delivery the standards and measures necessary to prevent losses
alone is not the controlling factor in order to be and damage to shipments under its custody.
considered as such.
In Firemans Fund Insurance Co. v. Metro Port Service, Inc.,
Both petitions lack merit. the Court explained the relationship and responsibility of
an arrastre operator to a consignee of a cargo, to quote:
The case of Philippines First Insurance Co., Inc. v. Wallem
Phils. Shipping, Inc.12 applies, as it settled the query on The legal relationship between the consignee and the
which between a common carrier and an arrastre operator arrastre operator is akin to that of a depositor and
should be responsible for damage or loss incurred by the warehouseman. The relationship between the consignee
shipment during its unloading. We elucidated at length: and the common carrier is similar to that of the consignee
and the arrastre operator. Since it is the duty of the
Common carriers, from the nature of their business and ARRASTRE to take good care of the goods that are in its
for reasons of public policy, are bound to observe custody and to deliver them in good condition to the
extraordinary diligence in the vigilance over the goods consignee, such responsibility also devolves upon the
transported by them. Subject to certain exceptions CARRIER. Both the ARRASTRE and the CARRIER are
enumerated under Article 1734 of the Civil Code, common therefore charged with and obligated to deliver the goods
carriers are responsible for the loss, destruction, or in good condition to the consignee. (Emphasis supplied)
deterioration of the goods. The extraordinary (Citations omitted)
responsibility of the common carrier lasts from the time
the goods are unconditionally placed in the possession of, The liability of the arrastre operator was reiterated in
and received by the carrier for transportation until the Eastern Shipping Lines, Inc. v. Court of Appeals with the
same are delivered, actually or constructively, by the clarification that the arrastre operator and the carrier are
carrier to the consignee, or to the person who has a right not always and necessarily solidarily liable as the facts of a
to receive them. case may vary the rule.

For marine vessels, Article 619 of the Code of Commerce Thus, in this case, the appellate court is correct insofar as
provides that the ship captain is liable for the cargo from it ruled that an arrastre operator and a carrier may not be
the time it is turned over to him at the dock or afloat held solidarily liable at all times. But the precise question is
alongside the vessel at the port of loading, until he delivers which entity had custody of the shipment during its
it on the shore or on the discharging wharf at the port of unloading from the vessel?
unloading, unless agreed otherwise. In Standard Oil Co. of
New York v. Lopez Castelo, the Court interpreted the ship The aforementioned Section 3 (2) of the COGSA states that
captains liability as ultimately that of the shipowner by among the carriers responsibilities are to properly and
regarding the captain as the representative of the carefully load, care for and discharge the goods carried.
shipowner. The bill of lading covering the subject shipment likewise
stipulates that the carriers liability for loss or damage to
Lastly, Section 2 of the COGSA provides that under every the goods ceases after its discharge from the vessel.
contract of carriage of goods by sea, the carrier in relation Article 619 of the Code of Commerce holds a ship captain
to the loading, handling, stowage, carriage, custody, care, liable for the cargo from the time it is turned over to him
and discharge of such goods, shall be subject to the until its delivery at the port of unloading.
responsibilities and liabilities and entitled to the rights and
In a case decided by a U.S. Circuit Court, Nichimen the tank of Caltex on shore, there was legally, at that
Company v. M/V Farland, it was ruled that like the duty of moment, a complete delivery thereof to Caltex. To be
seaworthiness, the duty of care of the cargo is non- sure, the extraordinary responsibility of common carrier
delegable, and the carrier is accordingly responsible for lasts from the time the goods are unconditionally placed in
the acts of the master, the crew, the stevedore, and his the possession of, and received by, the carrier for
other agents. It has also been held that it is ordinarily the transportation until the same are delivered, actually or
duty of the master of a vessel to unload the cargo and constructively, by the carrier to the consignee, or to a
place it in readiness for delivery to the consignee, and person who has the right to receive them. The discharging
there is an implied obligation that this shall be of oil products to Caltex Bulk Depot has not yet been
accomplished with sound machinery, competent hands, finished, Delsan still has the duty to guard and to preserve
and in such manner that no unnecessary injury shall be the cargo. The carrier still has in it the responsibility to
done thereto. And the fact that a consignee is required to guard and preserve the goods, a duty incident to its having
furnish persons to assist in unloading a shipment may not the goods transported.
relieve the carrier of its duty as to such unloading.
