12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.

CO N T EN T S

XIV. 14th week (maritime contracts) ...................................................................................... 2

1 Peralta De Guerrero v. Madrigal Shipping Co., 106 Phil 485* -Perez de Tagle ....... 2
2 Planters Products, Inc. v. CA, 226 SCRA 476* -Razon....................................................... 3
3 Coastwise Lighterage Corp. v. CA, 245 SCRA 796* -Santos ............................................ 5
4 Maritime Agencies & Services v. CA, 187 SCRA 346* -Superable ................................ 6
5 Litonjua Shipping v. National Seamean's Board, 176 SCRA 189 –Tandoc ................ 8
6 Puromines v. CA, 220 SCRA 281 –Tiu .................................................................................. 11
7 Ouano v. CA, 211 SCRA 740 –Puno........................................................................................ 13
8 Loadstar Shipping v. Pioneer Asia Insurance, 479 SCRA 655 –Sanchez.................. 16
9 Lea Mer Industries v. Malayan Insurance, 471 SCRA 698 -Nathan Oducado ........ 17
10 Mindanao Bus Co. v. Collector of Internal Revenue, 1 SCRA 538 –Bascara ......... 19
11 Macondray v. Commissioner of Customs, 62 SCRA 427 –Respicio ......................... 21
12 Magellan Mfg. Marketing v. CA, 201 SCRA 102* -Jaypee Ortiz ................................. 23
13 Telengtan Brothers & Sons v. CA, 236 SCRA 617* -Aquino ....................................... 27
14 Keng Hua Paper Products v. CA, 286 SCRA 257 –Benedicto ..................................... 29
15 Market Developers v. IAC, 177 SCRA 393 –Chan........................................................... 31
16 Reyma Brokerage, Inc. v. Phil. Home Assurance, 202 SCRA 564* -Cortez ........... 32
17 Sweet Lines, Inc. v. Teves, 83 SCRA 361 -Cruz Nenzo ................................................. 35
D. CARRIAGE OF GOODS BY SEA ACT ................................................................................................. 39
XV. 15th week (COGSA) ............................................................................................................ 39
Commonwealth Act No. 65 .......................................................................................................... 39
IN ACT TO DECLARE THAT PUBLIC ACT NUMBERED FIVE HUNDRED AND
TWENTY-ONE, KNOWN AS “CARRIAGE OF GOODS BY SEA ACT,” ENACTED BY
THE SEVENTY-FOURTH CONGRESS OF THE UNITED STATES, BE ACCEPTED,
AS IT IS HEREBY ACCEPTED BY THE NATIONAL ASSEMBLY .................................. 39
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
XIV. 14TH WEEK (MARITIME CONTRACTS)
Read:
1 PERALTA DE GUERRERO V. MADRIGAL SHIPPING CO., 106 PHIL 485* -
PEREZ DE TAGLE
FILIPINAS PERALTA DE GUERRERO, ET AL., Plaintiffs-Appellants, v. MADRIGAL
SHIPPING CO., INC., Defendant-Appellee.
GPT: Short case so no need for ER.
DOCTRINES:
1. Where the complaint shows that appellants’ cause of action is predicated on the
failure of appellee to comply with its contract of carrying safely the deceased
from one place to another, in that the vessel on which he was riding belonging to
appellee capsized because of the reckless and imprudent manner it was managed
and steered by its crew, it can be implied that the transportation was under
taken by virtue of a written contract of carriage.
2. It is a matter of common knowledge that whenever a passenger boards a ship for
transportation from one place to another he is issued a ticket by the shipper
which has all the elements of a written contract namely:
a. (1) the consent of the contracting parties manifested by the fact that
the passenger boards the ship and the shipper consents or accepts him
in the ship for transportation;
b. (2) cause or consideration which is the fare paid by the passenger as
stated in the ticket; and
c. (3) object, which is the transportation of the passenger from the place
of departure to the place of destination which are stated in the ticket.
COMPLETE DIGEST
FACTS:
On April 30, 1957, the wife and daughter of Pacifico Acacio, plaintiffs herein,
filed a complaint against defendant corporation alleging that
o on November 1, 1949 Pacifico Acacio entered into a contract of
carriage with defendant whereby for certain consideration the latter
undertook to carry the former on its vessel "M.S. Regulus" from
Malangas, Zamboanga, to the City of Manila;
o that while the vessel was passing San Jose, Antique, its crew without
taking the necessary precaution managed and steered the same in a
reckless and imprudent manner thereby causing the vessel to capsize
and resulting in the death of Pacifico Acacio.
2
Defendant filed a motion to dismiss on the ground that plaintiff’s cause of
action has already prescribed.
o It contended that they should have filed the action within six years
from the time of the alleged breach of contract, or on November 1,
1955,
o Considering that the complaint was filed on April 30, 1957, or more
than seven years thereafter, the complaint was filed out of time.
The lower court sustained the motion holding that since the nature of the
action is one for recovery of damages which is not based on a written contract,
the action is already barred by the statute of limitations. Hence the present
appeal.
It appears that the complaint was dismissed by the trial court on the strength
of a motion filed by defendant on the ground that the cause of action has
already prescribed. No evidence was presented by any party in support of or
against the motion, the ruling of the court having been based merely on the
factual allegations of the complaint.
ISSUE:
W/N the allegations of the complaint shows that the cause of action of plaintiffs is
merely for recovery of damages, as found by the trial court, or is one based on a written
contract of carriage as claimed by appellants
HELD:
Wherefore, the order appealed from is hereby set aside, and the case is remanded to the
lower court for further proceedings. No pronouncement as to costs.
RATIO:
We are inclined to uphold the contention of appellants, for a cursory reading of
the complaint would show that their cause of action is predicated upon the
failure of appellee to comply with its contract of carrying the deceased from
Malangas, Zamboanga to the City of Manila safely, in that the vessel on which
he was riding belonging to defendant capsized because of the reckless and
imprudent manner it was managed and steered by its crew.
It is true that the complaint does not in so many words state that the
transportation was undertaken by virtue of a written contract of carriage, but
this can be implied from the complaint because it is a matter of common
knowledge that whenever a passenger boards a ship for transportation from
one place to another he is issued a ticket by the shipper wherein the terms of
the contract are specified.
According to appellants, "This ticket is in itself a complete written contract by
and between the shipper and the passenger. It has all the elements of a
complete contract, namely:
o (1) the consent of the contracting parties manifested by the fact that
the passenger boards the ship and the shipper consents or accepts
him in the ship for transportation;
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
o (2) cause or consideration which is the fare paid by the passenger as
stated in the ticket; and
o (3) object, which is the transportation of the passenger from the
place of departure to the place of destination which are stated in the
ticket.” library
Considering that the ticket is not now before us because that case has been
decided merely on a motion to dismiss, and this ticket is necessary to
determine the right of action of appellants, it would have been more proper
had action on the motion been deferred until after trial on the merits.
o This is authorized by the rule if the ground alleged in the motion does
not appear to be indubitable (Section 3, Rule 8, of the Rules of Court).
o We are therefore of the opinion that, in fairness to appellants, the
trial court should not have dismissed the case outright but should
have deferred action on the motion until after trial for the evidence to
be presented may still show that the contract of the parties is really
written and not merely oral as intimated by the court a quo.
2 PLANTERS PRODUCTS, INC. V. CA, 226 SCRA 476* -RAZON
PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT
STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents.
DOCTRINE: A public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the
ship only, as in the case of a time-charter or voyage-charter. It is only when the charter
includes both the vessel and its crew, as in a bareboat or demise that a common carrier
becomes private, at least insofar as the particular voyage covering the charter-party is
concerned.
COMMON CARRIER: SSA (agent) and KKKK (carrier)
Shipper: Mitsubishi, seller and PPI as consignee
Goods: Urea fertilizer
PROBLEM: Goods contaminated
Who WON: Carrier - SSA and KKKK because they were not negligent
EMERGENCY DIGEST: Mitsubishi entered into a time-charter to transport his fertilizer
cargo via M/V Sun Plum owned by KKKK for delivery to consignee PPI. The ship was
inspected prior to voyage. Likewise the cargo was properly sealed and secured in the
holds of the vessel. Upon arrival, the unloading of the cargo was undertaken by the
shipper/consignee. It took them 11 days to unload and transfer the fertilizers to the
warehouse of consignee. The consignee hired a private marine and cargo surveyor and
found that a portion of the cargo was contaminated and there was shortage in the cargo
delivered. Thus, PPI filed a claim for the value of the shortage and contaminated cargo.
KKKK refused to pay alleging that it was a private carrier pursuant to the time charter
agreement. Lower court ruled in favor of PPI, CA reversed and absolved KKKK. SC held
3
that KKKK remained a public/common carrier notwithstanding the charter party
because the agreement was a time-charter, which did not divest the shipowner of
control over the ship and its crew. Therefore, it was still charged with the extraordinary
diligence required of a common carrier. However, the Court absolved KKKK of liability
because it was able to prove that it was not negligent in transporting the cargo. It was
found that the damage occurred during the unloading and transferring to the warehouse
of PPI, which part was no longer controlled by KKKK because the unloading was
undertaken by people hired by the consignee. KKKK was able to prove that it exercised
diligence in its transport of the cargo up to the time its contract ended in the port of
arrival.
COMPLETE DIGEST:
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46%
fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel
M/V "Sun Plum" owned by Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai,
Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by
Bill of Lading No. KP-1 signed by the master of the vessel and issued on the date of
departure.
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids,
covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches
remained closed and tightly sealed throughout the entire voyage.
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon
hatches were opened with the use of the vessel's boom. Petitioner unloaded the
cargo from the holds into its steelbodied dump trucks which were parked alongside
the berth, using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an F.I.O.S. clause). The hatches
remained open throughout the duration of the discharge.
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin
before it was transported to the consignee's warehouse located some fifty (50)
meters from the wharf. Midway to the warehouse, the trucks were made to pass
through a weighing scale where they were individually weighed for the purpose of
ascertaining the net weight of the cargo. The port area was windy, certain portions
of the route to the warehouse were sandy and the weather was variable, raining
occasionally while the discharge was in progress. It took 11 days to unload the
cargo.
A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI),
was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft
readings of the vessel prior to and after discharge.
The survey report submitted revealed a shortage in the cargo and contaminated
with dirt. The Certificate/Demand prepared by PPI likewise showed that the cargo
delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit
for commerce, having been polluted with sand, rust and dirt.
PPI then sent a demand letter to SSA, KKKK’s agent, for the alleged shortage and
diminution in value of the contaminated portion of the cargo left.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
SSA explained that they were not able to respond to the consignee's claim for
payment because, according to them, what they received was just a request for
shortlanded certificate and not a formal claim, and that this "request" was denied
by them because they "had nothing to do with the discharge of the shipment."
PPI filed an action for damages with the Court of First Instance of Manila. The
carrier argued that the strict public policy governing common carriers does not
apply to them because they have become private carriers by reason of the
provisions of the charter-party.
Lower court ruled for shipper. CA reversed and absolved carrier from liability.
Thus, PPI appealed to SC.
ISSUE: (TRANSPO related) Whether or not a charter-party between a shipowner and a
charterer transform a common carrier into a private one as to negate the civil law
presumption of negligence in case of loss or damage to its cargo? NO
Whether or not the shipowner in the instant case was able to prove that he had
exercised that degree of diligence required of him under the law? YES
HELD: Petition dismissed. Decision of CA affirmed.
RATIO:
A "charter-party" is defined as a contract by which an entire ship, or some
principal part thereof, is let by the owner to another person for a specified time or
use; a contract of affreightment by which the owner of a ship or other vessel lets
the whole or a part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight; Charter
parties are of two types: (a) contract of affreightment which involves the use of
shipping space on vessels leased by the owner in part or as a whole, to carry goods
for others; and, (b) charter by demise or bareboat charter, by the terms of which
the whole vessel is let to the charterer with a transfer to him of its entire command
and possession and consequent control over its navigation, including the master
and the crew, who are his servants. Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. In both cases, the
charter-party provides for the hire of vessel only, either for a determinate period of
time or for a single or consecutive voyage, the shipowner to supply the ship's
stores, pay for the wages of the master and the crew, and defray the expenses for
the maintenance of the ship. The distinction between a "common or public carrier"
and a "private or special carrier" lies in the character of the business, such that if
the undertaking is a single transaction, not a part of the general business or
occupation, although involving the carriage of goods for a fee, the person or
corporation offering such service is a private carrier.
It is not disputed that respondent carrier, in the ordinary course of business,
operates as a common carrier, transporting goods indiscriminately for all persons.
When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers
and compliment were under the employ of the shipowner and therefore continued
to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his
4
cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of
the decks, the determination of the course of the voyage and other technical
incidents of maritime navigation were all consigned to the officers and crew who
were screened, chosen and hired by the shipowner.
It is therefore imperative that a public carrier shall remain as such, notwithstanding
the charter of the whole or portion of a vessel by one or more persons, provided the
charter is limited to the ship only, as in the case of a time-charter or voyage-charter.
It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar
as the particular voyage covering the charter-party is concerned. Indubitably,
a shipowner in a time or voyage charter retains possession and control of the ship,
although her holds may, for the moment, be the property of the charterer.
As to the negligence of carrier, Verily, the presumption of negligence on the part of
the respondent carrier has been efficaciously overcome by the showing of
extraordinary zeal and assiduity exercised by the carrier in the care of the cargo.
The period during which private respondent was to observe the degree of diligence
required of it as a public carrier began from the time the cargo was unconditionally
placed in its charge after the vessel's holds were duly inspected and passed scrutiny
by the shipper, up to and until the vessel reached its destination and its hull was
reexamined by the consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the Addendum to the standard
"GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the
charterer, free from all risk and expense to the carrier. Moreover, a shipowner is
liable for damage to the cargo resulting from improper stowage only when
the stowing is done by stevedores employed by him, and therefore under his
control and supervision, not when the same is done by the consignee or
stevedores under the employ of the latter.
Article 1734 of the New Civil Code provides that common carriers are not
responsible for the loss, destruction or deterioration of the goods if caused by the
charterer of the goods or defects in the packaging or in the containers. The Code of
Commerce also provides that all losses and deterioration which the goods may
suffer during the transportation by reason of fortuitous event, force majeure, or the
inherent defect of the goods, shall be for the account and risk of the shipper, and
that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding
causes if it is proved, as against him, that they arose through his negligence or by
reason of his having failed to take the precautions which usage has established
among careful persons.
The evidence of respondent carrier also showed that it was highly improbable for
sea water to seep into the vessel's holds during the voyage since the hull of the
vessel was in good condition and her hatches were tightly closed and firmly sealed,
making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was
chartered for. If there was loss or contamination of the cargo, it was more likely to
have occurred while the same was being transported from the ship to the dump
trucks and finally to the consignee's warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of CSCI who supervised the unloading.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
He explained that the 18 M/T of alleged "bar order cargo" as contained in their
report to PPI was just an approximation or estimate made by them after the
fertilizer was discharged from the vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port
and unloaded her cargo. It rained from time to time at the harbor area while
the cargo was being discharged according to the supply officer of PPI, who
also testified that it was windy at the waterfront and along the shoreline
where the dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble
goods like fertilizer carries with it the risk of loss or damage. More so, with a
variable weather condition prevalent during its unloading, as was the case at bar.
This is a risk the shipper or the owner of the goods has to face. Clearly, respondent
carrier has sufficiently proved the inherent character of the goods which makes it
highly vulnerable to deterioration; as well as the inadequacy of its packaging which
further contributed to the loss. On the other hand, no proof was adduced by the
petitioner showing that the carrier was remise in the exercise of due diligence in
order to minimize the loss or damage to the goods it carried.
3 COASTWISE LIGHTERAGE CORP. V. CA, 245 SCRA 796* -SANTOS
Coastwise Lighterage Corporation v CA (1995)
Carrier: Coastwise Lighterage Corporation
Shipper/Consignee: Pag-asa Sales, Inc.
Insurer: Philippines General Insurance Company
Problem: Barge owned by Coastwise was damaged. Water gushed in and damaged the
goods. Coastwise claims that under the charter agreement (in this case a contract of
affreightment) it was not a common carrier.
Who Won: Pag-asa/PhilGen
Doctrine: A contract of affreightment does not transform a common carries into a
private carrier because there is no complete transfer of the vessel to the other party.
ER:
Pag-asa entered into a contract to transport molasses with Coastwise using the latter’s
dumb barges. Upon reaching Manila Bay, one of the barges struck an unknown sunken
object causing a hole in said barge. As such, the goods were contaminated and this
prompted Pag-asa to reject the same. PhilGen ended up paying the claim for the lost
cargo as Coastwise denied the same. PhilGen filed a claim against Coastwise, which was
granted by the courts.
Issue: WON Coastwise is a common carrier (YES)
Held: There is a distinction between the two kinds of charter parties (i.e. bareboat or
demise and contract of affreightment). A contract of affreightment is one in which the
owner of the vessel leases part or all of its space to haul goods for others. It is a contract
for special service to be rendered by the owner of the vessel and under such contract the
5
general owner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for his
payment of the charter hire. An owner who retains possession of the ship though the
hold is the property of the charterer, remains liable as carrier and must answer for any
breach of duty as to the care, loading and unloading of the cargo. Although a charter
party may transform a common carrier into a private one, the same however is not true
in a contract of affreightment.
Facts:
- Pag-asa Sales, Inc. (Pag-asa) entered into a contract to transport molasses from
the province of Negros to Manila with Coastwise Lighterage Corporation
(Coastwise), using the latter's dumb barges. The barges were towed in tandem
by the tugboat MT Marica, which is also owned by Coastwise.
- Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
"Coastwise 9", struck an unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a hole "2 inches
wide and 22 inches long.”
- The molasses were contaminated and rendered unfit for use. This prompted
Pag-asa to reject the shipment of molasses as a total loss. Thereafter, Pag-asa
filed a formal claim with the insurer of its lost cargo, Philippine General
Insurance Company (PhilGen) and Coastwise. Coastwise denied the claim and
it was PhilGen which paid Pag-asa, the amount of P700,000.00, representing
the value of the damaged cargo.
- PhilGen then filed an action against Coastwise before RTC Manila, seeking to
recover the amount it paid to Pag-asa for the lost cargo. PhilGen now claims to
be subrogated to all the contractual rights and claims which the consignee may
have against the carrier, which is presumed to have violated the contract of
carriage.
- RTC ruled in favor of PhilGen. Coastwise appealed to the CA where the award
was affirmed. Hence, this petition.
Issues:
(OUR TOPIC) WON Coastwise was transformed into a private carrier, by virtue of the
contract of affreightment which it entered into with Pag-asa. (YES)
WON PhilGen was subrogated into the rights of the consignee against the carrier, upon
payment by the insurer of the value of the consignee's goods lost while on board one of
the carrier's vessels. (YES)
Held:
- Coastwise contends that the RTC and CA erred in finding that it was a common
carrier. It stresses the fact that it contracted with Pag-asa to transport the
shipment of molasses from Negros Oriental to Manila and refers to this
contract as a "charter agreement". It cites Home Insurance Company vs.
American Steamship Agencies, Inc. ". . . a common carrier undertaking to carry a
special cargo or chartered to a special person only becomes a private carrier."
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
- Coastwise’s reliance on the aforementioned case is misplaced. A charter party
contract is one of affreightment over the whole vessel, rather than a demise.
The liability of the shipowner for acts or negligence of its captain and crew,
would remain in the absence of stipulation.
- There is a distinction between the two kinds of charter parties (i.e. bareboat or
demise and contract of affreightment) Under the demise or bareboat charter of
the vessel, the charterer will generally be regarded as the owner for the voyage
or service stipulated. The charterer mans the vessel with his own people and
becomes the owner pro hac vice, subject to liability to others for damages
caused by negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command and navigation
thereof to the charterer, anything short of such a complete transfer is a contract
of affreightment (time or voyage charter party) or not a charter party at all.
- A contract of affreightment is one in which the owner of the vessel leases part
or all of its space to haul goods for others. It is a contract for special service to
be rendered by the owner of the vessel and under such contract the general
owner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for
his payment of the charter hire. An owner who retains possession of the ship
though the hold is the property of the charterer, remains liable as carrier and
must answer for any breach of duty as to the care, loading and unloading of the
cargo.
- Although a charter party may transform a common carrier into a private one,
the same however is not true in a contract of affreightment.
- Pag-asa only leased three of Coastwise’s vessels, in order to carry cargo from
one point to another, but the possession, command and navigation of the
vessels remained with the latter. Coastwise, by the contract of affreightment,
was not converted into a private carrier, but remained a common carrier and
was still liable as such.
- Presumption of negligence that attaches to common carriers, once the goods it
transports are lost, destroyed or deteriorated, applies. This presumption,
which is overcome only by proof of the exercise of extraordinary diligence,
remained unrebutted in this case.
- The damage to the barge was caused by its hitting an unknown sunken object.
The object turned out to be a submerged derelict vessel. Coastwise contends
that this navigational hazard was the efficient cause of the accident. Further it
asserts that the fact that the Philippine Coastguard "has not exerted any effort
to prepare a chart to indicate the location of sunken derelicts within Manila
North Harbor to avoid navigational accidents" effectively contributed to the
happening of this mishap. Being unaware of the hidden danger that lies in its
path, it became impossible for the petitioner to avoid the same.
- However, the evidence on record where it appeared that far from having
rendered service with the greatest skill and utmost foresight, and being free
from fault, the carrier was culpably remiss in the observance of its duties. Jesus
R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not
licensed. Article 609 of the Code of Commerce provides that patrons of vessels
must prove the skill capacity and qualifications necessary to command and
direct the vessel, as established by marine and navigation laws, ordinances or
6
regulations, and must not be disqualified according to the same for the
discharge of the duties of the position. Embarking on a voyage with an
unlicensed patron violates this rule. It cannot safely claim to have exercised
extraordinary diligence. Had the patron been licensed, he could be presumed
to have both the skill and the knowledge that would have prevented the
vessel's hitting the sunken derelict ship that lay on their way to Pier 18.
- On the question of subsidiary liability, the damage sustained by the loss of the
cargo which Coastwise was transporting, it was not the carrier which paid the
value thereof to Pag-asa Sales but PhilGen.
- Article 2207 of the Civil Code: If the plaintiffs property has been insured, and
he has received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the
wrongdoer or the person who violated the contract.
- Jurisprudence has held that Article 2207 of the Civil Code is founded on the
well-settled principle of subrogation. Payment by the insurer to the assured
operated as an equitable assignment to the former of all remedies which the
latter may have against the third party whose negligence or wrongful act caused
the loss. The right of subrogation is not dependent upon, nor does it grow out
of, any privity of contract or upon written assignment of claim. It accrues
simply upon payment of the insurance claim by the insurer.
- Upon payment by PhilGen of the amount of P700,000.00 to Pag-asa, the
consignee of the cargo of molasses totally damaged while being transported by
Coastwise, the former was subrogated into all the rights which Pag-asa may
have had against the Coastwise.
4 MARITIME AGENCIES & SERVICES V. CA, 187 SCRA 346* -SUPERABLE
G.R. No. 77638 July 12, 1990
MARITIME AGENCIES & SERVICES, INC., petitioner, 
 vs.
 COURT OF APPEALS, and
UNION INSURANCE SOCIETY OF CANTON, LTD., respondents.
G.R. No. 77674 July 12, 1990
UNION INSURANCE SOCIETY OF CANTON, LTD., petitioner, 
 vs.
 COURT OF
APPEALS, HONGKONG ISLAND CO., LTD., MARITIME AGENCIES & SERVICES, INC.,
and/or VIVA CUSTOMS BROKERAGE, respondents. (NONS)
KEYWORD:
PONENTE: Cruz
Shipowner Hongkong Island Shipping
Shipwoner’s Agent Macondray Company
Shipper Transcontinental Fertilizer