To recapitulate, common carriers, from the nature of their
xxxx business and for reasons of public policy, are bound to
observe extraordinary diligence in vigilance over the goods
It is settled in maritime law jurisprudence that cargoes and for the safety of the passengers transported by them,
while being unloaded generally remain under the custody according to all the circumstances of each case. The mere
of the carrier x x x.13 proof of delivery of goods in good order to the carrier, and
their arrival in the place of destination in bad order, make
In Regional Container Lines (RCL) of Singapore v. The out a prima facie case against the carrier, so that if no
Netherlands Insurance Co. (Philippines), Inc.14 and Asian explanation is given as to how the injury occurred, the
Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court carrier must be held responsible. It is incumbent upon the
echoed the doctrine that cargoes, while being unloaded, carrier to prove that the loss was due to accident or some
generally remain under the custody of the carrier. We other circumstances inconsistent with its liability.18
cannot agree with Westwinds disputation that "the carrier
in Wallem clearly exercised supervision during the The contention of OFII is likewise untenable. A customs
discharge of the shipment and that is why it was faulted broker has been regarded as a common carrier because
and held liable for the damage incurred by the shipment transportation of goods is an integral part of its
during such time." What Westwind failed to realize is that business.19 In Schmitz Transport & Brokerage Corporation
the extraordinary responsibility of the common carrier v. Transport Venture, Inc.,20 the Court already reiterated: It
lasts until the time the goods are actually or constructively is settled that under a given set of facts, a customs broker
delivered by the carrier to the consignee or to the person may be regarded as a common carrier.1wphi1 Thus, this
who has a right to receive them. There is actual delivery in Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable
contracts for the transport of goods when possession has Court of Appeals held:
been turned over to the consignee or to his duly
authorized agent and a reasonable time is given him to The appellate court did not err in finding petitioner, a
remove the goods.16 In this case, since the discharging of customs broker, to be also a common carrier, as defined
the containers/skids, which were covered by only one bill under Article 1732 of the Civil Code, to wit, Art. 1732.
of lading, had not yet been completed at the time the Common carriers are persons, corporations, firms or
damage occurred, there is no reason to imply that there associations engaged in the business of carrying or
was already delivery, actual or constructive, of the cargoes transporting passengers or goods or both, by land, water,
to ATI. Indeed, the earlier case of Delsan Transport Lines, or air, for compensation, offering their services to the
Inc. v. American Home Assurance Corp.17 serves as a useful public.
guide, thus:
xxxx
Delsans argument that it should not be held liable for the
loss of diesel oil due to backflow because the same had Article 1732 does not distinguish between one whose
already been actually and legally delivered to Caltex at the principal business activity is the carrying of goods and one
time it entered the shore tank holds no water. It had been who does such carrying only as an ancillary activity. The
settled that the subject cargo was still in the custody of contention, therefore, of petitioner that it is not a
Delsan because the discharging thereof has not yet been common carrier but a customs broker whose principal
finished when the backflow occurred. Since the function is to prepare the correct customs declaration and
discharging of the cargo into the depot has not yet been proper shipping documents as required by law is bereft of
completed at the time of the spillage when the backflow merit. It suffices that petitioner undertakes to deliver the
occurred, there is no reason to imply that there was actual goods for pecuniary consideration.
delivery of the cargo to the consignee. Delsan is straining
the issue by insisting that when the diesel oil entered into
And in Calvo v. UCPB General Insurance Co. Inc., this Court vs.
held that as the transportation of goods is an integral part GLOW LAKS ENTERPRISES, LTD., Respondent.
of a customs broker, the customs broker is also a common
carrier. For to declare otherwise "would be to deprive DECISION
those with whom [it] contracts the protection which the
law affords them notwithstanding the fact that the PEREZ, J.:
obligation to carry goods for [its] customers, is part and
parcel of petitioners business."21 This is a Petition for Review on Certiorari1 filed pursuant to
Ruic 45 of the Revised Rules of Comi, primarily assailing
That OFII is a common carrier is buttressed by the the 11 December 2002 Resolution rendered by the Special
testimony of its own witness, Mr. Loveric Panganiban Former Sixteenth Division of the Court of Appeals in CA-
Cueto, that part of the services it offers to clients is cargo G.R. CV No. 48277,2 the decretal portion of which states:
forwarding, which includes the delivery of the shipment to
the consignee.22 Thus, for undertaking the transport of WHEREFORE, the appeal is GRANTED and the April 29.
cargoes from ATI to SMCs warehouse in Calamba, Laguna, 1994 Decision of the Regional Trial Court of Manila, Branch
OFII is considered a common carrier. As long as a person or 52 thereof' in Civil Case No. 88-45595, SET ASIDE. Nedlloyd
corporation holds itself to the public for the purpose of Lijncn B.V. Rotterdam and The East Asiatic Co., Ltd arc
transporting goods as a business, it is already considered a ordered to pay Glow l ,aks Enterprises, I ,td. the following:
common carrier regardless of whether it owns the vehicle
to be used or has to actually hire one. 1. The invoice value of the goodslost worth
$53,640.00, or its equivalent in Philippine
As a common carrier, OFII is mandated to observe, under currency;
Article 1733 of the Civil Code,23 extraordinary diligence in
the vigilance over the goods24 it transports according to 2. Attorneys fees of 50,000.00; and
the peculiar circumstances of each case. In the event that
the goods are lost, destroyed or deteriorated, it is
3. Costs.3
presumed to have been at fault or to have acted
negligently unless it proves that it observed extraordinary
The Facts
diligence.25 In the case at bar it was established that
except for the six containers/skids already damaged OFII
received the cargoes from ATI in good order and condition; Petitioner Nedlloyd Lijnen B.V. Rotterdam (Nedlloyd) is a
and that upon its delivery to SMC additional nine foreign corporation engaged in the business of carrying
containers/skids were found to be in bad order as noted in goods by sea, whose vessels regularly call at the port of
the Delivery Receipts issued by OFII and as indicated in the Manila. It is doing business in the Philippines thru its local
Report of Cares Marine Cargo Surveyors. Instead of merely ship agent, co-petitioner East Asiatic Co., Ltd. (East
excusing itself from liability by putting the blame to ATI Asiatic).
and SMC it is incumbent upon OFII to prove that it actively
took care of the goods by exercising extraordinary Respondent Glow Laks Enterprises,Ltd., is likewise a
diligence in the carriage thereof. It failed to do so. Hence foreign corporation organized and existing under the laws
its presumed negligence under Article 1735 of the Civil of Hong Kong. It is not licensed to do, and it is not doing
Code remains unrebutted. business in, the Philippines.

WHEREFORE, premises considered the petitions of On or about 14 September 1987, respondent loaded on
Westwind and OFII in G.R. Nos. 200289 and 200314 board M/S Scandutch at the Port of Manila a total 343
respectively are DENIED. The September 13 2011 Decision cartoons of garments, complete and in good order for pre-
and January 19 2012 Resolution of the Court of Appeals in carriage tothe Port of Hong Kong. The goods covered by
CA-G.R. CV No. 86752 which reversed and set aside the Bills of Lading Nos. MHONX-2 and MHONX-34 arrived in
January 27 2006 Decision of the Manila City Regional Trial good condition in Hong Kong and were transferred to M/S
Court Branch 30 are AFFIRMED. SO ORDERED. Amethyst for final carriage to Colon, Free Zone, Panama.
Both vessels, M/S Scandutch and M/S Amethyst, are
owned by Nedlloyd represented in the Phlippines by its
agent, East Asiatic. The goods which were valued at
US$53,640.00 was agreed to be released to the consignee,
Pierre Kasem, International, S.A., upon presentation of the
original copies of the covering bills of lading.5 Upon arrival
G.R. No. 156330 November 19, 2014
of the vessel at the Port of Colon on 23 October 1987,
petitioners purportedly notified the consignee of the
NEDLLOYD LIJNEN B.V. ROTTERDAM and THE EAST arrival of the shipments, and its custody was turned over
ASIATIC CO., LTD., Petitioners, tothe National Ports Authority in accordance with the
laws, customs regulations and practice of trade in Panama.