Shipper’s Agent Maritime Agencies
Consignee Atlas Fertilizer
Consignee’s Insurer Union Insurance Society
Goods 8073.35 MT (gross) bagged urea
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
Problem Goods shipped via voyage charter were lost/damaged. Insurer
claiming from the shipowner and its agent, and the shipper
and its agent.
Who Won Union Insurance
Doctrine In a voyage charter (private carriage), the responsibility for
cargo loss falls on the one who agreed to perform the duty
involved.
EMERGENCY RECIT
Transcontinental hired via voyage charter the motor vessel “Hongkong Island” from
Hongkong Island Shipping. It shipped bagged urea to Manila and Cebu. Atlas was one of
the consignee/recipient of the goods. Maritime was the agent of Transcontinental while CA held liable
Macondray was the agent of Hongkong Island. When Atlas received the goods, it found only the
out that some were lost or damaged. Its claim against Maritime and Macondray were charterer
rejected so it claimed from Union Insurance. Union filed the case against Hongkong
Island, Transcontinental, Maritime and one year later, impleaded Macondray.
ISSUE: Who was liable?
HELD: Everyone (Transcontinental, Hongkong Island, Maritime and Macondray) but
claim against Macondray has prescribed already. Since this is a voyage charter (private
carriage), parties are free to stipulate on the liabilities of all the parties. The
responsibility for cargo loss falls on the one who agreed to perform the duty involved" in
accordance with the terms of most voyage charters. Maritime cannot be held liable for
the acts of Transcontinental during the unloading of the goods from the vessel as it was
a mere agent. Maritime, however, is liable for the loss that occurred during the time that
the goods were in the ex-lighter and was in the trucks (as that was its duty). Hongkong
is liable for the loss that occurred when the goods were in the vessel.
FACTS:
Transcontinental Fertilizer Company of London chartered the motor vessel
“Hongkong Island” owned by Hongkong Island Shipping Company, for the
shipment of 8073.35 MT (gross) bagged urea from Novorossisk, Odessa, USSR
to the Philippines. The parties signed a Uniform General Charter dated August
9, 1979.
5,400.04 MT of the shipment was for Atlas Fertilizer Company (consignee), of
which 3,400 MT was to be discharged in Manila, and the 2000 in Cebu. The
goods were insured by Atlas with Union Insurance Society against all risks.
Maritime Agencies & Services, Inc. was appointed as the charterer's agent
(Transcontinental) and Macondray Company, Inc. as the owner's agent
(Hongkong Island Shipping).
On Oct. 3, 1979, the vessel arrived in Manila and unloaded the goods there. On
Oct. 19, 1979, the vessel arrived in Cebu and discharged the rest of the goods.
Atlas filed a claim against Maritime copy furnished Macondray, for the amount
of P87,163.54, representing cost and freightvalue of the 1,383 shortlanded
bags (shortlanded: goods were damaged or lost on board the vessel before
unloading of the shipment). Atlas also filed a claim against Viva Customs
7
Brokerage, for the amount of P36,030.23, representing the value of 574 bags of
net unrecovered spillage.
The claims were rejected so Atlas went to Union and demanded payment,
which Union did. Union as subrogee filed the claim for reimbursement against
Maritime, Viva Customs (later dropped as defendant) and Hongkong in the
RTC-Manila. Macondray was impleaded on 1981.
The trial court ruled in favor of Union and found Macondray and Hongkong
Island, and Maritime and Transcontinental liable for the damage. On appeal to
the CA, the CA found Maritime and Transcontinental liable for the damage, but
exempted Macondray and Hongkong Islandfrom liability. Union and Maritime’s
MR were denied.
In G.R. No. 77638, Maritime pleads non-liability on the ground that it was only
the charterer's agent and should not answer for whatever responsibility might
have attached to the principal. It also argues that the respondent court erred in
applying Articles 1734 and 1735 of the Civil Code in determining the
charterer's liability.
In G.R. No. 77674, Union asks for the modification of the decision of the
respondent court so as to make Maritime solidarily and solely liable, its
principal not having been impleaded and so not subject to the jurisdiction of
our courts.
ISSUE: Whether Maritime can be held liable for the acts of Transcontinental (as agent
for the principal)
HELD: NO. WHEREFORE, the decision of the respondent court is SET ASIDE and that of
the trial court is REINSTATED as above modified. The parties shall bear their respective
costs.
RATIO:
Categories of Charters
There are three general categories of charters: the demise or "bareboat
charter," the time charter and the voyage charter.
A demise involves the transfer of full possession and control of the vessel for
the period covered by the contract, the charterer obtaining the right to use the
vessel and carry whatever cargo it chooses, while manning and supplying the
ship as well.
A time charter is a contract to use a vessel for a particular period of time, the
charterer obtaining the right to direct the movements of the vessel during the
chartering period, although the owner retains possession and control. 12
A voyage charter is a contract for the hire of a vessel for one or a series of
voyages usually for the purpose of transporting goods for the charterer. The
voyage charter is a contract of affreightment and is considered a private
carriage. WHY THOUGH? DI BA DAPAT COMMON CARRIER STILL?
Voyage Charter
The agreement between the parties is a voyage charter. As a private carriage,
the parties are free to stipulate on the liability for damage of the goods, and
others.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
The basic principle is that "the responsibility for cargo loss falls on the one
who agreed to perform the duty involved" in accordance with the terms
of most voyage charters.
This is true in the present cases where the charterer was responsible for
loading, stowage and discharging at the ports visited, while the owner was
responsible for the care of the cargo during the voyage. This was agreed upon
in the Uniform General Charter between the parties.
In Home Insurance Co. v. American Steamship Agencies, the Court declared that
in private carriages, a stipulation exempting the owner from liability for the
negligence of its agent is not against public policy, and is deemed valid.
However in this case, the vessel was not at fault. Since the goods were covered
by a clean of bill of lading (good order when received in the vessel) and were
shortlanded, the presumption is that they were damaged or lost during the
voyage as a result of their negligent improper stowage. For this the ship owner
should be held liable.
Prescribed under COGSA against Macondray
Under the COGSA, the prescriptive period for actions involving loss or
damaged goods is one year, reckoned from the time the goods were delivered
or supposed to be delivered.
The one-year period in the cases at bar should commence on October 20, 1979,
when the last item was delivered to the consignee. Union's complaint was filed
against Hongkong on September 19, 1980, but tardily against Macondray on
April 20, 1981. The consequence is that the action is considered
prescribed as far as Macondray is concerned but not against its principal,
which is what matters anyway.
Liability of Maritime Agencies
As regards the goods damaged or lost during unloading, the charterer is
liable therefor, having assumed this activity under the charter party "free
of expense to the vessel."
However, Transcontinental has never been impleaded in the case. Maritime as
an agent cannot be liable for the injury caused by its principal. It is a well-
settled principle that the agent shall be liable for the act or omission of the
principal only if the latter is undisclosed.
Union seeks to hold Maritime liable as ship agent on the basis of the ruling of
Switzerland General Insurance Co., Ltd. v. Ramirez. However, it is not applicable.
The facts in Switzerland and this case are different. The charterer did not
represent itself as a carrier and indeed assumed responsibility ability
only for the unloading of the cargo, i.e, after the goods were already
outside the custody of the vessel. In supervising the unloading of the cargo
and issuing Daily Operations Report and Statement of Facts indicating and
describing the day-to-day discharge of the cargo, Maritime acted in
representation of the charterer and not of the vessel. It thus cannot be
considered a ship agent.
As a mere charterer's agent, it cannot be held solidarily liable with
Transcontinental for the losses/damages to the cargo outside the custody of
8
the vessel. Notably, Transcontinental was disclosed as the charterer's principal
and there is no question that Maritime acted within the scope of its authority.
Liability of Hongkong and Macondray
As the Court is clothed with ample authority to review matters, even if they are
not assigned as errors in their appeal, if it finds that their consideration is
necessary in arriving at a just decision of the case. Thus, Hongkong and
Macondray cannot use the fact that the appealed decision does not concern
them to evade liability.
As the RTC held: The sum (representing the loss/damaged goods) should be
the principal and primary liability and responsibility of the carrying vessel.
Under the contract for the transportation of goods, the vessel's
responsibility commence upon the actual delivery to, and receipt by the
carrier or its authorized agent, until its final discharge at the port of
Manila. Hongkong Island Co., Ltd., as "shipowner" and represented by the
Macondray & Co., Inc., as its local agent in the Philippines, should be
responsible for the value of the bags of urea fertilizer which were shortlanded.
(But remember, prescribed as against Macondray)
The remainder of the claim representing the unrecovered spillages having
occurred after the shipment was discharged from the vessel unto the ex-
lighters as well as during the discharge from the lighters to the truck which
transported the shipment to the consignee's warehouses should be for the
account of the defendant Maritime Agencies & Services, Inc.
5 LITONJUA SHIPPING V. NATIONAL SEAMEAN'S BOARD, 176 SCRA 189 –
TANDOC
ER:
There was a foreign vessel owned by Mullion. It entered into a charter-party agreement
with Fairwind. Fairwind, thereafter, contracted Litonjua as its agent. Litonjua employed
Candago, respondent in this case. Before the expiration of the contract, Candago was
terminated. He was disembarked at a port in Malaysia. He returned back to the
Philippines. He filed a complaint with NSB for breach of the employment contract. NSB
ruled in favor of Cadago
Petitioner Litonjua contends that the shipowner, not the charterer, was the employer of
private respondent Candongo; and that liability for damages cannot be imposed upon
Litonjua which was a mere agent of the charterer
ISSUE: w/on Litonjua should be held liable. Yes, the charter party entered into by the
shipowner and Fairwind is considered a demise charter
A bareboat or demise charter is a demise of a vessel, much as a lease of an unfurnished
house is a demise of real property. The shipowner turns over possession of his vessel to
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
the charterer, who then undertakes to provide a crew and victuals and supplies and fuel
for her during the term of the charter
It is well settled that in a demise or bare boat charter, the charterer is treated as
owner pro hac vice of the vessel, the charterer assuming in large measure the
customary rights and liabilities of the shipowner in relation to third persons who
have dealt with him or with the vessel
As agent of the charterer, Litonjua should be held liable
(See doctrine to know the different types of charter parties)
DOCTRINE:
[NOTE: CASE DOCTRINE]The first basis is the charter party which existed between
Mullion, the shipowner, and Fairwind, the charterer. In modern maritime law and usage,
there are three (3) distinguishable types of charter parties: (a) the "bareboat" or
"demise" charter; (b) the "time" charter; and (c) the "voyage" or "trip" charter. A
bareboat or demise charter is a demise of a vessel, much as a lease of an unfurnished
house is a demise of real property. The shipowner turns over possession of his vessel to
the charterer, who then undertakes to provide a crew and victuals and supplies and fuel
for her during the term of the charter. The shipowner is not normally required by the
terms of a demise charter to provide a crew, and so the charterer gets the "bare boat",
i.e., without a crew. 8 Sometimes, of course, the demise charter might provide that the
shipowner is to furnish a master and crew to man the vessel under the charterer's
direction, such that the master and crew provided by the shipowner become the agents
and servants or employees of the charterer, and the charterer (and not the owner)
through the agency of the master, has possession and control of the vessel during the
charter period. A time charter, upon the other hand, like a demise charter, is a contract
for the use of a vessel for a specified period of time or for the duration of one or more
specified voyages. In this case, however, the owner of a time-chartered vessel (unlike
the owner of a vessel under a demise or bare-boat charter), retains possession and
control through the master and crew who remain his employees. What the time
charterer acquires is the right to utilize the carrying capacity and facilities of the vessel
and to designate her destinations during the term of the charter. A voyage charter, or
trip charter, is simply a contract of affreightment, that is, a contract for the carriage of
goods, from one or more ports of loading to one or more ports of unloading, on one or
on a series of voyages. In a voyage charter, master and crew remain in the employ of the
owner of the vessel. 9
It is well settled that in a demise or bare boat charter, the charterer is treated as
owner pro hac vice of the vessel, the charterer assuming in large measure the
customary rights and liabilities of the shipowner in relation to third persons who
have dealt with him or with the vessel. 10 In such case, the Master of the vessel is
the agent of the charterer and not of the shipowner. 11 The charterer or owner pro
hac vice, and not the general owner of the vessel, is held liable for the expenses of
the voyage including the wages of the seamen. 12
9
FACTS:
Petitioner Litonjua is the duly appointed local crewing Managing Office of the Fairwind
Shipping Corporation ('Fairwind).
The M/V Dufton Bay is an ocean-going vessel of foreign registry owned by the R.D.
Mullion Ship Broking Agency Ltd. ("Mullion").
While the Dufton Bay was in the port of Cebu and while under charter by Fairwind, the
vessel's master contracted the services of, among others, private respondent Gregorio
Candongo to serve as Third Engineer for a period of twelve (12) months with a monthly
wage of US$500.00. This agreement was executed before the Cebu Area Manning Unit of
the NSB.
Thereafter, Candongo boarded the vessel
Before expiration of his contract, Candongo was required to disembark at Port Kelang,
Malaysia, and was returned to the Philippines on 5 January 1977
-Candongo filed a complaint before public respondent NSB, which complaint was
docketed as NSB-1331-77, for violation of contract, against Mullion as the shipping
company and petitioner Litonjua as agent of the shipowner and of the charterer of the
vessel
NSB ruled in favor of Candongo
Petitioner Litonjua contends that the shipowner, not the charterer, was the employer of
private respondent Candongo; and that liability for damages cannot be imposed upon
Litonjua which was a mere agent of the charterer. It is insisted that private respondent's
contract of employment and affidavit of undertaking clearly showed that the party with
whom he had contracted was none other than Mullion, the shipowner, represented by
the ship's master
ISSUE: W/on the Shipowner should be held liable and not the the charterer and its agent
HELD: Litonjua as agent of a charter should be held liable
RATIO:
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
- Petitioner Litonjua thus argues that being the agent of the charterer and not of the
shipowner, it accordingly should not have been held liable on the contract of
employment of private respondent.
We are not persuaded by petitioner's argument. We believe that there are two (2)
grounds upon which petitioner Litonjua may be held liable to the private respondent on
the contract of employment.
[NOTE: CASE DOCTRINE]The first basis is the charter party which existed between
Mullion, the shipowner, and Fairwind, the charterer. In modern maritime law and usage,
there are three (3) distinguishable types of charter parties: (a) the "bareboat" or
"demise" charter; (b) the "time" charter; and (c) the "voyage" or "trip" charter. A
bareboat or demise charter is a demise of a vessel, much as a lease of an unfurnished
house is a demise of real property. The shipowner turns over possession of his vessel to
the charterer, who then undertakes to provide a crew and victuals and supplies and fuel
for her during the term of the charter. The shipowner is not normally required by the
terms of a demise charter to provide a crew, and so the charterer gets the "bare boat",
i.e., without a crew. 8 Sometimes, of course, the demise charter might provide that the
shipowner is to furnish a master and crew to man the vessel under the charterer's
direction, such that the master and crew provided by the shipowner become the agents
and servants or employees of the charterer, and the charterer (and not the owner)
through the agency of the master, has possession and control of the vessel during the
charter period. A time charter, upon the other hand, like a demise charter, is a contract
for the use of a vessel for a specified period of time or for the duration of one or more
specified voyages. In this case, however, the owner of a time-chartered vessel (unlike
the owner of a vessel under a demise or bare-boat charter), retains possession and
control through the master and crew who remain his employees. What the time
charterer acquires is the right to utilize the carrying capacity and facilities of the vessel
and to designate her destinations during the term of the charter. A voyage charter, or
trip charter, is simply a contract of affreightment, that is, a contract for the carriage of
goods, from one or more ports of loading to one or more ports of unloading, on one or
on a series of voyages. In a voyage charter, master and crew remain in the employ of the
owner of the vessel. 9
It is well settled that in a demise or bare boat charter, the charterer is treated as
owner pro hac vice of the vessel, the charterer assuming in large measure the
customary rights and liabilities of the shipowner in relation to third persons who
have dealt with him or with the vessel. 10 In such case, the Master of the vessel is
the agent of the charterer and not of the shipowner. 11 The charterer or owner pro
hac vice, and not the general owner of the vessel, is held liable for the expenses of
the voyage including the wages of the seamen. 12
^applying
It is important to note that petitioner Litonjua did not place into the record of this
case a copy of the charter party covering the M/V Dufton Bay. We must assume
that petitioner Litonjua was aware of the nature of a bareboat or demise charter
and that if petitioner did not see fit to include in the record a copy of the charter
party, which had been entered into by its principal, it was because the charter
10
party and the provisions thereof were not supportive of the position adopted by
petitioner Litonjua in the present case, a position diametrically opposed to the
legal consequence of a bareboat charter. 13 Treating Fairwind as owner pro hac vice,
petitioner Litonjua having failed to show that it was not such, we believe and so hold
that petitioner Litonjua, as Philippine agent of the charterer, may be held liable on the
contract of employment between the ship captain and the private respondent.
NOT TRANSPO-RELATED:
There is a second and ethically more compelling basis for holding petitioner Litonjua
liable on the contract of employment of private respondent. The charterer of the vessel,
Fairwind, clearly benefitted from the employment of private respondent as Third
Engineer of the Dufton Bay, along with the ten (10) other Filipino crewmembers
recruited by Captain Ho in Cebu at the same occasion. 14 If private respondent had not
agreed to serve as such Third Engineer, the ship would not have been able to proceed
with its voyage. The equitable consequence of this benefit to the charterer is, moreover,
reinforced by convergence of other circumstances of which the Court must take account.
There is the circumstance that only the charterer, through the petitioner, was present in
the Philippines. Secondly, the scope of authority or the responsibility of petitioner
Litonjua was not clearly delimited. Petitioner as noted, took the position that its
commission was limited to taking care of vessels owned by Fairwind. But the
documentary authorization read into the record of this case does not make that clear at
all. The words "our ships" may well be read to refer both to vessels registered in the
name of Fairwind and vessels owned by others but chartered by Fairwind. Indeed the
commercial, operating requirements of a vessel for crew members and for supplies and
provisions have no relationship to the technical characterization of the vessel as owned
by or as merely chartered by Fairwind. In any case, it is not clear from the authorization
given by Fairwind to petitioner Litonjua that vessels chartered by Fairwind (and owned
by some other companies) were not to be taken care of by petitioner Litonjua should
such vessels put into a Philippine port. The statement of account which the Dufton Bay's
Master had signed and which pertained to the salary of private respondent had referred
to a Philippine agency which would take care of disbursing or paying such account.
'there is no question that Philippine agency was the Philippine agent of the charterer
Fairwind. Moreover, there is also no question that petitioner Litonjua did assist the
Master of the vessel in locating and recruiting private respondent as Third Engineer of
the vessel as well as ten (10) other Filipino seamen as crew members. In so doing,
petitioner Litonjua certainly in effect represented that it was taking care of the crewing
and other requirements of a vessel chartered by its principal, Fairwind. 15
Last, but certainly not least, there is the circumstance that extreme hardship would
result for the private respondent if petitioner Litonjua, as Philippine agent of the
charterer, is not held liable to private respondent upon the contract of employment.
Clearly, the private respondent, and the other Filipino crew members of the vessel,
would be defenseless against a breach of their respective contracts. While wages of crew
members constitute a maritime lien upon the vessel, private respondent is in no position
to enforce that lien. If only because the vessel, being one of foreign registry and not
ordinarily doing business in the Philippines or making regular calls on Philippine ports
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
cannot be effectively held to answer for such claims in a Philippine forum. Upon the
other hand, it seems quite clear that petitioner Litonjua, should it be held liable to
private respondent for the latter's claims, would be better placed to secure
reimbursement from its principal Fairwind. In turn, Fairwind would be in an indefinitely
better position (than private respondent) to seek and obtain recourse from Mullion, the
foreign shipowner, should Fairwind feel entitled to reimbursement of the amounts paid
to private respondent through petitioner Litonjua.
We conclude that private respondent was properly regarded as an employee of the
charterer Fairwind and that petitioner Litonjua may be held to answer to private
respondent for the latter's claims as the agent in the Philippines of Fairwind. We think
this result, which public respondent reached, far from constituting a grave abuse of
discretion, is compelled by equitable principles and by the demands of substantial
justice. To hold otherwise would be to leave private respondent (and others who may
find themselves in his position) without any effective recourse for the unjust dismissal
and for the breach of his contract of employment
6 PUROMINES V. CA, 220 SCRA 281 –TIU
March 22, 1993
PUROMINES, INC.
vs.
COURT OF APPEALS and PHILIPP BROTHERS OCEANIC, INC
NOCON, J p:
ER: A sales contract for the sale of prilled urea was entered into by Puromines and
Makati Agro and it was provided therein that any disputes arising from the contract
shall be settled by arbitration in London. The shipment covered by 3 bills of lading was
undertaken by MV Liliana Dimitrova with Philipp Brothers as charterer of said vessel.
When shipment covered by Bill of Lading 2&3 were discharged in Manila in bad order
and condition, Puromines filed a complaint with TC for breach of contract of carriage
against Maritime, ship-agent and Philipp Brothers, as charterer. Philipp filed a motion to
dismiss on the basis that case should be brought to arbitration first. Puromines opposed
contending that the sales contract does not include contract of carriage, the latter not
covered by agreement on arbitration.
SC: Granted Motion to Dismiss, sales contract and bill of lading provides covers
arbitration clause. Assuming the cause of action is based on contract of carriage, it must
be first determined what kind of charter party had with the shipowner to determine
liability. If contract of affreightment, charterer is not liable as possession is still with
owner. If charter of demise or bareboat, then charterer is liable as it is considered the
owner and therefore would be liable for damage or loss.
FACTS:
Puromines, Inc. and Makati Agro Trading, Inc. (not a party in this case) entered into
a contract with Philipp Brothers Oceanic, Inc. for the sale of prilled Urea in bulk.
Sales Contract provided an arbitration clause:
11
o "9. Arbitration: "Any disputes arising under this contract shall be settled
by arbitration in London in accordance with the Arbitration Act 1950
and any statutory amendment or modification thereof. Each party is to
appoint an Arbitrator, and should they be unable to agree, the decision
of an Umpire appointed by them to be final. The Arbitrators and Umpire
are all to be commercial men and resident in London. This submission
may be made a rule of the High Court of Justice in England by either
party."
May 22, ‘88: M/V "Liliana Dimitrova" loaded on board at Yuzhny, USSR a shipment
of 15k metric tons prilled Urea in bulk complete and in good order and condition
for transport to Iloilo and Manila, to be delivered to Puromines.
3 bills of lading were issued by the ship-agent, Maritime Factors Inc:
o Bill of Lading No. 1 dated May 12, ‘88 covering 10k metric tons for
discharge to Manila;
o Bill of Lading No. 2 of even date covering 4k metric tons for unloading in
Iloilo City; and
o Bill of Lading No. 3, same date, covering 1,500 metric tons likewise for
discharge in Manila
Shipment covered by Bill of Lading No. 2 was discharged in Iloilo City complete and
in good order and condition. However, shipments covered by Bill of Lading Nos. 1
and 3 were discharged in Manila in bad order and condition, caked, hardened
and lumpy, discolored and contaminated with rust and dirt.
o Damages were valued at P683, 056. 29 including additional discharging
expenses.
Puromines filed a complaint with the trial court for breach of contract of carriage
against Maritime Factors Inc. (not included as respondent in this petition) as ship-
agent for the owners of the vessel MV "Liliana Dimitrova," while Philipp Brothers
Oceanic Inc., was impleaded as charterer of the said vessel
o Caking and hardening, wetting and melting, and contamination by rust
and dirt of the damaged portions of the shipment were due to the
improper ventilation and inadequate storage facilities of the vessel
o Wetting of the cargo was attributable to the failure of the crew to close the
hatches before and when it rained while the shipment was being unloaded
in the Port of Manila;
o As a direct and natural consequence of the unseaworthiness and
negligence of the vessel, Puromines suffered damages in the total amount
of P683, 056.29.
Maritime Factors, Inc. filed its Answer to the complaint, while Philipp filed a
motion to dismiss on the grounds that:
o the complaint states no cause of action; it was prematurely filed; and
Puromines should comply with the arbitration clause in the sales contract.
Puromines opposed motion to dismiss contending the inapplicability of the
arbitration clause inasmuch as the cause of action did not arise from a violation
of the terms of the sales contract but rather for claims of cargo damages where
there is no arbitration agreement.
TC: Denied Philipp's motion to dismiss. Arbitration not applicable.
o Sales contract states in part: 'Any disputes arising under this contract
shall be settled by arbitration’
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
o Facts alleged in the complaint show that the cause of action arose from a
breach of contract of carriage by the vessel chartered by Philipp Brothers
thus; the arbitration clause cannot apply to the dispute in the present
action which concerns Puromines' claim for cargo loss/damage arising
from breach of contract of carriage.
o No merit to allegations that Philipp, not being the ship owner, is therefore
not the real party in interest as it was impleaded as charterer of the