By an unfortunate turn ofevents, however, unauthorized custom, it is presumed that foreign laws are the sameas
persons managed to forge the covering bills of lading and our local or domestic or internal law under the doctrine of
on the basis of the falsified documents, the ports authority processual presumption. Under the New Civil Code, the
released the goods. discharge of the goods intothe custody of the ports
authority therefore does not relieve the commoncarrier
On 16 July 1988, respondent filed a formal claim with from liability because the extraordinary responsibility of
Nedlloyd for the recovery of the amount of US$53,640.00 the common carriers lasts until actual or constructive
representing the invoice value of the shipment but to no delivery of the cargoes tothe consignee or to the person
avail.6 Claiming that petitioners are liable for the who has the right to receive them. Absent any proof that
misdelivery of the goods, respondent initiated Civil Case the notify party or the consignee was informed of the
No. 88-45595 before the Regional Trial Court (RTC) of arrival of the goods, the appellate court held that the
Manila, Branch 52, seeking for the recovery of the amount extraordinary responsibility of common carriers remains.
of US$53,640.00, including the legal interest from the date Accordingly, the Court of Appeals directed petitioners to
of the first demand.7 pay respondent the value of the misdelivered goods in the
amount of US$53,640.00.
In disclaiming liability for the misdelivery of the shipments,
petitioners asserted in their Answer8 that they were never The Issues
remiss in their obligation as a common carrier and the
goods were discharged in good order and condition into Dissatisfied with the foregoing disquisition, petitioners
the custody of the National Ports Authority of Panama in impugned the adverse Court of Appeals Decision before
accordance with the Panamanian law. They averred that the Court on the following grounds:
they cannot be faulted for the release of the goods to
unauthorized persons, their extraordinary responsibility as I.
a common carrier having ceased at the time the
possession of the goods were turned over to the THERE IS ABSOLUTELY NO NEED TO PROVE
possession of the port authorities. PANAMANIAN LAWS BECAUSE THEYHAD BEEN
JUDICIALLY ADMITTED. AN ADMISSION BY A PARTY IN
After the Pre-Trial Conference, trial on the merits ensued. THE COURSE OF THE PROCEEDINGS DOES NOT REQUIRE
Both parties offered testimonial and documentary PROOF.
evidence to support their respective causes. On 29 April
2004, the RTC rendered a Decision9 ordering the dismissal II.
of the complaint but granted petitioners counterclaims. In
effect, respondent was directed to pay petitioners the BY PRESENTING AS EVIDENCE THE [GACETA] OFFICIAL OF
amount of 120,000.00 as indemnification for the REPUBLICA DE PANAMA NO. 17.596 WHERE THE
litigation expenses incurred by the latter. In releasing the APPLICABLE PANAMANIAN LAWS WERE OFFICIALLY
common carrier from liability for the misdelivery of the PUBLISHED, AND THE TESTIMONY OF EXPERT
goods, the RTC ruled that Panama law was duly proven WITNESSES, PETITIONERS WERE ABLE TO PROVE THE
during the trial and pursuant to the said statute, carriers of LAWS OF PANAMA.
goods destined to any Panama port of entry have to
discharge their loads into the custody of Panama Ports III.
Authority to make effective government collection of port
dues, customs duties and taxes. The subsequent
IF WE HAVE TO CONCEDE TO THE COURT OF APPEALS
withdrawal effected by unauthorized persons on the
FINDING THAT THERE WAS FAILURE OF PROOF, THE
strength of falsified bills of lading does not constitute
LEGAL QUESTION PRESENTED TO THE HONORABLE
misdelivery arising from the fault of the common carrier.
COURT SHOULD BE RESOLVED FAVORABLY BECAUSE THE
The decretal part of the RTC Decision reads: WHEREFORE,
CARRIER DISCHARGED ITS DUTY WHETHER UNDER THE
judgment is renderedfor [petitioners] and against
PANAMANIAN LAW OR UNDER PHILIPPINE LAW.12
[Respondent], ordering the dismissal of the complaint and
ordering the latter to pay [petitioners] the amount of ONE
The Courts Ruling
HUNDRED TWENTY THOUSAND PESOS (120,000.00) on
their counterclaims.
We find the petition bereft of merit.
Cost against [Respondent].10
It is well settled that foreign laws do not prove themselves
in our jurisdiction and our courts are not authorized to
On appeal, the Court of Appeals reversed the findings of
take judicial notice of them. Like any other fact, they must
the RTC and held that foreign laws were not proven in the
be alleged and proved.13 To prove a foreign law, the party
manner provided by Section 24, Rule 132 of the Revised
invoking it must present a copy thereof and comply with
Rules of Court, and therefore, it cannot be given full faith
Sections 24 and 25 of Rule 132 of the Revised Rules of
and credit.11 For failure to prove the foreign law and
Court14 which read: SEC. 24. Proof of official record. The
record of public documents referred to in paragraph (a) of secretary of the embassy or legation, consul general,
Section 19, when admissible for any purpose, may be consul, vice-consular or by any officer in the foreign
evidenced by an official publication thereof or by a copy service of the Philippines stationed in the foreign country,
attested by the officer having the legal custody of the and authenticated by the seal of his office. The latter
record, or by his deputy, and accompanied, if the record is requirement is not merely a technicality but is intended to
not kept in the Philippines, with a certificate that such justify the giving of full faith and credit to the genuineness
officer has the custody. If the office in which the record is of the document in a foreign country.19 Certainly, the
kept is in a foreigncountry, the certificate may be made by deposition of Mr. Enrique Cajigas, a maritime law
a secretary of the embassy or legation, consul general, practitioner in the Republic of Panama, before the
consul, vice- consul, or consular agent or by any officer in Philippine Consulate in Panama, is not the certificate
the foreign service of the Philippines stationed in the contemplated by law. At best, the deposition can be
foreign country in which the record is kept, and considered as an opinion of an expert witness who possess
authenticated by the seal of his office. the required special knowledge on the Panamanian laws
but could not be recognized as proof of a foreign law, the
SEC. 25. What attestation of copy must state. Whenever deponent not being the custodian of the statute who can
a copy of a document or record is attested for the purpose guarantee the genuineness of the document from a
of the evidence, the attestation must state,in substance, foreign country. To admit the deposition as proof of a
that the copy is a correct copy of the original, or a specific foreign law is, likewise, a disavowal of the rationaleof
part thereof, as the case may be. The attestation must be Section 24, Rule 132 of the Revised Rules of Court, which
under the official seal of the attesting officer, if there be isto ensure authenticity of a foreign law and its existence
any, or if he be the clerk of a court having a seal, under the so as to justify its import and legal consequence on the
seal of such court. event or transaction in issue. The above rule, however,
admits exceptions, and the Court in certain cases
For a copy of a foreign public document to be admissible, recognized that Section 25, Rule132 of the Revised Rules
the following requisites are mandatory: (1) itmust be of Court does not exclude the presentation of other
attested by the officer having legal custody of the records competent evidence to prove the existence of foreign law.
or by his deputy; and (2) it must be accompanied by a In Willamete Iron and Steel Works v. Muzzal20 for
certificate by a secretary of the embassy or legation, instance, we allowed the foreign law tobe established on
consul general, consul, vice-consular or consular agent or the basis of the testimony in open court during the trial in
foreign service officer, and with the seal of his the Philippines of an attorney-atlaw in San Francisco,
office.15 Such official publication or copy must be California, who quoted the particular foreign law sought to
accompanied, if the record is not kept in the Philippines, be established.21 The ruling is peculiar to the facts.
with a certificate that the attesting officer has the legal Petitioners cannot invoke the Willamete ruling to secure
custody thereof.16 The certificate may be issued by any of affirmative relief since their so called expert witness never
the authorized Philippine embassy or consular officials appeared during the trial below and his deposition, that
stationed in the foreign country in which the record is was supposed to establish the existence of the foreign law,
kept, and authenticated by the seal of his office.17 The was obtained ex-parte.
attestation must state, in substance, that the copy is a
correct copy of the original, or a specific part thereof, as It is worth reiterating at this point that under the rules of
the case may be, and mustbe under the official seal of the private international law, a foreign law must be properly
attesting officer.18 pleaded and proved as a fact. In the absence of pleading
and proof, the laws of the foreign country or state will be
Contrary to the contention of the petitioners, the presumed to be the same as our local or domestic law.