vessel, hence, a proper party
CA: Complaint Dismissed. The arbitration provision in the sales contract and/or the
bills of lading is applicable in the present case.
o Sales contract is broad enough to include the claim for damages
arising from the carriage and delivery of the goods subject-matter
thereof.
o Bills of lading state: 'Any dispute arising under this Bill of Lading shall be
referred to arbitration of the Maritime Arbitration Commission xxx
Hence, this special civil action for certiorari and prohibition.
o Puromines argues that the sales contract does not include the contract
of carriage which is a different contract entered into by the carrier with
the cargo owners.
o Error for CA to touch upon the arbitration provision of the bills lading in
its decision inasmuch as the same was not raised as an issue by Philipp
who was not a party in the bills of lading
ISSUES:
1) Whether the phrase "any dispute arising under this contract" in the arbitration clause
of the sales contract covers a cargo claim against the vessel (owner and/or charterers)
for breach of contract of carriage? (YES)
2) Assuming that the cause of action arises from the contract of carriage, whether
Philipp, as charterer, would be liable for the loss or damage? (Depends on type of
charter, YES if charter of demise, NO if contract of affreightment)
3) Whether arbitration provision should not have been discussed as it was not raised as
a defense? (NO)
RATIO:
1) Sales contract is comprehensive enough to include claims for damages arising from
carriage and delivery of the goods.
GENERAL RULE: Seller has the obligation to transmit the goods to the buyer, and
concomitant thereto, the contracting of a carrier to deliver the same.
o Art. 1523: Where in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer, delivery of the
goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the
buyer, EXCEPT in the cases provided for in article 1503, first, second and
third paragraphs, or UNLESS a contrary intent appear.
o "Unless otherwise authorized by the buyer, the seller must take such
contract with the carrier on behalf of the buyer as may be reasonable,
having regard to the nature of the goods and the other circumstances of
the case. If the seller omits so to do, and the goods are lost or damaged
12
in course of transit, the buyer may decline to treat the delivery to the
carrier as a delivery to himself, or may hold the seller responsible in
damages."
Sales Contract provides for conditions relative to the delivery of goods, such as date
of shipment, demurrage, weight as determined by the bill of lading at load port and
more particularly the provisions in the contract. xxxx
Puromines derives his right to the cargo from the bill of lading which is the
contract of affreightment together with the sales contract. It is BOUND by the
provisions and terms of said bill of lading and of the ARBITRATION CLAUSE
incorporated in the sales contract.
2) Assuming that the liability of Philipp is not based on the sales contract, but rather on
the contract of carriage, being the charterer of the vessel MV "Liliana Dimitrova," it is
material to show what kind of charter party Philipp had with owner of vessel to
determine former's liability. Assuming that in the present case, the charter party is a
demise or bareboat charter, then Philipp Brothers is liable to Puromines, Inc.,
subject to the terms and conditions of the sales contract. On the other hand, if the
contract between Philipp and the owner of the vessel MV "Liliana Dimitrova" was
merely that of affreightment, then it cannot be held liable for the damages caused by
the breach of contract of carriage, the evidence of which is the bill of lading.
Charter party: Definition
American jurisprudence defines charter party as a contract by which an entire ship or
some principal part thereof is let by the owner to another person for a specified time or
use. (Ward v. Thompson)
Two Kinds of Charter Parties
o Charter of demise or bareboat AND contracts of affreightment.
Demise or Bareboat Charter of Contract of Affreightment
Veseel
Charterer will generally be considered Owner of the vessel leases part or all of
as OWNER for the voyage or service its space to haul goods for others
stipulated
The charterer mans the vessel with his It is a contract for a special service to be
own people and becomes, in effect, the rendered by the owner of the vessel and
owner pro hac vice, subject to liability under such contract the GENERAL
to others for damages caused by OWNER RETAINS the possession,
negligence. (Assistance, Inc. v. Teledyne command and navigation of the ship, the
Industries Inc) charterer or freighter merely having
use of the space in the vessel in return
for his payment of the charter hire. (US
v. Shea)
To create a demise, the owner of a Anything short of such a complete
vessel must completely and exclusively transfer is a contract of affreightment
relinquish possession. (time or voyage charter party) or not a
charter party at all.
Responsibility to third persons for If the charter is a contract of
goods shipped on board a vessel affreightment, which leaves the general
follows the vessel's possession and owner in possession of the ship as
employment; and if possession is owner for the voyage, the rights,
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
transferred to the charterer by virtue of responsibilities of ownership rest on
a demise, the charterer, and not the the owner and the charterer is
owner, is liable as carrier on the usually free from liability to third
contract of affreightment made by persons in respect of the ship. (Leary v.
himself or by the master with third US)
persons, and is answerable for loss, An owner who retains possession of the
damage or non-delivery of goods ship, though the hold is the property of
received for transportation. the charterer, remains liable as carrier
and must answer for any breach of duty
as to the care, loading or unloading of
the cargo. (Gracie v. Palmer)
o In any case, whether the liability of Philipp should be based on the same contract or
that of the bill of lading, the parties are nevertheless obligated to respect the
arbitration provisions on the sales contract and/or the bill of lading.
Puromines being a signatory and party to the sales contract cannot escape from his
obligation under the arbitration clause as stated therein.
Arbitration Clauses
o Arbitration has been held valid and constitutional. Even before the enactment of RA
876, SC has countenanced the settlement of disputes through arbitration. The
rule now is that UNLESS the agreement is such as absolutely to close the doors of
the courts against the parties, which agreement would be void, the courts will look
with favor upon such amicable arrangements and will only interfere with great
reluctance to anticipate or nullify the action of the arbitrator. (Arbitration as a
Means of Reducing Court Congestion, Coquia, Jorge quoting Malcolm, J.)
o Mindanao Portland Cement Corp. v. McDonough Construction Company of Florida:
With a written provision for arbitration as well as failure on respondent's part to
comply, parties must proceed to their arbitration in accordance with the terms of
their agreement (Sec. 6, RA 876). Proceeding in court is merely a summary
remedy to enforce the agreement to arbitrate. The duty of the court in this case
is not to resolve the merits of the parties' claims but only to determine if they
should proceed to arbitration or not. And although it has been ruled that a
frivolous or patently baseless claim should not be ordered to arbitration it is also
recognized that the mere fact that a defense exist against a claim does not
make it frivolous or baseless.
3) Puromines contention that the arbitration provision in the bills of lading should not
have been discussed as an issue in the CA decision since it was not raised as a special or
affirmative defense is without merit. The 3 bills of lading were attached to the complaint
as Annexes and are therefore parts thereof and may be considered as evidence although
not introduced as such. (Philippine Bank of Communications v. CA) It was then proper
for CA/TC to discuss the contents of the bills of lading, having been made part of the
record.
DISPOSITIVE: Arbitration clause stated in Sales Contract valid and applicable. CA
Affirmed.
7 OUANO V. CA, 211 SCRA 740 –PUNO
13
JULIUS C. OUANO v. CA MARKET DEVELOPERS, INC., JULIAN O. CHUA, SUPREME
MERCHANT CONSTRUCTION SUPPLY, INC., JOHNNY ANG, alias Chua Pek Giok, and
FLORENTINO RAFOLS, JR.
G.R. No. 95900 July 23, 1992
REGALADO, J.:
EMERGENCY RECITATION
Ouano is the owner of M/V Don Julio Ouano. He leased the vessel to Rafols under a
charter party with a provision against subleasing the boat. Rafols then entered into a
“Fixture Note” agreement with MADE to transport cement sacks to SMCSI in General
Santos City. Ouano then wrote a letter to MADE requesting them to withhold payment to
Rafols until Rafols pays him. MADE paid Rafols. Ouano filed a complaint in RTC Cebu
against MADE, as shipper; SMC, as consignee; and Rafols, as charterer, seeking payment
of P23,000.00 representing the freight charges for the cement cargo, aside from moral
and exemplary damages in the sum of P150,000.00, attorney's fees and expenses of
litigation. He claims that MADE and SMCSI are liable for being sub-lessees of the boat.
RTC ruled MADE et al liable. CA reversed and held that ONLY RAFOLS was liable. Ouano
appealed.
SC held that CA DID NOT ERR. Only Rafols can be held liable. Ouano, as owner of the
vessel, has no lien on the cargo. A charter party may be of two kinds: One is where the
owner agrees to carry a cargo which the charterer agrees to provide, and the second is
where there is an entire surrender by the owner of the vessel to the charterer, who hires
the vessel as an entire outfit. In such a contract, the charterer is substituted in place of
the owner and becomes the owner for the voyage. This second type is also known as a
bareboat charter or otherwise referred to as a demise of the vessel.
In a bareboat charter. not only the entire capacity of the ship is let but the ship
itself, and the possession is passed to the charterer. The entire control and
management of it is given up to him. The general owner loses his lien for freight,
but the lien itself is not destroyed; the charterer is substituted in his place, in
whose favor the lien continues to exist when goods are taken on freight. The
general owner has no remedy for the charter of his vessel but his personal action
on the covenants of the charter party. It is a contract in which he trusts in the
personal credit of the charterer.
Therefore, since in this case there was a bareboat charter, the general owner has no lien
on the cargo for the hire of the vessel, in the absence of an express provision.
FACTS
Ouano is the registered owner and operator of the motor vessel M/V Don Julio Ouano.
On October 8, 1980, Ouano leased vessel to Rafols under a charter party. The
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
consideration for the letting and hiring of the vessel was P60,000.00 a month, with
P30,000.00 as down payment and the balance of P30,000.00 to be paid within 20 days
after actual departure of the vessel from the port of call. It was also expressly stipulated
that the charterer should operate the vessel for his own benefit and should not sublet or
sub-charter to the same without the knowledge and written consent of the owner.
Three days after, Rafols contracted with Market Developers, Inc. (MADE) through its
group manager, Julian O. Chua, under an agreement denominated as a "Fixture Note" to
transport 13,000 bags of cement from Iligan City to General Santos City, consigned to
Supreme Merchant Construction Supply, Inc. (SMCSI) for a freightage of P46,150.00.
Said amount was payable to Rafols by MADE in two installments (P23,075.00 upon
loading of the cement at Iligan City and P23,075.00 upon completion of loading and
receipt of the cement cargo by SMCSI). The fixture note did not have the written consent
of Ouano.
Rafols had on board the M/V Don Julio Ouano his sobre cargo (jefe de viaje aka tour
leader) when it departed from Iligan City until the cargo of cement was unloaded in
General Santos City.
On October 13, 1980, Ouano wrote a letter to MADE through its manager, Chua, "to
strongly request, if not demand to hold momentarily any payment or partial payment
whatsoever due M/V Don Julio Ouano until Mr. Florentino Rafols makes goods his
commitment" to him.
On October 20, 1980, MADE paid Rafols P23,075.00 corresponding to the last
installment of the freightage.
The entire cargo was thereafter unloaded at General Santos City Port and delivered to
SMCSI, the consignee without any attempt on the part of either the captain of M/V Don
Julio Ouano or the said sobre cargo of Rafols, or even of Ouano himself who was then in
General Santos City Port, to hold and keep in deposit either the whole or part of the
cement cargo to answer for freightage. Neither was there any demand made on any of
the respondents for a bond to secure payment of the freightage, nor to assert in any
manner the maritime lien for unpaid freight over the cargo by giving notice thereof to
the consignee SMCI. The cement was sold by SMCI to its customers in October and
November, 1980.
On January 6, 1981, Ouano filed a complaint in the RTC Cebu against MADE, as shipper;
SMC, as consignee; and Rafols, as charterer, seeking payment of P23,000.00
representing the freight charges for the cement cargo, aside from moral and exemplary
damages in the sum of P150,000.00, attorney's fees and expenses of litigation.
On March 10, 1981, MADE filed its answer, while Ang and Chua filed theirs on February
10 and May 31, 1982, respectively. Rafols was declared in default for failure to file his
answer despite due service of summons.
14
Due to subsequent dropping and impleading of parties defendant, the complaint
underwent several amendments until the case was eventually tried on the 3 rd amended
complaint, which alleged three causes of action.
On May 25, 1985, RTC rendered its decision in favor of Ouano holding all the defendants
solidarily liable. On appeal, the CA modified the decision of the RTC and held that only
Rafols was liable. MADE et al was not liable to Ouano. Ouano filed an MR but the CA
denied.
ISSUES:
1. Whether the CA erred in not holding MADE and Chua liable for damages to
Ouano for quasi-delict under Art. 2176, New Civil Code, let alone for
inducement to violate contract under Art. 1314 thereof.
2. Whether the CA erred in not holding respondents MADE and Chua liable for all
damages which are the natural and probable consequences of their act or
omission, the term "all damages" being broad enough to embrace the
P150,000.00 moral and exemplary damages claimed by Ouano, as well as
P10,000.00 attorney's fees likewise claimed by him (Art. 2202, N.C.C.).
3. Whether the CA erred in not holding MADE and Chua liable jointly and
solidarily (Art. 2194, N.C.C.) for the damages and attorney's fee, as well as
actual damages of P23,075.00 representing unpaid freight on Ouano's vessel.
HELD: CA did not err. Petition dismissed.
RATIO:
Ouano claims that Rafols, by entering into a “Fixture Note” sublet the charter boat.
However, the CA noted that the possession, operation, and management of the vessel
was not transferred to MADE but remained with Rafols as the lessee or charterer. Rafols,
as such lessee, was the one who bound himself to transport, as he did transport, the
cargo of cement for a fixed price.
On the other hand, even if there was a sublease or sub-charter, still no right of recovery
exists in Ouano’s favor against MADE and SMCSI.
In civil law, a contract can only bind the parties who had entered into it or their
successors who assumed their personalities or their juridical positions, and that, as a
consequence, such contract can neither favor nor prejudice a third person. The charter
contract was entered into only by and between Ouano and Rafols. MADE, SMCSI and the
other private respondents were neither parties thereto nor were they aware of the
provisions thereof.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
The claim that Rafols violated the prohibition in the contract against the sublease or
sub-charter of the vessel without Ouano’s knowledge and written consent, even if true,
does not give rise to a cause of action against the supposed sublease or sub-charterer.
The act of the charterer in sub-chartering the vessel, in spite of a categorical prohibition
may be a violation of the contract, but the owner's right of recourse is against the
original charterer, either for rescission or fulfillment, with the payment of damages in
either case.
The obligation of contracts is limited to the parties making them and, ordinarily, only
those who are parties to contracts are liable for their breach. Parties to a contract cannot
thereby impose any liability on one who, under its terms, is a stranger to the contract,
and, in any event, in order to bind a third person contractually, an expression of assent
by such person is necessary.
We reject the contention of Ouano that MADE and Chua should be held liable for
damages for a quasi-delict under Article 2176 of the Civil Code for having failed to
obtain his consent before entering into an agreement with Rafols, and under Article
1314 of the same Code for inducing Rafols to violate the charter party. The obligation to
obtain the written consent of Ouano before subleasing or sub-chartering the vessel was
on Rafols and not on MADE, hence MADE cannot be held liable for the supposed non-
compliance.
MADE and Chua could not be guilty of inducing Rafols to violate the original charter
party. Firstly, there is no evidence on record to show that said respondents had
knowledge of the prohibition imposed in the original charter party to sublease or sub-
charter the vessel. Secondly, at the time the fixture note was entered into between
Rafols and MADE, a written authorization signed by the wife of Ouano in his behalf,
authorizing Rafols to execute contracts, negotiate for cargoes and receive freight
payments, was shown by the former to the latter. Although the said authorization may
have been made by the wife, the same, however, can evidently be proof of good faith on
the part of MADE and Chua who merely relied thereon. Thirdly, as stated in the fixture
note, the agreement between Rafols and MADE was for the former to transport the
cement of the latter using either the "M/V Don Julio Ouano or substitute vessel at his
discretion." Hence, the decision to use the M/V Don Julio Ouano in transporting the
cargo of MADE was solely that of Rafols.
Also, Ouano is deemed to have ratified the supposed sub-charter contract entered into
by MADE and Rafols when he demanded the payment of the second freight installment
as provided in the agreement and, later, received the same by virtue of the decision of
the Court of First Instance of Cebu in Civil Case No. R-19845, an interpleader case filed
by MADE.
Contrary to Ouano's contestation, the act of MADE in paying the first freight installment
to Rafols is not an indication of bad faith or malice. Article 1240 of the Civil Code
provides that "(p)ayment shall be made to the person in whose favor the obligation has
been constituted, or his successor in interest, or any person authorized to receive it."
15
Consequently, MADE, under the fixture note, was under obligation to pay the freight to
Rafols.
Even on Ouano's theory that there was a sublease, it must be stressed that in a sublease
arrangement, the basic principles of which are applicable in the present case, there are
two distinct leases involved, that is, the principal lease and the sublease. There are two
juridical relationships which co-exist and are intimately related to each other, but are
nonetheless distinct one from the other. The personality of the lessee qua lessee does
not disappear; his rights and obligations vis-a-vis the lessor are not passed on to nor
acquired by the sublessee. The lessor is a stranger to the relationship between the
lessee-sublessor and the sublessee. The lessee-sublessor is not an agent of the lessor nor
is the lessor an agent of the lessee-sublessor. The sublessee has no right or authority to
pay the sublease rentals to the lessor, said rentals being due and payable to the lessee-
sublessor. MADE was, therefore, under no obligation to pay Ouano since the freightage
was payable to Rafols.
Although it is provided in Article 1652 of the Civil Code that the sublessee is subsidiarily
liable to the lessor for any rent due from the lessee, the sublessee shall not be
responsible beyond the amount of rent due from him, in accordance with the terms of
the sublease, at the time of the extrajudicial demand by the lessor. However, in this case,
Ouano made no demand for payment from MADE. His letter dated October 13, 1980 was
only a request to hold momentarily any payment due for the use of M/V Don Julio Ouano
until Rafols had made good his obligations to him.
In the absence of any positive action on the part of Ouano, MADE could not withhold the
payment of the freight to Rafols. As stated in the fixture note, the first freight installment
was due and payable upon arrival of the assigned vessel at the port of loading. The
goods were loaded in the vessel on or before October 9, 1980, hence on that date the
first freight installment was already due and demandable. To further withhold the
payment of said installment would constitute a breach of MADE's obligation under the
foregoing contract.
In addition, Rafols has issued to Ouano three checks in the total amount as payment. The
fact that the checks bounced for insufficient funds cannot in any way be ascribable to
MADE nor can it create or affect any liability which Ouano seeks to impute to
respondents MADE, SMCSI and their agents.
As to the issue on maritime lien on the cargo, Ouano insists that the first freight
instalment having remained unpaid to him as owner of M/V Don Julio Ouano, the
maritime lien on the cargo subsists.
Ouano, as owner of the vessel, has no lien on the cargo. A charter party may, among
other classifications, be of two kinds: One is where the owner agrees to carry a cargo
which the charterer agrees to provide, and the second is where there is an entire
surrender by the owner of the vessel to the charterer, who hires the vessel as one hires a
house, takes her empty, and provides the officers and provisions, and, in short, the
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
entire outfit. In such a contract, the charterer is substituted in place of the owner and
becomes the owner for the voyage. This second type is also known as a bareboat charter
or otherwise referred to as a demise of the vessel.
In a charter party of the second kind, not only the entire capacity of the ship is let but the
ship itself, and the possession is passed to the charterer. The entire control and
management of it is given up to him. The general owner loses his lien for freight, but the
lien itself is not destroyed; the charterer is substituted in his place, in whose favor the
lien continues to exist when goods are taken on freight. The general owner has no
remedy for the charter of his vessel but his personal action on the covenants of the
charter party. It is a contract in which he trusts in the personal credit of the charterer.
Therefore, where the charter constitutes a demise of the ship and the charterer is the
owner for the voyage, and that is the kind of charter party involved in the instant case,
the general owner has no lien on the cargo for the hire of the vessel, in the absence of an
express provision as in the case at bar.
Even on the assumption that Ouano had a lien on the cargo for unpaid freight, the same
was deemed waived when the goods were unconditionally released to the consignee at
the port of destination. A carrier has such a lien only while it retains possession of the
goods, so that delivery of the goods to the consignee or a third person terminates, or
constitutes a waiver of, the lien. The lien of a carrier for the payment of freight charges is
nothing more than the right to withhold the goods, and is inseparably associated with its
possession and dependent upon it.
The shipowner's lien for freight is not in the nature of a hypothecation which will
remain a charge upon the goods after he has parted with possession, but is simply the
right to retain them until the freight is paid, and is therefore lost by an unconditional
delivery of the goods to the consignee.
Furthermore, under Article 667 of the Code of Commerce, the period during which the
lien shall subsist is 20 days. This has been modified Article 2241 of the Civil Code which
provides that credits for transportation of the goods carried, for the price of the contract
and incidental expenses shall constitute a preferred claim or lien on the goods carried
until their delivery and for 30 days thereafter. During this period, the sale of the goods
may be requested, even though there are other creditors and even if the shipper or
consignee is insolvent. But, this right may not be made used of where the goods have
been delivered and were turned over to a third person without malice on the part of the
third person and for a valuable consideration.
Since the cargo of cement was unloaded from the vessel and delivered to the consignee
on October 23, 1980, without any oral or written notice or demand having been made on
SMCSI for unpaid freight on the cargo, after the lapse of thirty (30) days from the date of
delivery, the cargo of cement had been released from any maritime lien for unpaid
freight.
16
8 LOADSTAR SHIPPING V. PIONEER ASIA INSURANCE, 479 SCRA 655 –
SANCHEZ
Loadstar Shipping Co. v. Pioneer Asia Insurance Corp
ER:
Loadstar entered into a voyage-charter with NORTHERN MINDANAO
TRANSPORT COMPANY, INC to transfer 65,000 bags of Cement consigned to Market
Developers and insured by Pioneer. The ship sailed from Iligan on the afternoon. The
next day, the Captain ordered the vessel to be forced aground, causing the bags of
cement to be exposed to seawater. The cement bags were now useless. Market
Developers demanded payment from Loadstar, but Loadstar refused to pay.
Nevertheless, the insurer paid Market Developers. Pioneer (insurer) sued Loadstar at
RTC Manila and won. The CA affirmed that Loadstar is liable but reduced the amount to
be paid by 10% of the value of the claim. Loadstar appeals to the SC.
Issue: (1) WON the voyage-charter converted Loadstar into a private carrier
(No); (2) Assuming it’s a common carrier, WON there was a fortuitous event which
will exempt Loadstar (No)
Held: (1) A public carrier shall remain as such, notwithstanding the charter of
the whole or portion of a vessel by one or more persons, provided the charter is limited
to the ship only, as in the case of a time-charter or voyage-charter. Here, the charter was
only for the SHIP and does not extend to the VESSEL and the CREW. Thus, it’s still a
common-carrier. (2) Records show that the sea and weather was calm when the ship
ran aground. A PAG-ASA report also shows that tropical storm “ASIANG” has moved
away from the Philippines.
FACTS:
- LOADSTAR is the registered owner and operator of the M/V Weasel. It entered
into a voyage-charter with NORTHERN MINDANAO TRANSPORT COMPANY,
INC.
o The charter was for the carriage of 65,000 bags of cement from Iligan
to Manila.
o The shipper was Iligan Cement Corporation, while the consignee
in Manila was Market Developers, Inc.
o Iligan Cement insured the goods with PIONEER ASIA INSURANCE
CORP.
- On June 24, 1984, 67,500 bags of cement were loaded on board M/V Weasel.
On the afternoon, the ship left Iligan City in good weather. However, on the
morning of the next day, Captain Montera, the master of the Weasel ordered
the vessel to be forced aground.
- The entire shipment of cement was good as gone due to exposure to sea water.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
- Market Developers (Consignee) demanded from Loadstar to pay the amount,
but LOADSTAR refused. Nevertheless, the PIONEER (Insurer) paid MARKET
DEVELOPERS. PIONEER was then subrogated to the rights of MARKET
DEVELOPERS.
- Pioneer filed a complaint in the RTC of Manila, alleging the following:
o (1) the M/V Weasel was not seaworthy at the commencement of the
voyage;
o (2) the weather and sea conditions then prevailing were usual and
expected for that time of the year and as such, was an ordinary peril
of the voyage for which the M/V Weasel should have been normally
able to cope with; and
o (3) LOADSTAR was negligent in the selection and supervision of its
agents and employees then manning the M/V Weasel.
- Loadstar answered: (1) the vessel was seaworthy and (2) the failure was due
to force majeure
- RTC RULING: Pioneer Insurance wins and is entitled to 1.9 Million.
o A presumption arises that the common carrier was negligent unless it
could prove that it had observed extraordinary diligence.
o Petitioner’s defense of force majeure was rejected. The RTC called
attention to the PAG-ASA report that at the time of the incident,
tropical storm “Asiang” had moved away from the Philippines.
Further, records showed that the sea and weather conditions in the
area of Hinubaan, Negros Occidental from 8:00 p.m. of June 24, 1984
to 8:00 a.m. the next day were slight and smooth. RTC concluded that
the cause of the loss was not tropical storm “Asiang” or any other
force majeure, but gross negligence of petitioner.
- Loadstar appealed to the CA. CA RULING: Loadstar is still liable, but only for
10% of the total claim.
- Loadstar appeals to the SC.
ISSUES:
1. WON Loadstar is a Common Carrier
2. Assuming that Loadstar is a CC, WON there was a fortuitous event which will
exempt it from liability
HELD: WHEREFORE, the petition is DENIED. The assailed Decision dated October 15,
2002 and the Resolution dated February 27, 2003, of the Court of Appeals in CA-G.R. CV
No. 40999, are AFFIRMED.
RATIO:
1st Issue – Loadstar is a common carrier.
- LOADSTAR is a corporation engaged in the business of transporting cargo by
water and for compensation, offering its services indiscriminately to the
17
public. Thus, without doubt, it is a common carrier. However, LOADSTAR
entered into a voyage-charter with the Northern Mindanao Transport
Company, Inc. Now, had the voyage-charter converted petitioner into a private
carrier? [NO.]
o We think not. The voyage-charter agreement between LOADSTAR
and Northern Mindanao Transport Company, Inc. did not in any way
convert the common carrier into a private carrier.
- In Planters Products v. CA, the SC held that
o It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one
or more persons, provided the charter is limited to the ship only, as
in the case of a time-charter or voyage-charter. It is only when the
charter includes both the vessel and its crew, as in a bareboat or demise
that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably,
a shipowner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the
property of the charterer.
- Here, the charter is for the SHIP only, and does not involve the vessel and its
crew. This is a voyage-charter, not a bareboat charter. Thus, it’s a common
carrier.
2nd Issue – There was no fortuitous event.
Records show that in the evening of June 24, 1984, the sea and weather conditions in the
vicinity of Negros Occidental were calm. The records reveal that petitioner took a
shortcut route, instead of the usual route, which exposed the voyage to unexpected
hazard. Petitioner has only itself to blame for its misjudgment.
9 LEA MER INDUSTRIES V. MALAYAN INSURANCE, 471 SCRA 698 -NATHAN
ODUCADO
LEA MER v. MALAYAN INSURANCE
G.R. No. 161745 || September 30, 2005 || J. Panganiban
Petitioner: LEA MER INDUSTRIES, INC.
Respondent: MALAYAN INSURANCE CO., INC.
Summary:
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
Ilian Silican contracted Lea Mer for the shipment of silica from Palawan to Manila. The
vessel sank during its voyage. Malayan paid the consignee and Malayan sued Lea Mer for
reimbursement. RTC ruled in favor of Lea Mer finding that it was a fortuitous event. CA
reversed on the finding that it was not seaworthy when it commenced the trip. Issue:
Whether Lea Mer is Liable. YES!
Under the demise or bareboat charter of the vessel, the charterer will generally be
considered as owner for the voyage or service stipulated. The charterer mans the vessel
with his own people and becomes, in effect, the owner pro hac vice, subject to liability to
others for damages caused by negligence. To create a demise, the owner of a vessel
must completely and exclusively relinquish possession, command and navigation
thereof to the charterer; anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all. The contract
affreightment, was shown by the fact that it was Lea Mer’s crew that manned the
tugboat M/V Ayalit and controlled the barge Judy VII. Hence a Common Carrier.
Petitioner failed to overcome the presumption of negligence since failed to prove that it
had attempted to minimize or prevent the loss before, during or after the alleged
fortuitous event by its own witness(Draper). Moreover, the alleged fortuitous event was
not the sole and proximate cause of the loss. There is a preponderance of evidence that
the barge was not seaworthy when it sailed for Manila. Respondent was able to prove
that, in the hull of the barge, there were holes that might have caused or aggravated the
sinking.
Facts:
Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc.,
for the shipment of 900 metric tons of silica (valued at 565k)
The cargo was to be transported from Palawan to Manila, consigned to Vulcan
Industrial and Mining Corporation.
On October 25, 1991, the silica sand was placed on board Judy VII, a barge leased by
Lea Mer. During its voyage the vessel sank and lost its cargo.
Malayan paid Vulcan Industrial and demanded reimbursement from Lea Mer, which
refused to comply.
Unable to cope with such rejection (Parang binusted lang), Malayan filed a case for
reimbursement in the RTC of Manila.
On October 7, 1999, the trial court dismissed the Complaint, upon finding that the
cause of the loss was a fortuitous event, Typhoon Trining. The court ruled that Lea
Mer had no advance knowledge of the incoming typhoon, and that the vessel had
been cleared by the Philippine Coast Guard to travel from Palawan to Manila.
CA reversed the decision finding that the vessel was not seaworthy, thus Lea Mer
was at fault.
Hence, this petition.
ISSUES:
(1) Whether petitioner is liable for the loss of the cargo. Yes.
(2) Whether the survey report of Jesus Cortez is admissible in evidence. Partly Correct.
18
HELD: WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution
are AFFIRMED. Costs against petitioner.
Ratio:
Liability
This issue involves primarily a question of fact, notwithstanding petitioner’s claim
that it pertains only to a question of law. The present case serves as an exception to
this rule, because the factual findings of the appellate and the trial courts vary.
Rule on Common Carriers (Alam nyo na to)
Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods, or both --
by land, water, or air -- when this service is offered to the public for
compensation.
Petitioner is clearly a common carrier, because it offers to the public its
business of transporting goods through its vessels.
The Court corrects the trial court’s finding that petitioner became a private
carrier when Vulcan chartered it. (Check lang the distinction)
“Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service
stipulated. The charterer mans the vessel with his own people and
becomes, in effect, the owner pro hac vice, subject to liability to others for
damages caused by negligence. To create a demise, the owner of a vessel
must completely and exclusively relinquish possession, command and
navigation thereof to the charterer; anything short of such a complete
transfer is a contract of affreightment (time or voyage charter party) or
not a charter party at all.”
The distinction is significant, because a demise or bareboat charter
indicates a business undertaking that is private in character.
Consequently, the rights and obligations of the parties to a contract of
private carriage are governed principally by their stipulations, not by the
law on common carriers.
The Contract in the present case was one of affreightment, as shown by
the fact that it was Lea Mer’s crew that manned the tugboat M/V Ayalit
and controlled the barge Judy VII. Necessarily, petitioner was a common
carrier, and the pertinent law governs the present factual circumstances.
Extra Ordinary Diligence Required (Alam nyo narin to)
Extraordinary diligence requires rendering service with the greatest skill
and foresight to avoid damage and destruction to the goods entrusted for
carriage and delivery.
Common carriers are presumed to have been at fault or to have acted
negligently for loss or damage to the goods that they have transported.
This presumption can be rebutted only by proof that they observed
extraordinary diligence, or that the loss or damage was occasioned by
causes under 1734.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
Jurisprudence defines the elements of a “fortuitous event” as follows: (a)
the cause of the unforeseen and unexpected occurrence, or the failure of
the debtors to comply with their obligations, must have been independent
of human will; (b) the event that constituted the caso fortuito must have
been impossible to foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it impossible for the debtors
to fulfill their obligation in a normal manner; and (d) the obligor must
have been free from any participation in the aggravation of the resulting
injury to the creditor
Lea Mer sorely failed to overcome the presumption of negligence.
Lea Mer claimed that the loss of the cargo was due to the bad weather
condition brought about by Typhoon Trining.
Evidence was presented to show that petitioner had not been informed of
the incoming typhoon, and that the Philippine Coast Guard had given it
clearance to begin the voyage.
On (25 Oct) the date on which the voyage commenced and the barge sank,
Typhoon Trining was allegedly far from Palawan, where the storm
warning was only “Signal No. 1.”
As required by the pertinent law, it was not enough for the common
carrier to show that there was an unforeseen or unexpected
occurrence. It had to show that it was free from any fault -- a fact it
miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize
or prevent the loss before, during or after the alleged fortuitous event. Its
witness, Joey A. Draper, testified that he could no longer remember
whether anything had been done to minimize loss when water started
entering the barge. (This was confirmed in the cross examination)
Second, the alleged fortuitous event was not the sole and proximate cause
of the loss. There is a preponderance of evidence that the barge was not
seaworthy when it sailed for Manila. Respondent was able to prove that,
in the hull of the barge, there were holes that might have caused or
aggravated the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its
witness, Domingo A. Luna, testified that the barge was in “tip-top” or
excellent condition, but that he had not personally inspected it when it
left Palawan.
The submission of the Philippine Coast Guard’s Certificate of Inspection
of Judy VII, dated July 31, 1991, did not conclusively prove that the barge
was seaworthy. The regularity of the issuance of the Certificate is
disputably presumed. (this evidence did not necessarily take into account
the actual condition of 
 the vessel)
Admissibility (Not relevant for our topic)
Lea Mer questions the Survey Report prepared by Jesus Cortez
19
Because he did not testify during the trial, then the Report that he had
prepared was hearsay and therefore inadmissible for the purpose of
proving the truth of its contents.
The facts reveal that Cortez’s Survey Report was used in the testimonies
of respondent’s witnesses -- Charlie M. Soriano; and Federico S. Manlapig,
a cargo marine surveyor and the vice-president of Toplis and Harding
Company.
Soriano testified that the Survey Report had been used in preparing the
final Adjustment Report conducted by their company. The final Report
showed that the barge was not seaworthy because of the existence of the
holes.
Manlapig testified that he had prepared that Report after taking into
account the findings of the surveyor, as well as the pictures and the
sketches of the place where the sinking occurred. Evidently, the existence
of the holes was proved by the testimonies of the witnesses, not merely
by Cortez’ Survey Report.
The rule on Independently relevant statement states:
“Section 36. Testimony generally confined to personal knowledge; hearsay
excluded. –A witness can testify only to those facts which he knows of his
personal knowledge; that is, which are derived from his own perception,
except as otherwise provided in these rules.”
On this basis, the TC correctly refused to admit Jesus Cortez’s Affidavit,
which respondent had offered as evidence since it was hearsay.
An exception is the rule on “independently relevant statements.” A report
made by a person is admissible if it is intended to prove the tenor, not the
truth, of the statements. Independent of the truth or the falsity of the
statement given in the report, the fact that it has been made is
relevant. Here, the hearsay rule does not apply.
The challenged Survey Report prepared by Cortez was admitted only as
part of the testimonies of respondent’s witnesses. The referral to Cortez’s
Report was in relation to Manlapig’s final Adjustment Report. Evidently,
it was the existence of the Survey Report that was testified to. The
admissibility of that Report as part of the testimonies of the witnesses
was correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already failed to overcome
the presumption of fault that applies to common carriers.
10 MINDANAO BUS CO. V. COLLECTOR OF INTERNAL REVENUE, 1 SCRA 538 –
BASCARA
Mindanao Bus vs. Collector of Internal Revenue
Doctrine: As long as a ticket contains a written acknowledgement by the carrier of the
receipt of goods and an agreement to transport the same to a specified person or to the
order of a specified person, it is a bill of lading.
Emergency Recitation:
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
Mindanao Bus is a common carrier engaged in transporting passengers and freight by
means of buses. Sometime in 1953, its books were examined and it was discovered that
the freight tickets used by it do not contain the required documentary stamp tax (DST)
Thus, it was assessed to pay DST. Mindanao Bus appealed, alleging that the freight
tickets it issued are not bills of lading subject to DST.
Whether or not the freight tickets bills of lading subject to DST? YES
Bills of Lading, in modern jurisprudence, are not those issued by masters of vessels
alone; they now comprehend all forms of transportation, whether by sea or land,
and includes the receipts for cargo transported
As comprehending all methods of transportation, a bill of lading may be defined as
a written acknowledgment of the receipt of goods and an agreement to transport
and to deliver them at a specified place to a person named or on his order. Such
instruments are sometimes called 'shipping receipts,' 'forwarders' receipts,' and
'receipts for transportation."
The designation, however, is not material, and neither is the form of the instrument.
If it contains an acknowledgment by the carrier of the receipt of goods for
transportation, it is, in legal effect, a bill of lading. It follows therefore that the
freight tickets are also bills of lading that require payment of DST.
Facts:
Mindanao Bus Company is a common carrier engaged in transporting
passengers and freight by means of auto-buses in Northern Mindanao, under
certificates of public convenience issued by the Public Service Commission.
Sometime in September 1953, an agent of the respondent Collector of Internal
Revenue examined the books of accounts of Mindanao Bus and found that the
freight tickets used by it do not contain the required documentary stamp tax.
Said agent took with him 500 booklets of tickets used by Mindanao Bus and
counted the freight receipts contained therein. He counted 1,305 freight
tickets. Assuming that each freight ticket covers baggage valued at more than
P5, the Collector of Internal Revenue, upon recommendation of the agent,
assessed against Mindanao Bus the sum of P15,704.16, exclusive of
compromise penalty, as documentary stamp taxes from January 1, 1948 up to
September 16, 1953.
The assessment of the Collector was appealed to the CTA. In that court the
respondent Collector was declared in default and Mindanao Bus presented its
evidence. The tax court, modified the decision of the Collector and ordered
Mindanao Bus to pay only P15,704.16 as documentary stamp tax for the period
above-stated, without any compromise penalty.
Upon Mindanao Bus’ motion for reconsideration, the court resolved to reopen
the case, for the sole purpose of allowing the petitioner to present as evidence
the 500 booklets and 17 sackful, respectively, of passenger and freight tickets
of Mindanao Bus. During the rehearing of the case, Mindanao Bus, however,
20
failed to submit the said evidence; instead it presented stub tickets,which were
already in its possession during the first hearing.
The Court of Tax Appeals denied the motion for reconsideration. Hence, this
appeal.
Issue: Whether or not the tax court erred in holding that the tickets issued for excess
baggage are bills of lading subject to the documentary stamp tax
Held: WHEREFORE, the decision appealed from should be affirmed, with costs against
petitioner-appellant.
Ratio:
The claim of Mindanao Bus that the freight tickets issued by it are not bills of
lading subject to documentary stamp tax must also be dismissed in view of our
ruling in the case of Interprovincial Autobus Co., Inc. vs. Collector.
“The claim that freight tickets of bus companies are not 'bills of lading or
receipts' within the meaning of the Documentary Stamp Tax Law is without
merit. Bills of Lading, in modern jurisprudence, are not those issued by
masters of vessels alone; they now comprehend all forms of transportation,
whether by sea or land, and includes the receipts for cargo transported.”
“The term 'bill of lading' is frequently defined, especially by the older
authorities as a writing signed by the master of a vessel acknowledging the
receipts of goods on board to be transported to a certain port and there
delivered to a designated person or on his order. This definition was
formulated at a time when goods were principally transported by sea and,
while adequate in view of the conditions existing at that early day, is too
narrow to suit present conditions.”
“As comprehending all methods of transportation, a bill of lading may be
defined as a written acknowledgment of the receipt of goods and an agreement
to transport and to deliver them at a specified place to a person named or on
his order. Such instruments are sometimes called 'shipping receipts,'
'forwarders' receipts,' and 'receipts for transportation." The designation,
however, is not material, and neither is the form of the instrument. If it
contains an acknowledgment by the carrier of the receipt of goods for
transportation, it is, in legal effect, a bill of lading."
Section 227 of the National Internal Revenue Code imposes the tax on receipts
for goods or effects shipped from one port or place to another port or place in
the Philippines. The use of the word place after port and of the, word 'receipt'
shows that the receipts for goods shipped on land are included.
Mindanao Bus also questions the validity of Section 127 of Regulation No. 26,
insofar as it provides that chits, memoranda and other papers not in the usual
commercial form of bill of lading, when used by the common carrier in the
transportation of goods for the collection of fares, are to be considered bills of
lading subject to documentary stamp tax, alleging that said section is beyond
the powers of the Secretary of Finance, which are contained in Section 388 of
the Tax Code. This argument should also be dismissed for lack of merit.
The validity of such regulation should be upheld under the principle of legislative
approval by reenactment. The regulations were approved on September 16, 1924. When
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
the National Internal Revenue Code was approved on February 18, 1939, the same
provisions on stamp tax, bills of lading and receipts were reenacted. There is a
presumption that the legislature reenacted the law on the tax with full knowledge of the
contents of the regulations then in force regarding bills of lading and receipts, and that it
approved or confirmed them because they carry out the legislative purpose.
11 MACONDRAY V. COMMISSIONER OF CUSTOMS, 62 SCRA 427 –RESPICIO
Emergency
Macondray is a ship agent in manila of SS TAI PING. Consignee asked 1) carbon steels, 2)
carbon steel flat and 3) carbon tool holders to be shipped from California to manila. The
agent of the consignee here noticed that the 3 items were listed in the bill of lading but
the vessel’s manifest only lists only item 1. The agent of the consignee requested the
shipagent to amend the manifest to include the two items. The shipagent asked the cir to
amend the manifest. The cir instead fined the shipagent for the misdeclaration in the
manifest. Issue: does the complete list of the goods in the bill of lading supplement the
manifest? No. the law requires that manifests should list all contents of the vessel.
Otherwise, the shipowner would be liable by fine. The bill of lading is different from the
manifest. The bill of lading is a private commenrcial contract. The manifest is the
responsibility of the vessel with the government. It is for the inspection, so as to
facilitate detection of smuggling.
Complete Facts
On November 2, 1962, the vessel S/S TAI PING", of which petitioner is the local agent,
arrived at the port of Manila from San Francisco, California, U.S.A., conveying various
shipments of merchandise, among which was a shipment of one (1) coil carbon steel,
one (1) bundle carbon steel flat and one (1) carton containing carbon tool holders
carbide cutters, ground, all of which appeared in the Bill of Lading No. 22, consigned to
Bogo Medellin Millings Co., Inc. The shipment, except the one (1) coil carbon steel was
not reflected in the Inward Cargo Manifest as required by Section 1005 in relation to
Section 2521 of the Tariff and Customs Code of the Philippines. Allied Brokerage
Corporation, acting for and in behalf of Bogo Medellin Milling Co. requested petitioner
Macondray & Co., agent of the vessel S/S TAI PING", to correct the manifest of the
steamer so that it may take delivery of the goods at Customs House. Meanwhile, the
Collector of Customs required herein petitioner to explain and show cause why no
administrative fine should be imposed upon said vessel. On August 15, 1963, counsel for
petitioner wrote a letter to the Collector of Customs pertinent portion of which reads as
follows:
21
It appears from our client's records that the disputed shipment was
described in the ship's manifest as "1 coil carbon steel" only.
However, the bill of lading issued and surrendered to our client, duly
endorsed by the consignee, called for the delivery of 1 coil carbon
steel, 1 bundle carbon steel flat and 1 carbon containing tool holders
carbide cutters ground. Upon investigation by our client, it was
verified that the vessel actually carried on board and discharged at
Manila 3 as called for in the bill of lading. By a letter dated November
15, 1962, our client immediately applied with your Bureau for the
appropriate amendment on an approved customs form to reflect the
true correct description of the shipment and to effect its release from
the customs house.
To said letter, the Collector of Customs replied on September 26, 1963, as follows:
On August 13, 1963 you wrote this Office informing that this case
would be referred to your lawyers who would in turn take the matter
with us. However, this Office would like to inform you that under
Section 2308, in relation to Section 2312, of the Tariff and Customs
Code, you are free to contest by appropriate protest the action of this
Office in imposing the fine, but you have to pay the fine first.
The records of this Office show that the vesels under your agency have
oftentimes failed to declare correctly the cargoes they convey as
covered by the pertinent bill of lading. Intentionally, or otherwise, such
incorrect preparation of cargo manifests cannot be tolerated for it
does not only enhance the commission of fraud but also makes
smuggling suspicious since it renders difficult tracing of the source of
contraband goods. In passing, it may be stated that your vessels have
been found committing the same violations despite the warnings
heretofore given and which your company has not given any concern.
As a matter of fact, your vessel have oftentimes been reported
committing the same violations, which conduct is tantamount to
willful and deliberate defiance of constituted authority. (p. 5 Customs
Record)
The fine of P1,000 was paid by herein petitioner under protest on December 4, 1963.
Issue
The sole question to be resolved is whether or not the Collector of Customs erred in
imposing a fine on the vessel, S/S TAI PING, for alleged violation of section 1005 in
relation to section 2521 of the Tariff and Customs Code for landing unmanifested cargo
at the port of Manila.
Ratio
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
I mail to the Auditor General a true copy of the manifest of the
On the first assigned error, petitioner herein contends that from "the fact the whole
shipment was indicated in the bill of lading, it is clear that the deficiency of the original
vessel's manifest was adequately supplied by the entries of said bill of lading and,
therefore, no violation of the provision of the Tariff and Customs Code, was committed."
(Brief for petitioner pp. 6-7.)We do not subscribe to such conclusion. Sections 1004 and
1005, in relation to section 2521 of the Tariff and Customs Code, explicitly provide:
Section 1004. Documents to be produced by master upon entry of a
vessel — For the purpose of making entry of a vessel engaged in foreign
trade, the master thereof shall present the following documents, duly
certified by him, to the customs boarding official:.
a. The original manifest of all cargo destined for the port, to be
returned with the indorsement of the boarding official;
b. Three copies of the same manifest, one of which upon certification
by the boarding official as to the correctness of the copy, shall be
returned to the master;
c. ...
Section 1005. Manifest required of vessel from foreign port. — Every
vessel from a foreign port must have on board a complete manifest of
all her cargo.
All of the cargo intended to be landed at a port, in the Philippines, must
be described in separate manifests for each port of call therein. Each
manifest shall include the port of departure and the port of delivery
with the marks, numbers, quantity and description of the packages
and the names of the consignees thereof. Every vessel from a foreign
port must have on board complete manifests of passengers and their
baggage, in the prescribed form, setting forth their destination and all
particulars required by the immigration laws; ...
Section 2521. Failure to supply requisite manifests. — If any vessel or
aircraft enters or departs from a port of entry without submitting the
proper manifests to the customs authorities, or shall enter or depart
conveying unmanifested cargo other than as stated in the next
proceeding section hereof,such vessel or aircraft shall be fined in a
sum not exceeding ten thousand pesos.
The same fine shall be imposed upon any arriving or departing vessel
or aircraft if the master or pilot in command shall fail to deliver or
22
incoming or outgoing cargo, as required by law.
The inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the
requirement of the aforequoted sections of the Tariff and Customs Code. It is to be noted
that nowhere in the said section is the presentation of a Bill of Lading required, but only
the presentation of a Manifest containing a true and accurate description of the cargoes.
This is for the simple reason that while a manifest is a declaration of the entire cargo, a
bill of lading is but a declaration of a specific part of the cargo and is a matter of business
convenience based exclusively on a contract. 1 The object of a manifest is to furnish the
customs officers with a list to check against, to inform our revenue officers what goods
are being brought into the country, and to provide a safeguard against goods being
brought into this country on a vessel and then smuggled ashore. 2 In short, while a bill of
lading is ordinarily merely a convenient commercial instrument designed to protect the
importer or consignee, a manifest of the cargo is absolutely essential to the exportation
or importation of property in all vessels, the evident intent and object of which is to
impose upon the owners and officers of such vessel an imperative obligation to submit
lists of the entire loading of the ship in the prescribed form, to facilitate the labors of the
customs and immigration officers and to defeat any attempt to make use of such vessels
to secure the unlawful entry of persons or things into the country. 3 Since therefore, the
purpose served by the manifest is far different from that of the bill of lading, We cannot
acceptor place an imprimatur on the contention of petitioner that the entries in the bill
of lading adequately supplied the deficiency of the manifest and cured it of its infirmity.
The mandate of the law is clear and We cannot settle for less. The law imposes the
absolute obligation, under penalty for failure, upon every vessel from a foreign port to
have "on board complete written or typewritten manifests of all her cargo, signed by the
master". Where the law requires a manifest to be kept or delivered, it is not complied
with unless the manifest is true and accurate. (U.S. vs. The S.S. Islas Filipinos, No. 8746,
28 Phil. 291.297).
II
On the second assigned error, petitioner would want Us to believe that an amendment
was made on the manifest to reflect the true and accurate description of the shipment.
We have, however, gone over the record very carefully but found no evidence to
substantiate the allegation of herein petitioner. The testimony of Irineo Lumabi, (t.s.n.
March 2, 1964, p. 78 Customs Record), manifest clerk of the Marine Division, that he
prepared the amending entries himself is of no moment. In the first place, Lumabi
alleged in his testimony that he "made" the entries reflecting the unmanifested cargoes
without prior approval from either the Collector of Customs, his Deputy, or the chief of
the Marine Division and, therefore, in contravention of the usual and accepted office
procedure. Secondly, no amended manifest was ever presented during the hearing
inspite of ample time requested by and granted to petitioners to enable them to produce
this document. Also, the supposed amendments were never attached to the manifest
itself as required by Section 1005 4 but as mentioned earlier, said "amendments were
allegedly annotated" by Irineo Lumabi on the manifest itself after he "noted" the
discrepancy between the entries in the original manifest and the entry papers.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil. 23