Panamanian laws, particularly Law 42 and its This is known as processual presumption.22 While the
Implementing Order No. 7, were not duly proven in foreign law was properly pleaded in the case at bar, it
accordance with Rules of Evidence and as such, it cannot was,however, proven not in the manner provided by
govern the rights and obligations of the parties in the case Section 24, Rule 132 of the Revised Rules of Court. The
at bar. While a photocopy of the Gaceta Official of the decision of the RTC, which proceeds from a disregard of
Republica de Panama No. 17.596, the Spanish text of Law specific rules cannot be recognized.
42 which is theforeign statute relied upon by the court a
quoto relieve the common carrier from liability, was Having settled the issue on the applicable Rule, we now
presented as evidence during the trial of the case below, resolve the issue of whether or not petitioners are liable
the same however was not accompanied by the required for the misdelivery of goods under Philippine laws.
attestation and certification.
Under the New Civil Code, common carriers, from the
It is explicitly required by Section 24, Rule 132 of the nature of their business and for reasons of public policy,
Revised Rules of Court that a copy of the statute must be are bound to observe extraordinary diligencein the
accompanied by a certificate of the officer who has legal vigilance over goods, according to the circumstances of
custody of the records and a certificate made by the each case.23Common carriers are responsible for loss,
destruction or deterioration of the goods unless the same stop page in transitu, and terminates only after the lapse
is due to flood, storm, earthquake or other natural disaster of a reasonable time for the acceptance, of the goods by
or calamity.24 Extraordinary diligence is that extreme care the consignee or such other person entitled to receive
and caution which persons of unusual prudence and them.30
circumspection use for securing or preserving their own
property or rights.25This expecting standardimposed on It was further provided in the samestatute that the carrier
common carriers in contract of carrier of goods is intended may be relieved from the responsibility for loss or damage
to tilt the scales in favor of the shipper who is at the mercy to the goods upon actual or constructive delivery of the
of the common carrier once the goods have been lodged same by the carrier to the consignee or to the person who
for the shipment.26Hence, in case of loss of goods in has the right to receive them.31 In sales, actual delivery has
transit, the common carrier is presumed under the law to been defined as the ceding of the corporeal possession by
have been in fault or negligent.27 the seller, and the actual apprehension of the corporeal
possession by the buyer or by some person authorized by
While petitioners concede that, as a common carrier, they him to receive the goods as his representative for the
are bound to observe extraordinary diligence in the care purpose of custody or disposal.32 By the same token, there
and custody of the goods in their possession, they insist is actual delivery in contracts for the transport of goods
that they cannot be held liable for the loss of the when possession has been turned over to the consignee or
shipments, their extraordinary responsibility having ceased to his duly authorized agent and a reasonable time is given
at the time the goods were discharged into the custody of him to remove the goods.33
the customs arrastreoperator, who in turn took complete
responsibility over the care, storage and delivery of the In this case, there is no dispute that the custody of the
cargoes.28 goods was never turned over to the consignee or his
agents but was lost into the hands of unauthorized
In contrast, respondent, submits that the fact that the persons who secured possession thereof on the strength
shipments were not delivered to the consignee as statedin of falsified documents. The loss or the misdelivery of the
the bill of lading or to the party designated or named by goods in the instant case gave rise to the presumption that
the consignee, constitutes misdelivery thereof, and under the common carrier is at fault or negligent.