Likewise, petitioner Macondray & Co. presented Dominador Bergano, its chief of claims board bill of lading, and there was a transhipment of goods. As a result of the refusal
but whose testimony did not in any way bolster up petitioner's stand. All he testified to of the buyer to accept, the anahaw fans were shipped back to Manila.
was the fact that they (Macondray & Co.) approved the amendment to the manifest and
filed the same with the Bureau of Customs (t.s.n. p. 68 Customs Record) without even
knowing whether or not the same was approved by the Collector of Customs. What is
evident on record is the fact that no valid amendment to the ship's manifest was made Orient and Zuellig billed MAGELLAN for shipment and for demurrage in Japan. In a
conformably with Section 1005 of the Tariff and Customs Code supra. Since there was no letter, Orient and Zuellig gave MAGELLAN the option of paying the sum of P51,271
valid amendment, liability attached as to the unmanifested cargoes and this is clearly or to abandon the anahaw fans to enable Orient and Zuellig to sell them at public
provided for in Section 2521, supra, of the Tariff and Customs Code. And as ably argued auction to cover the cost of shipment and demurrages. MAGELLAN opted to
by then Solicitor General, now Justice Antonio Barredo, in respondent's well prepared abandon the goods.
brief; "that even granting arguendo, that the amendment was approved and therefore
valid it does not in any way relieve the vessel from the liability which she had already
incurred prior to the amendment. The philosophy and purpose behind the law
authorizing amendment, under paragraph 3 of Section 1005 of the Tariff and Customs
Despite Magellan’s exercise of the option to abandon, Orient and Zuellig demanded for
Code, is to protect innocent importers or consignees from the mistake or unlawful acts
payment of P298,150 from MAGELLAN which represents the freight charges from
of the master. vessels are made responsible for the unlawful acts of their masters and
Japan to Manila, demurrage incurred in Japan and Manila, and charges for
crews '... statutory penalties are incurred where vessel bound for US failed to produce
stripping the container van of the anahaw fans.
manifest, or has on board unmanifested merchandise.'

12 MAGELLAN MFG. MARKETING V. CA, 201 SCRA 102* -JAYPEE ORTIZ

MAGELLAN MANUFACTURERS MARKETING CORP. v. CA
ER:
Magellan entered into a contract with Choju Co of Japan to export anahaw fans (Manila
to Japan). As payment, a letter of credit was issued to Magellan. The letter of credit has
two conditions 1) that there will be no transhipment and 2) and on board bill of lading
be issued by the carrier. Magellan’s President, CU, contracted FE Zuellig a shipping
agent, to ship the anahaw fans through Orient Overseas Container lines. Cu specified
that he needed an on board bill-of lading and that transshipment was not allowed under
the LOC. It will be revealed later on in the case that the bill of lading on its face says
“transhipment” (the goods would be transported via MV Despatcher from Manila to
Hongkong and later transferred to a mother vessel MV Oriental Researcher from
Hongkong to Manila) Also, the case mentioned that there was no on board bill of lading
issued but a “received for shipment bill of lading”, despite requests for substitution of
the correct bill of lading, Orient merely issued a certification that the said goods were
boarded on the vessel.
MAGELLAN filed a complaint praying that Orient and Zuellig be ordered to pay whatever
it was not able to earn from Choju Co., Ltd. Orient and Zuellig claimed that Magellan was
well aware of the transhipment. Orient filed a counterclaim praying that MAGELLAN be
ordered to pay freight charges from Japan to Manila and the demurrages in Japan and
Manila amounting to P298,150.93.
RTC ruled in favor of Zuellig and Orient and ordered Magellan to pay demurrage charges
incurred in Japan and in Manila (298k ). CA affirmed RTC’s finding that there was
transhipment but modified Magellan’s liability to 52K, representing the demurrage
charges in Japan and excluding demurrage incurred in Manila, because of lack of prior
notice upon arrival of the goods in Manila.
ISSUE: w/n there was transhipment? Yes

MAGELLAN paid F.E. Zuellig the freight charges and secured a copy of the bill of lading Transhipment, in maritime law, is defined as “the act of taking cargo out of one ship
which was presented to Allied Bank. The bank then credited the amount of US$23,220 and loading it in another,” or “the transfer of goods from the vessel stipulated in
covered by the letter of credit to Magellan’s account. However, Cu was later informed the contract of affreightment to another vessel before the place of destination
that the payment was refused by the buyer allegedly because there was no on- named in the contract has been reached,” or “the transfer for further
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil. 24

transportation from one ship or conveyance to another.” Clearly, either in its Lines, Inc., (Orient) specifying that he needed an on-board bill of lading
ordinary or its strictly legal acceptation, there is transhipment whether or not the same and that transhipment is not allowed under the letter of credit.
person, firm or entity owns the vessels. In other words, the fact of transhipment is not
dependent upon the ownership of the transporting ships or conveyances or in the
change of carriers, as MMMC seems to suggest, but rather on the fact of actual physical
transfer of cargo from one vessel to another.
MAGELLAN paid F.E. Zuellig the freight charges and secured a copy of the bill
of lading which was presented to Allied Bank. The bank then credited the
amount of US$23,220 covered by the letter of credit to appellant’s account.

That there was transhipment within this contemplation is the inescapable conclusion, as
there unmistakably appears on the face of the bill of lading the entry “Hong Kong”
in the blank space labeled “Transhipment,” which can only mean that
transhipment actually took place. However, when MAGELLAN’s president James Cu, went back to the bank, he
was informed that the payment was refused by the buyer allegedly because
there was no on-board bill of lading, and there was a transhipment of
goods. As a result of the refusal of the buyer to accept, the anahaw fans were
shipped back to Manila.
w/n Magellan is liable for Demurrage charges (no)

There is no dispute that ORIENT and Zuellig expressly and on their own volition
granted MAGELLAN an option with respect to the satisfaction of freightage and
Orient and Zuellig billed MAGELLAN for shipment and for demurrage in Japan.
demurrage charges. Having given such option, especially since it was accepted by
In a letter, Orient and Zuellig gave MAGELLAN the option of paying the sum of
MAGELLAN, ORIENT and Zuellig are estopped from reneging thereon. MAGELLAN,
P51,271 or to abandon the anahaw fans to enable Orient and Zuellig to sell
on its part, was well within its right to exercise said option.
them at public auction to cover the cost of shipment and demurrages.
MAGELLAN opted to abandon the goods.

COMPLETE:
However, Orient and Zuellig demanded for payment of P298,150 from
MAGELLAN which represents the freight charges from Japan to Manila,
demurrage incurred in Japan and Manila, and charges for stripping the
Facts: container van of the anahaw fans.

Magellan Manufacturers Marketing Corp. (Magellan) entered into a contract

with Choju Co. of Yokohama, Japan to export anahaw fans.
MAGELLAN filed a complaint praying that Orient and Zuellig be ordered to pay
whatever MAGELLAN was not able to earn from Choju Co., Ltd.

A letter of credit was issued to Magellan by the buyer.

In its answer, Orient and Zuellig alleged that the bill of lading clearly shows
that there will be a transhipment and that MAGELLAN was well aware
that MV (Pacific) Despatcher was only up to Hongkong where the subject
Through its president, James Cu, Magellan then contracted F.E. Zuellig, a
cargo will be transferred to another vessel for Japan.
shipping agent, to ship the anahaw fans through Orient Overseas Container
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
Orient filed a counterclaim praying that MAGELLAN be ordered to pay freight
charges from Japan to Manila and the demurrages in Japan and Manila
amounting to P298,150.93.
RTC
ruled in favor of Zuellig and Orient.
dismissed the complaint on the ground that Magellan had given its consent
to the contents of the bill of lading where it is clearly indicated that there
will be transhipment.
The lower court said that Magellan is liable to pay to Zuellig and Orient the
freight charges from Japan to Manila and demurrages since it was the
former which ordered the reshipment of the cargo from Japan to Manila.
COURT OF APPEALS
CA affirmed TC’s finding that Magellan agreed to the transhipment of the
goods
CA modified the finding that Magellan is liable for P298 K. Its liability was
reduced to P52K which represents the freight charges and demurrages
incurred in Japan but not for the demurrages incurred in Manila because
Zuellig and Orient did not timely inform Magellan that the goods were already
in Manila in addition to the fact that Zuellig and Orient had given Magellan the
option of abandoning the goods in exchange for the demurrages.
ISSUE:
W/N CA erred in affirming the decision of the trial court which dismissed Magellan’s
complaint (no, THERE WAS TRANSHIPMENT)
W/N CA erred in holding that MMMC is liable to OCCL and Zuellig in the amount of
P52,102 (YES)
25
Held:
Magellan faults Zuellig and Orient for the refusal of its buyer, Choju Co., Ltd., to take
delivery of the exported anahaw fans resulting in a loss of P174K representing the
purchase price of the said export items because of violation of the terms and conditions of
the letter of credit issued in favor of Magellan which specified the requirement for an on
board bill of lading and the prohibition against transhipment of goods, inasmuch as the bill
of lading issued by ORIENT bore the notation "received for shipment" and contained an
entry indicating transhipment in Hongkong.
SC: We find no fault on the part of Zuellig and Orient. On the matter of transhipment,
Magellan maintains that "... while the goods were transferred in Hongkong from MV
Pacific Despatcher, the feeder vessel, to MV Oriental Researcher, a mother vessel,
the same cannot be considered transhipment because both vessels belong to the
same shipping company, the private respondent Orient Overseas Container Lines,
Inc." Magellan claims that since the two vessels belong to one and the same company
then there was no transshipment. JP: Note that the defense of Zuellig and Orient, is that
Magellan consented to the transhipment as indicated in the bill of lading. On the other
hand, Magellan claims that there was no transhipment that occurred, thus, he could have
not agreed to it.
1. Transhipment, in maritime law, is defined as “the act of taking cargo out of one ship
and loading it in another,” or “the transfer of goods from the vessel stipulated in
the contract of affreightment to another vessel before the place of destination
named in the contract has been reached,” or “the transfer for further
transportation from one ship or conveyance to another.” Clearly, either in its
ordinary or its strictly legal acceptation, there is transhipment whether or not the same
person, firm or entity owns the vessels. In other words, the fact of transhipment is not
dependent upon the ownership of the transporting ships or conveyances or in the
change of carriers, as Magellan seems to suggest, but rather on the fact of actual physical
transfer of cargo from one vessel to another.
That there was transhipment within this contemplation is the inescapable conclusion, as
there unmistakably appears on the face of the bill of lading the entry “Hong Kong”
in the blank space labeled “Transhipment,” which can only mean that
transhipment actually took place.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil. 26

A bill of lading operates both as a receipt and as a contract. It is a receipt for the goods
shipped and a contract to transport and deliver the same as therein stipulated. As a
contract, it names the parties, which includes the consignee, fixes the route, destination, Magellan knew that its buyer, Choju Co., Ltd., particularly required that there be
and freight rates or charges, and stipulates the rights and obligations assumed by the an on board bill of lading, obviously due to the guaranty afforded by such bill of
parties. Being a contract, it is the law between the parties who are bound by its terms lading over any other kind of bill of lading.
and conditions provided that these are not contrary to law, morals, good customs, public
order and public policy. A bill of lading usually becomes effective upon its delivery to
and acceptance by the shipper. It is presumed that the stipulations of the bill were, in the
absence of fraud, concealment or improper conduct, known to the shipper, and he is
generally bound by his acceptance whether he reads the bill or not. ON BOARD BILL OF LADING RECEIVED FOR SHIPMENT
One which states that the goods have been one in which it is stated that the goods
received on board the vessel which is to have been received for shipment with or
carry the goods without specifying the vessel by which the
goods are to be shipped.
The holding in most jurisdictions has been that a shipper who receives a bill of
An on board bill of lading is issued when Received for shipment bills of lading are
lading without objection after an opportunity to inspect it, and permits the carrier
the goods have been actually placed issued whenever conditions are not
to act on it by proceeding with the shipment is presumed to have accepted it as
aboard the ship with every reasonable normal and there is insufficiency of
correctly stating the contract and to have assented to its terms.
expectation that the shipment is as good as shipping space.
on its way
a party to a maritime contract would
require an on board bill of lading because
In the light of the series of events that transpired in the case at bar, there can be no of its apparent guaranty of certainty of
logical conclusion other than that Magellan had full knowledge of, and actually shipping as well as the seaworthiness of
consented to, the terms and conditions of the bill of lading thereby making the same the vessel which is to carry the goods.
conclusive as to it, and it cannot now be heard to deny having assented thereto.

In sum, Magellan had full knowledge that the bill issued to it contained terms and
Magellan further argues that assuming that there was transhipment, it cannot be conditions clearly violative of the requirements of the letter of credit.
deemed to have agreed thereto even if it signed the bill of lading containing such entry
because it had made known to private respondents from the start that transhipment
was prohibited under the letter of credit and that, therefore, it had no intention to allow
transhipment of the subject cargo.
Any violation of the terms and conditions of the letter of credit as would defeat its right
to collect the proceeds thereof was, therefore, entirely of Magellan’s making for which it
must bear the consequences.