the law it is presumed that the common carrier is at fault
or negligent if the goods they transported, as in this case, A common carrier is presumed to have been negligent if it
fell into the hands of persons who have no right to receive fails to prove that it exercised extraordinary vigilance over
them. the goods it transported.34 When the goods shipped are
either lost or arrived in damaged condition, a presumption
We sustain the position of the respondent. arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of
Article 1736 and Article 1738 are the provisions in the New negligence to hold it liable.35 To overcome the
Civil Code which define the period when the common presumption of negligence, the common carrier must
carrier is required to exercise diligence lasts, viz: establish by adequateproof that it exercised extraordinary
diligence over the goods.36 It must do more than merely
Article 1736. The extraordinary responsibility of the show that some other party could be responsible for the
common carrier lasts from the time the goodsare damage.37
unconditionally placed in the possession of, and received
by the carrier for transportation until the same are In the present case, petitioners failed to prove that they
delivered, actually or constructively, by the carrier to the did exercise the degree of diligence required by law over
consignee, or to the person who has a right to receive the goods they transported. Indeed, aside from their
them, without prejudice to the provisions of article 1738. persistent disavowal of liability by conveniently posing an
excuse that their extraordinary responsibility isterminated
Article 1738. The extraordinary liability of the common upon release of the goods to the Panamanian Ports
carrier continues to be operative even during the time the Authority, petitioners failed to adduce sufficient evidence
goods are stored in a warehouse of the carrier at the place they exercised extraordinary care to prevent unauthorized
of destination, until the consignee has been advised of the withdrawal of the shipments. Nothing in the New Civil
arrival of the goods and has had reasonable opportunity Code, however, suggests, even remotely, that the common
thereafter to remove them or otherwise dispose of them. carriers responsibility over the goods ceased upon
delivery thereof to the custom authorities. To the mind of
Explicit is the rule under Article 1736 of the Civil Code that this Court, the contract of carriage remains in full force
the extraordinary responsibility of the common carrier and effect even after the delivery of the goods to the port
begins from the time the goods are delivered to the authorities; the only delivery that releases it from their
carrier.29 This responsibility remains in full force and effect obligation to observe extraordinary care is the delivery to
even when they are temporarily unloaded or stored in the consignee or his agents. Even more telling of
transit, unless the shipper or owner exercises the right of petitioners continuing liability for the goods transported
to the fact that the original bills of lading up to this time, to depa1i from the ruling of the Court of Appeals that
remains in the possession of the notify party or consignee. under the contract of carriage, petitioners are liable for
Explicit on this point is the provision of Article 353 of the the value of the misdelivcred goods.
Code of Commerce which provides:
WHEREFORE, premises considered, the petition is hereby
Article 353. The legal evidence of the contract between DENIED. The assailed Resolution of the Court of Appeals is
the shipper and the carrier shall be the bills of lading, by hereby AFFIRMED.
the contents of which the disputes which may arise
regarding their execution and performance shall be SO ORDERED.
decided, no exceptions being admissible other than those
of falsity and material error in the drafting.

After the contract has been complied with, the bill of

lading which the carrier has issued shall be returned to
him, and by virtue of the exchange of this title with the
thing transported, the respective obligations and actions
shall be considered cancelled, unless in the same act the
claim which the parties may wish to reserve be reduced to
writing, with the exception of that provided for in Article
366.

In case the consignee, upon receiving the goods, cannot

return the bill of lading subscribed by the carrier, because
of its loss or of any other cause, he must give the latter a
receiptfor the goods delivered, this receipt producing the
same effects as the return of the bill of lading.

While surrender of the original bill of lading is not a

condition precedent for the common carrier to
bedischarged from its contractual obligation, there must
be, at the very least, an acknowledgement of the delivery
by signing the delivery receipt, if surrender of the original
of the bill of lading is not possible.38 There was neither
surrender of the original copies of the bills of lading nor
was there acknowledgment of the delivery in the present
case. This leads to the conclusion that the contract of
carriage still subsists and petitioners could be held liable
for the breach thereof.

Petitioners could have offered evidence before the trial

court to show that they exercised the highest degree of
care and caution even after the goods was turned over to
the custom authorities, by promptly notifying the
consignee of its arrival at the P01i of Cristobal in order to
afford them ample opportunity to remove the cargoes
from the port of discharge. We have scoured the records
and found that neither the consignee nor the notify paiiy
was informed by the petitioners of the arrival of the
goods, a crucial fact indicative of petitioners' failure to
observe extraordinary diligence in handling the goods
entrusted to their custody for transport. They could have
presented proof to show that they exercised extraordinary
care but they chose in vain, full reliance to their cause on
applicability of Panamanian law to local jurisdiction. It is
for this reason that we find petitioners liable for the
misdelivery of the goods. It is evident from the review of
the records and by the evidence adduced by the
respondent that petitioners failed to rebut the prima facie
presumption of negligence. We find no compelling reason