The terms of the contract as embodied in the bill of lading are clear and thus obviates
the need for any interpretation.
Note: the SC said that The questions of whether or not there was a violation of the terms
--------------------------------- and conditions of the letter of credit, or whether or not such violation was the cause or
motive for the rejection by Magellans's Japanese buyer should not affect Zuellig and Orient
Another ground for the refusal of acceptance of the cargo of anahaw fans by Choju since they were not privies to the terms and conditions of the letter of credit and cannot
Co., Ltd. was that the bill of lading that was issued was not an on board bill of therefore be held liable for any violation thereof by any of the parties thereto.
lading, in clear violation of the terms of the letter of credit issued in favor of
petitioner. On cross-examination, it was established that Magellan, through its
president, was aware of this fact.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
2. MMMC contends that CA erred in holding it liable to pay P52,102 (demurrage
charges) despite its exercise of its option to abandon the cargo.
Demurrage, in its strict sense, is the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the time agreed on for loading and
unloading. Essentially, demurrage is the claim for damages for failure to accept delivery.
In a broad sense, every improper detention of a vessel may be considered a demurrage.
Liability for demurrage, using the word in its strictly technical sense, exists only when
expressly stipulated in the contract.
Using the term in its broader sense, damages in the nature of demurrage are recoverable
for a breach of the implied obligation to load or unload the cargo with reasonable
dispatch, but only by the party to whom the duty is owed and only against one who is a
party to the shipping contract. Notice of arrival of vessels or conveyances, or of their
placement for purposes of unloading is often a condition precedent to the right to collect
demurrage charges.
Magellan asserts that by virtue of the exercise of its option to abandon the goods so as to
allow Orient and Zuellig to sell the same at a public auction and to apply the proceeds
thereof as payment for the shipping and demurrage charges, it was released from
liability for the sum of P52,102 since such amount represents the shipping and
demurrage charges from which it is considered to have been released due to the
abandonment of goods.
SC agrees with Magellan. Ordinarily, the shipper is liable for freightage due to the fact
that the shipment was made for its benefit or under its direction and, correspondingly,
the carrier is entitled to collect charges for its shipping services. This is particularly true
in this case where the reshipment of the goods was made at the instance of MAGELLAN.
However, Orient and Zuellig belatedly informed MAGELLAN of the arrival of its goods
from Japan and that if it wished to take delivery of the cargo it would have to pay
P51,271 or abandon the goods in order to have the cargo auctioned to recover the
costs involved.
27
Clearly, therefore, Orient and Zuellig unequivocally offered MAGELLAN the option of
paying the shipping and demurrage charges in order to take delivery of the goods or of
abandoning the same so that they could sell them at public auction and thereafter apply
the proceeds in payment of the shipping and other charges.
Responding thereto, MAGELLAN seasonably communicated its decision to abandon to
the goods in favor of ORIENT and Zuellig with the specific instruction that any excess of
the proceeds over the legal costs and charges be turned over to MAGELLAN. Receipt of
said letter was acknowledged by ORIENT and Zuellig.
There is no dispute that ORIENT and Zuellig expressly and on their own volition
granted MAGELLAN an option with respect to the satisfaction of freightage and
demurrage charges. Having given such option, especially since it was accepted by
MAGELLAN, ORIENT and Zuellig are estopped from reneging thereon. MAGELLAN,
on its part, was well within its right to exercise said option.
It will be remembered that in overland transportation, an unreasonable delay in the
delivery of transported goods is sufficient ground for the abandonment of goods. By
analogy, this can also apply to maritime transportation. Further, with much more reason
can MAGELLAN in the instant case properly abandon the goods, not only because of the
unreasonable delay in its delivery but because of the option which was categorically
granted to and exercised by it as a means of settling its liability for the cost and expenses
of reshipment. And, said choice having been duly communicated, the same is binding
upon the parties on legal and equitable considerations of estoppel.
13 TELENGTAN BROTHERS & SONS V. CA, 236 SCRA 617* -AQUINO
TELENGTAN BROTHERS & SONS, INC. (LA SUERTE CIGAR & CIGARETTE FACTORY),
petitioner, vs. THE COURT OF APPEALS, KAWASAKI KISHEN KAISHA, LTD. and
SMITH, BELL & CO., INC., respondents.
By Alexis Aquino
Facts:
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil. 28

K-Line is a foreign shipping company doing business in the Philippines, its shipping In their answer, K-Line and Smith Bell claimed that they were not free to waive
agent is Smith, Bell & Co., Inc. It is a member of the Far East Conference, the body these charges because under the United States Shipping Act of 1916 it was unlawful
which fixes rates by agreement of its member-shipowners. for any common carrier engaged in transportation involving the foreign commerce
Van Reekum Paper, Inc. entered into a contract of affreightment with the K-Line for to charge or collect a greater or lesser compensation that the rates and charges
the shipment of 468 rolls of container board liners from Georgia to Manila, specified in its tariffs on file with the Federal Maritime Commission.
 

consigned to La Suerte Cigar. RTC dismissed petitioner's complaint.
The contract of affreightment was embodied in Bill of Lading issued by the carrier o The bill of lading was the contract between the parties and, therefore,
to the shipper. The expenses of loading and unloading were for the account of the petitioner was liable for demurrage charges. It rejected petitioner's claim
consignee (La Suerte). The shipment was packed in 12 container vans. of force majeure in such a way that the delay in the delivery of the
At Tokyo, the cargo was transhipped on two vessels of the K-Line. Ten (10) containers was caused by the breaking down of the equipment of the
container vans were loaded on the 1st vessel, while two (2) were loaded on another arrastre operator.
vessel.
 
 CA affirmed.
On June 11, the first vessel arrived at the port of Manila.
o La Suerte was notified in writing of the ship's arrival, together with
information that container demurrage would be charged unless the Issue: Whether or not La Suerte is liable for demurrage for delay in removing its cargo
consignee took delivery of the cargo within ten (10) days.
 
 from the containers.
On June 21, the other vessel arrived and was discharged of its contents the next day.
On the same day the shipping agent Smith, Bell & Co. released the Delivery Permit
for twelve (12) containers to the broker upon payment of freight charges on the bill
of lading. Held: Yes but only for the period July 3-13, wit respect to the 10 containers and from
On June 22, La Suerte’s broker, IBC, presented the shipping documents to the July 10-13, with respect to the 2 other containers.
Bureau of Customs. But the latter refused to act on them because the manifest of the
1st vessel covered only 10 containers, whereas the bill of lading covered 12
containers.
 

The broker therefore sent back the manifest to Smith, Bell & Co with the request Ratio:
that the manifest be amended.
o Smith, Bell & Co. refused on the ground that an amendment would violate
the Tariff and Customs Code relating to unmanifested cargo.
 

o Later however, it agreed to add a footnote reading "Two container vans Demurrage, in its strict sense, is the compensation provided for in the
carried by other vessel to complete the shipment of twelve containers contract of affreightment for the detention of the vessel beyond the time
under the bill of lading."
 
 agreed on for loading and unloading. Essentially, demurrage is the claim
When the broker tried to secure the release of the cargo, it was informed by Smith, for damages for failure to accept deliver.
Belle, & Co. that the free time for removing the containers from the container yard Clause 29(a) of the bill of lading, in relation to Rule 21 of the Far East
had expired on June 26 for the first vessel, and on July 9, in the case of the 2nd Conference Tariff , specifically provides for the payment by the consignee
vessel, and that demurrage charges had begun to run a day after the free time, of demurrage for the detention of containers and other equipment after
respectively.
 
 the so-called "free time."
 

La Suerte paid P47,680 representing the total demurrage charges on all the A bill of lading is both a receipt and a contract. As a contract, its terms and
containers, but it was not able to obtain its goods. It was able to obtain only a conditions are conclusive on the parties, including the consignee.
partial release of the cargo because of the breakdown of the arrastre's equipment at Period of Demurrage
the container yard.
On July 16, La Suerte sent a letter to Smith, Bell & Co. requesting reconsideration of With respect to the period of La Suerte’s liability, La Suerte cannot be held
the demurrage charges, but was refused. liable for demurrage starting June 27 on the 10 containers because the
La Suerte refused to pay any more demurrage charges on the ground that the delay delay in obtaining release of the goods was not due to its fault.
 
 The
in the release of the cargo was not due to its fault but to the breakdown of the evidence shows that the Bureau of Customs refused to give an entry
equipment at the container yard.
 
 permit to petitioner because the manifest issued by K-Line stated only 10
containers whereas the bill of lading also issued by the K-Line showed
La Suerte filed this suit in the RTC for specific performance to compel respondents
to release 7 container vans consigned to it free of charge.
 
 there were 12 containers.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
For this reason, petitioner's broker had to see Smith, Bell & Co. on June 22,
but the latter did not immediately do something to correct the manifest.
Smith, Bell & Co. was asked to "amend" the manifest, but it refused to do
so on the ground that this would violate the law. It was only on June 29
that it thought of adding instead a footnote, by which time the "free time"
had already expired.
The period of delay, however, for all the 12 containers must be deemed to
have stopped on July 13, because on this date petitioner paid P47,680.00.
If it was not able to get its cargo from the container vans, it was because of
the breakdown of the shifter or cranes of the arrastre service operation. It
would be unjust to charge demurrage after July 13, since the delay in
emptying the containers was not due to the fault of La Suerte.
In sum, we hold that petitioner can be held liable for demurrage only for the period July
3-13, 1979 and that in accordance with the stipulation in its bill of lading.
14 KENG HUA PAPER PRODUCTS V. CA, 286 SCRA 257 –BENEDICTO
G.R. No. 116863 February 12, 1998
KENG HUA PAPER PRODUCTS CO. INC., vs.
CA; RTC OF MANILA, BR. 21; and SEA-LAND SERVICE, INC.,
PANGANIBAN, J.: (1st Division)
EMERGENCY RECIT
Sea-Land Service, a shipping company, is a foreign corporation licensed to do business
in the Philippines. On June 29, 1982, Sea-Land received at its Hong Kong terminal a
sealed container, Container No. SEAU 67523, containing 76 bales of "unsorted waste
paper" for shipment to Keng Hua Paper Products, Co. in Manila. A bill of lading to cover
the shipment was issued by Sea Land.
The shipment was discharged at the Manila International Container Port. Notices of
arrival given to Keng Hua but the latter failed to discharge the shipment from the
container during the "free time" period or grace period. The shipment remained inside
the Sea Land's container from the moment the free time period expired until the time
when the shipment was unloaded from the container or a total of 481 days. During the
481-day period, demurrage charges accrued. Within the same period, letters demanding
payment were sent by the Sea Land to Keng Hua who refused to settle its obligation
which amounted to P67,340.00. Numerous demands were made on Keng Hua but the
obligation remained unpaid. Sea Land filed this civil action for collection and damages.
Issue: Whether Keng Hua is liable for demurrage under the bill of lading. Held: YES.
The acceptance of a bill of lading by the shipper and the consignee, with full knowledge
of its contents, gives rise to the presumption that the same was a perfected and binding
contract. A "bill of lading delivered and accepted constitutes the contract of carriage
even though not signed," because the "acceptance of a paper containing the terms of a
proposed contract generally constitutes an acceptance of the contract and of all of its
terms and conditions of which the acceptor has actual or constructive notice." . Keng
Hua admits that it "received the bill of lading immediately after the arrival of the
29
shipment." Keng Hua was afforded an opportunity to examine the said document, but
did not immediately object to or dissent from any term or stipulation therein. It was
only 6 months later that Keng Hua sent a letter to Sea Land saying that it could not
accept the shipment. Keng Hua's inaction for such a long period conveys the clear
inference that it accepted the terms and conditions of the bill of lading
FACTS
Sea-Land Service, a shipping company, is a foreign corporation licensed to do business
in the Philippines. On June 29, 1982, Sea-Land received at its Hong Kong terminal a
sealed container, Container No. SEAU 67523, containing 76 bales of "unsorted waste
paper" for shipment to Keng Hua Paper Products, Co. in Manila. A bill of lading (Exh. A)
to cover the shipment was issued by Sea Land.
The shipment was discharged at the Manila International Container Port. Notices of
arrival were transmitted to the Keng Hua but the latter failed to discharge the shipment
from the container during the "free time" period or grace period. The shipment
remained inside the Sea Land's container from the moment the free time period expired
on July 29, 1982 until the time when the shipment was unloaded from the container on
November 22, 1983, or a total of 481 days. During the 481-day period, demurrage
charges accrued. Within the same period, letters demanding payment were sent by the
Sea Land to Keng Hua who refused to settle its obligation which amounted to
P67,340.00. Numerous demands were made on Keng Hua but the obligation remained
unpaid. Sea Land filed this civil action for collection and damages.
In its answer, Keng Hua, ( by way of special and affirmative defense) alleged that it
purchased 50 tons of waste paper from the shipper in Hong Kong, Ho Kee Waste Paper,
as manifested in Letter of Credit No. 824858 issued by Equitable Banking Corporation,
with partial shipment permitted. Under the letter of credit, the remaining balance of
the shipment was only 10 metric tons as shown in Invoice No. H-15/82; that Sea Land
was asking Keng Hua to accept 20 metric tons which is 10 metric tons more than the
remaining balance. If Keng Hua were to accept the shipment, it would be violating
Central Bank rules and regulations and custom and tariff laws. Sea Land had no cause of
action against the Keng Hua because the latter did not hire Sea Land to carry the
merchandise; that the cause of action should be against the shipper which contracted
the Sea Land's services and not against Keng Hua. Keng Hua duly notified Sea Land
about the wrong shipment through a letter.
RTC found Keng Hua liable for demurrage; attorney's fees and expenses of litigation.
Keng Hua appealed to theCA, arguing that the lower court erred in (1) awarding the sum
of P67,340 in favor of Sea Land, (2) rejecting Keng Hua's contention that there was
overshipment, (3) ruling that Keng Hua's recourse was against the shipper, and (4)
computing legal interest from date of extrajudicial demand.
CA denied the appeal and affirmed the lower court's decision in toto. MR denied
ISSUE
Whether Keng Hua is liable under the bill of lading (Main Issue) – YES
Whether Keng Hua ia liable to pay demurrage of P67,340.00 to Sea Land - YES
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
Whether or not the award of legal interest from the date of private respondent's
extrajudicial demand was proper – NO, Modified
HELD
Decision is hereby AFFIRMED with the MODIFICATION that the legal interest of 6% per
annum shall be computed from September 28, 1990 until its full payment before finality
of judgment. The rate of interest shall be adjusted to 12% per annum, computed from
the time said judgment became final and executory until full satisfaction. The award of
attorney's fees is DELETED.
RATIO
A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it
is a contract by which three parties, namely, the shipper, the carrier, and the consignee
undertake specific responsibilities and assume stipulated obligations. (AMQB – Sir told
us there are 3 functions. Contract, Evidence of receipt and Symbol or Title Deed to
the loaded goods). A "bill of lading delivered and accepted constitutes the contract of
carriage even though not signed," because the "acceptance of a paper containing the
terms of a proposed contract generally constitutes an acceptance of the contract and of
all of its terms and conditions of which the acceptor has actual or constructive notice."
In a nutshell, the acceptance of a bill of lading by the shipper and the consignee, with full
knowledge of its contents, gives rise to the presumption that the same was a perfected
and binding contract.
Both lower courts held that the bill of lading was a valid and perfected contract between
the shipper (Ho Kee), the consignee (Keng Hua), and the carrier (Sea-Land). Section 17
—> of the bill of lading provided that the shipper and the consignee were liable for the
answer payment of demurrage charges for the failure to discharge the containerized shipment
to first beyond the grace period allowed by tariff rules. Applying said stipulation, both lower
issue
courts found Keng Hua liable. Sec. 17 of the bill of lading reads:
17. COOPERAGE FINES. The shipper and consignee shall be liable for,
indemnify the carrier and ship and hold them harmless against, and the
carrier shall have a lien on the goods for, all expenses and charges for mending
cooperage, baling, repairing or reconditioning the goods, or the van, trailers or
containers, and all expenses incurred in protecting, caring for or otherwise
made for the benefit of the goods, whether the goods be damaged or not, and
for any payment, expense, penalty fine, dues, duty, tax or impost, loss, damage,
detention, demurrage, or liability of whatsoever nature, sustained or incurred
by or levied upon the carrier or the ship in connection with the goods or by
reason of the goods being or having been on board, or because of shipper's
failure to procure consular or other proper permits, certificates or any papers
that may be required at any port or place or shipper's failure to supply
information or otherwise to comply with all laws, regulations and
requirements of law in connection with the goods of from any other act or
omission of the shipper or consignee: (Emphasis supplied.)
Keng Hua contends that it should not be bound by the bill of lading because it never gave
its consent thereto. Keng Hua admits that it "received the bill of lading immediately after
30
the arrival of the shipment." Keng Hua was afforded an opportunity to examine the said
document, but did not immediately object to or dissent from any term or stipulation
therein. It was only 6 months later that Keng Hua sent a letter to Sea Land saying that it
could not accept the shipment. Keng Hua's inaction for such a long period conveys the
clear inference that it accepted the terms and conditions of the bill of lading. Moreover,
said letter spoke only of Keng Hua’s's inability to use the delivery permit, i.e. to pick up
the cargo, due to the shipper's failure to comply with the terms and conditions of the
letter of credit, for which reason the bill of lading and other shipping documents were
returned by the "banks" to the shipper. The letter merely proved Keng Hua's refusal to
pick up the cargo, not its rejection of the bill of lading.
Keng Hua's reliance on the Notice of Refused or On Hand Freight, as proof of its
nonacceptance of the bill of lading, is wrong. The notice was not written by Keng Hua; it
was sent by Sea Land to Keng Hua four months after Keng Hua received the bill of lading.
If the notice has any legal significance at all, it is to highlight Keng Hua's prolonged
failure to object to the bill of lading.
Keng Hua's attempt to evade its obligation to receive the shipment on the pretext that
this may cause it to violate customs, tariff and central bank laws must likewise fail. Mere
apprehension of violating said laws, without a clear demonstration that taking delivery
of the shipment has become legally impossible, cannot defeat theits contractual
obligation and liability under the bill of lading.
The issue of whether petitioner accepted the bill of lading was raised for the first time
only in Keng Hua's memorandum before SC. The Court cannot now entertain an issue
raised for the very first time on appeal.
The prolonged failure of Keng Hua to receive and discharge the cargo from Sea Land's
vessel constitutes a violation of the terms of the bill of lading. It should thus be liable for
demurrage to the former. The amount of demurrage charges in the sum of P67,340 is a
factual conclusion of the trial court that was affirmed by the Court of Appeals and, thus,
binding on this Court. 24 Necessarily, the longer the cargo remained unclaimed, the
higher the demurrage. While in his letter dated April 24, 1983, Sea Land's counsel
demanded payment of only P37,800, the additional demurrage incurred was due to
Keng Hua’s continued refusal to receive delivery of the cargo which ballooned to
P67,340 by November 22, 1983.
Bill of Lading Separate from Other Letter of Credit Arrangements
In a letter of credit, there are three distinct and independent contracts:
(1) the contract of sale between the buyer and the seller, (2) the contract of the buyer
with the issuing bank, and (3) the letter of credit proper in which the bank promises to
pay the seller pursuant to the terms and conditions stated therein. "Few things are more
clearly settled in law than that the three contracts which make up the letter of credit
arrangement are to be maintained in a state of perpetual separation." A transaction
involving the purchase of goods may also require, apart from a letter of credit, a contract
of transportation specially when the seller and the buyer are not in the same locale or
country, and the goods purchased have to be transported to the latter.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
The contract of carriage, as stipulated in the bill of lading in the present case, must be
treated independently of the contract of sale between the seller and the buyer, and the
contract for the issuance of a letter of credit between the buyer and the issuing bank.
Any discrepancy between the amount of the goods described in the commercial invoice
in the contract of sale and the amount allowed in the letter of credit will not affect the
validity and enforceability of the contract of carriage as embodied in the bill of lading. As
the bank cannot be expected to look beyond the documents presented to it by the seller
pursuant to the letter of credit, neither can the carrier be expected to go beyond the
representations of the shipper in the bill of lading and to verify their accuracy vis-a-viz
the commercial invoice and the letter of a credit. Thus, the discrepancy between the
amount of goods indicated in the invoice and the amount in the bill of lading cannot
negate Keng Hua’s obligation to Sea Land arising from the contract of transportation.
Payment of Interest and Attorney’s Fees
The case before us involves an obligation not arising from a loan or forbearance of
money; pursuant to Article 2209 of the Civil Code, the applicable interest rate is 6% per
annum. Since the bill of lading did not specify the amount of demurrage, and the sum
claimed by Sea Land increased as the days went by, the total amount demanded cannot
be deemed to have been established with reasonable certainty until the trial court
rendered its judgment. Consequently, the legal interest rate is six percent, to be
computed from September 28, 1990, the date of the trial court's decision. And in
accordance with Philippine National Bank and Eastern Shipping, the rate of 12% per
annum shall be charged on the total then outstanding, from the time the judgment
becomes final and executory until its satisfaction.
Finally, the Court notes that the matter of attorney's fees was taken up only in the
dispositive portion of the trial court's decision. This falls short of the settled
requirement that the text of the decision should state the reason for the award of
attorney's fees, for without such justification, its award would be a "conclusion without
a premise, its basis being improperly left to speculation and conjecture."
15 MARKET DEVELOPERS V. IAC, 177 SCRA 393 –CHAN
Market Developers vs IAC
G.R. No. 74978, September 8, 1989
MARKET DEVELOPERS, INC. (MADE), petitioner, vs. HON. INTERMEDIATE APPELLATE
COURT and GAUDIOSO UY, respondents.
EMERGENCY RECIT
MADE entered into a written barging and towage contract with Uy for the shipment of
the former’s cargo from Iligan to Kalibo, Aklan. MADE was allowed 4 lay days and agreed
to pay demurrage at P5,000.00 per day of delay or in excess of the stipulated allowance.
Upon completion of the loading of MADE’s goods, the parties agreed to divert the barge
to Roxas City. This new agreement was not reduced to writing. Cargo was eventually
loaded. 6 months after, Uy demanded payment of demurrage for an alleged delay of 8
days and 4/25 hours. MADE ignored this demand
31
ISSUE – W/N 2nd contract was valid. YES!!!
It’s erroneous for respondent courts to affirm that the original contract continued to
regulate the relations of the parties. To hold that the old agreement was still valid and
subsisting notwithstanding the substantial change (Roxas City is a much busier port
than Kalibo, Aklan) was to impose upon MADE a condition it had not accepted under the
new agreement. SC sees no reason why 2nd agreement should not be recognized simply
because it was not in writing. Demurrage charges cannot be deemed stipulated in the
2nd agreement because the conditions in the port of Aklan and Roxas were not the
same. Parol evidence will not apply because the 1st written agreement had been
replaced by the 2nd verbal agreement.
Also, the contract in this case is one of affreightment. It takes the form of a charter party
or a bill of lading. Art. 652 of the CoC provides that a charter party must be drawn in
duplicate and signed by the contracting parties. While this rule shows that this kind of
contract must be in writing, Art. 653 provides that if the cargo should be received
without a charter party, contract shall be understood as executed in accordance with
what appears in the bill of lading. SC says that this means that the charter party may be
oral, in which case the terms shall be those embodied in the bill of lading. However, the
bill of lading shows that there is no condition or requirement for payment of demurrage.
DETAILED DIGEST
FACTS
- In this case, Respondent Gaudioso Uy seems to have lost interest after the
decision in his favor was appealed to the respondent court. He didn’t even
submit a brief. When this petition was filed and he was required to comment,
he also failed to do so.
- On June 20, 1978, petitioner Market Developers, Inc. (MADE) entered into a
written barging and towage contract with Uy for the shipment of the former’s
cargo from Iligan City to Kalibo, Aklan, at the rate of P1.45 per bag. Petitioner
was allowed 4 lay days and agreed to pay demurrage at the rate of P5,000.00
for every day of delay, or in excess of the stipulated allowance.
- Uy sent a barge and a tugboat to Iligan and the cargo of MADE began
immediately.
- It is not clear who made the request but upon completion of the loading, the
parties agreed to divert the barge to Culasi, Roxas City (instead of Kalibo,
Aklan). This new agreement was not reduced to writing.
- The shipment arrived in Roxas and the cargo was eventually unloaded. There
is dispute as to the time consumed for such unloading. 6 months after, Uy
demanded payment of demurrage charges for an alleged delay of 8 days and
4/25 hours. MADE ignored this demand.
- Uy filed suit and was sustained by the trial court, which ordered MADE to pay
him the said amount with interest. IAC affirmed saying that since the new
agreement was not written, the original agreement must prevail.
ISSUE – W/N the 2nd contract was valid. YES!!!
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
HELD - WHEREFORE, the petition is GRANTED. The decision of the respondent court is
REVERSED. Civil Case No. R 18095 in the Regional Trial Court of Cebu is hereby
dismissed, with costs against the private respondent.
RATIO
- It was erroneous for the respondent courts to affirm that the original contract
continued to regulate the relations of the parties.
- Uy said he felt there was no need to draft another agreement as any rates
remained unchanged. He did not consider, however, that there was a
substantial difference between Roxas City and Kalibo, Aklan as ports of
destination.
o Roxas City is a much busier port than Kalibo, Aklan, where unloading
of its cargo could have been accomplished faster because of the
lighter traffic. This is why MADE agreed to pay demurrage charges
under the original contract (Kalibo, Aklan) but not under the revised
verbal agreement.
- To hold that the old agreement was still valid and subsisting notwithstanding
this substantial change was to impose upon the petitioner a condition he had
not, and would not have, accepted under the new agreement.
o If the 1st contract was, indeed, valid, then it was clearly violated
because of the diversion of the cargo which could not have been
agreed upon verbally.
- Article 1356 of the Civil Code
o “Contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are
present. However, when the law requires that a contract be in some
form in order that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and
indispensable.”
- The contract in this case is a contract of affreightment. It is a contract with the
shipowner to hire his ship or part of it, for the carriage of goods, and generally
takes the form either of a charter party or a bill of lading.
- Article 652 of the Code of Commerce provides that a charter party must be
drawn in duplicate and signed by the contracting parties. However, while the
rule clearly shows that this kind of contract must be in writing, the succeeding
article 653 provides:
o “If the cargo should be received without a charter party having been
signed, the contract shall be understood as executed in
accordance with what appears in the bill of lading, the sole
evidence of title with regard to the cargo for determining the rights
and obligations of the ship agent, of the captain and of the charterer.”
o SC: this last provision means that the charter party may be oral, in
which case the terms thereof, not having been reduced to writing,
shall be those embodied in the bill of lading.
o We see no reason why the second agreement of the parties to deliver
the petitioner's cargo to Roxas City instead of Kalibo, Aklan, should
not be recognized simply because it was not in writing. Law and
jurisprudence support the validity of such a contract.
32
o If the rate in the old written contract was maintained in the new oral
contract, it was simply because the rates of the 2 ports were there
same. However, the demurrage charges cannot be deemed stipulated
because the conditions in the port of Aklan and Roxas City were not
the same.
o Parol evidence will not apply because the 1 st written agreement had
not been merely modified but actually replaced by the 2 nd verbal
agreement.
- Regarding the bill of lading, an examination will reveal that there is no
condition or requirement for payment of demurrage charges. Therefore, there
was no reason to read any stipulation for demurrage into the 2nd contract.
- Even assuming that demurrage is seen in the 2 nd contract, there is no
acceptable evidence of delay allegedly incurred. Uy’s testimony is self-serving.
He was even admittedly not present at the unloading. Exhibits B and C, the
statement of facts according to the barge patron, was not presented at the trial
to testify on his report.
- As to the timeliness of Uy’s demand for the payment of demurrage, this would
indicate the real intention of the parties regarding the matter.
o MADE points out that the original bill sent by Uy charged it only for
freight and made no mention of demurrage.
o After Uy sent the bill on July 8, the latter did not make any additional
billing for demurrage following the completion of the unloading on
July 24.
o MADE also remitted to Uy a check “in full payment of our account”
and Uy accepted without protest. Also, MADE and Uy entered into at
least 1 more voyage afterwards and no demand on demurrage was
made.
o Curiously, it took 6 months before it occurred to Uy to make a written
demand for demurrage. While this delay is not long enough to
constitute laches, it nevertheless clearly reflects on Uy’s credibility
when asserted in relation to the facts above narrated.
In the end, while Uy could have met all the arguments of MADE frontally, he merely
relied on the respondent courts’ decisions feeling smugly that he had already won. That
was his error. It should never be assumed that when this Court sits to review the
decisions of the lower courts, it will merely and automatically affirm them without
further inquiry on the convenient assumption that they are correct.
16 REYMA BROKERAGE, INC. V. PHIL. HOME ASSURANCE, 202 SCRA 564* -
CORTEZ
Reyma Brokerage, Inc. vs Philippine Home Assurance Corp. and COURT OF APPEALS
(G.R. No. 93464, October 7, 1991)
SHIPPER: Craig Mostlyn & Co. (of Queensland, Austrialia)
CONSIGNEE: RFM Corp.
ARRASTRE OPERATOR: Reyma Brokerage [the petitioner]
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
INSURANCE: Philippine Home Assurance Corp. (PHAC) [the respondent]
VESSEL NAME: MS Malmros Monsoon
WHAT WAS SHIPPED? 2,680 cartons of hard frozen boneless beef contained in 5
containers
WHAT HAPPENED? When the shipment was brought by Reyma to RFM, upon
inspection and inventory, it was found out that such shipment was 203 cartons short.
RFM blamed Reyma for this. RFM recovered from the insurance company. The insurance
company, due to subrogation, wishes to recover from Reyma.
DOCTRINE:
The carrier, by signifying in the bill of lading that “it is a receipt xxx for the
number of packages shown above” had explicitly admitted that the
containerized shipments had actually the number of packages declared by the
shipper in the bill of lading
The bill of lading operates both as a receipt and a contract. It is a receipt for the
goods shipped and a contract to transport and deliver the same as therein
stipulated
o As a receipt, it recites the date and place of the shipment, describes
the goods as to quantity, weight, dimensions, identification marks
and condition, quality and value.
o As a contract, it names the contracting parties, which include the
consignee, fixes the route, destination, and freight rates or charges,
and stipulates the rights and obligations assumed by the parties.
Sec 2(6) par. 4 of COGSA provides: “... the carrier and the ship shall be
discharged from all liability in respect of loss or damage unless suit is brought
within one year after delivery of the goods or the date when the goods should
have been delivered: ...”
EMERGENCY DIGEST:
The vessel “MS Malmros Monsoon” received from the shipper, CRAIG MOSTLYN of
Australia a shipment of 2,680 cartons of hard frozen boneless beef contained in 5
containers for transport to Manila in favour of the consignee RFM under a bill of lading.
The shipment arrived in Manila on Oct 13. Upon arrival, the shipment was discharged
and was into the possession and custody of REYMA the arrastre operator. On Oct 22, the
shipment was brought by Reyma to RFM, from the pier to the latter’s warehouse in
Pasig. Upon inspection and inventory, it was found out that such shipment was 203
cartons short. RFM blamed Reyma for contending that the latter had custody and
responsibility over the beef. RFM recovered from PHIL. HOME ASSURANCE, the
insurance company. The insurance company, due to subrogation, wishes to recover from
Reyma.
ISSUES: W/N Reyma is liable for the missing 203 cartons (YES); and W/N action has
prescribed (NO)
HELD & RATIO: Petition is DENIED. The SC revisited a rule enunciated by United States
Lines which applies to a situation where the carrier of the containerized cargo simply
33
admits the information furnished by the shipper with regard to the goods it shipped as
reflected in the bill of lading ("said to contain") but not where the carrier of the
containerized cargo makes an explicit admission as to the weight, measurement marks,
numbers, quality contents, and value, and more so, inscribed these admissions as
stipulations in the bill of lading itself, or made them an addendum thereto, to which the
carrier affixed its express acknowledgment as what happened in this case. The situation
in this case is an exception to the doctrine in US States Lines case. In this case, evidently,
the carrier, by signifying in the bill of lading that "it is a receipt ... for the number of
packages shown above," had explicitly admitted that the containerized shipments had
actually the number of packages declared by the shipper in the bill of lading. And this
conclusion is bolstered by the stipulation printed in the bill of lading, "unless expressly
acknowledged and agreed to." Therefore, the phrase "said to contain" also appearing in
the bill of lading must give way to this reality.
With respect to the defense of prescription under COGSA, Reyma has waived/or
abandoned this defense since this was not raised in the proceedings in the lower courts
so this cannot be raised before the SC. Assuming arguendo that prescription was
properly raised, it still cannot apply. Reyma is a broker and Phil Home is an insurer. The
prescription period for this action is 10yrs.
FACTS:
On Oct 2, 1979, “MS Malmros Monsoon” (THE VESSEL) received onboard at Queensland,
Australia from the shipper Craig Mostlyn & Co. (of Queensland) a shipment of 2,680
cartons of hard frozen boneless beef contained in 5 containers complete and in good
order and condition for transport to Manila
This is in favor of the eventual consignee RFM Corp. (RFM) under a Bill of
Lading
On Oct 13, 1979, the vessel arrived at Pier 3, Port of Manila and discharged the shipment
into the possession and custody of the arrastre operator, Reyma Brokerage (REYMA)
From pier 3, the shipment was transferred to the Reefer Van Area of pier 13
On Oct 22, 1979, Reyma loaded the containers in 2 trucks and delivered them to Grech
Food Industries Cold Storage in Pasig, Rizal
Arrived there at 1am of Oct 23
4 Reyma personnel delivered the containers: a driver and helper in each truck
On around 9am the next day (Oct 23), the containers were stripped and the
representative of Reyma and RFM counted the contents of the 5 containers.
After an inventory of one of the containers (container no. BROU-430656[1]), it
was discovered that 203 cartons were found short out of the loaded 2,680
cartons of hard frozen boneless beef
o According to RFM, the shortage was attributable to Reyma such
shortage occurred while the latter has custody and responsibility
over the said containers
RFM filed a claim for recovery of the missing 203 cartons but it was denied.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
Consequently, RFM filed the claim with Phil. Home Assurance Corp. (PHIL.
HOME) under its Marine Cargo insurance policy.
o Phil. Home paid RFM P88,658.22
The payment of RFM’s claim by Phil. Home had subrogated the latter to file this claim for
the recovery of the amount paid.
The Lower Courts ruled against Reyma. Reyma’s arguments [related to the topic]:
a) In the light of the US Lines case, a “said-to-contain” bill of lading for sealed
containers is “RECEIPT” only of the containers but NOT of their contents,
which the carrier is not in a position to verify
b) Burden of proof lies with Phil. Home since there was no evidence that the seals
were tampered
c) Action is barred by prescription since the the action was brought beyond the 1
yr prescription period fixed by the COGSA (1 yr from Oct 22, 1979) [note: case
didn’t state the date when Phil. Home brought this action against Reyma]
ISSUES:
1) W/N Reyma is liable for the short delivery of 203 cartons from the
containerized shipments under the bill of lading (YES, liable)
2) W/N action is barred by prescription in accordance to COGSA (NO, this defense
was waived/abandoned)
HELD: Reyma Brokerage’s petition is DENIED.
RATIO:
1st issue RE: Liability under the Bill of Lading:
In to the US Lines case, according to a Customs Administrative Order, “...Under this
system, the shipper loads his cargoes in a specially designed container, seals the
container and delivers it to the carrier for transportation.
The carrier does not participate in the counting of the merchandise for loading
into the container, the actual loading thereof nor the sealing of the container.
o Having no actual knowledge of the kind, quantity or condition of the
contents of the container, the carrier issues the corresponding bill of
lading based on the declaration of the shipper.
The bill of lading describes the cargo as a container simply and it states the
contents of the container either as advised by the shipper or prefaced by the
phrase "said to contain."
o Clearly then, the matter quantity, description and conditions of the
cargo is the sole responsibility of the shipper.”
In this case, the Bill of Lading has the following entries:
34
SHIPPED ON BOARD FIVE SHIPPER PACKED CONTAINERS SAID TO CONTAIN 2680
CARTONS HARD FROZEN BONELESS 72938 kgs = 160800 lbs nett:
536 CARTONS - CONTAINER NO: BROU 430915 (4)
536 CARTONS - CONTAINER NO: ITLU 780480 (2)
536 CARTONS - CONTAINER NO: BROU 430773 (7)
536 CARTONS - CONTAINER NO: ITLU 780254 (3)
536 CARTONS - CONTAINER NO: BROU 4306561
Moreover, we must note also that the bill of lading itself contains the printed
stipulations:
xxx xxx xxx
Weight, measurement marks and numbers (except loading marks for which the carrier is
only responsible if stamped or otherwise shown clearly in letters at least 50 mm high)
quality contents and value shown above are furnished by the Merchant and have not been
checked and are to be considered unknown, unless expressly acknowledged and agreed to.
And in the bottom portion of the bill of lading there appears the statement, which was
signed by the carrier:
This bill of lading is a receipt only for the number of packages shown above. which
was duly signed by the carrier.
Evidently, the carrier, by signifying in the bill of lading that "it is a receipt ... for the
number of packages shown above," had explicitly admitted that the containerized
shipments had actually the number of packages declared by the shipper in the bill of
lading. And this conclusion is bolstered by the stipulation printed in the bill of lading,
"unless expressly acknowledged and agreed to." Therefore, the phrase "said to contain"
also appearing in the bill of lading must give way to this reality.
Hence, this express acknowledgment of the carrier makes the case at bar an exception to
the doctrine enunciated in United States Lines.
The rule enunciated by United States Lines applies to a situation where the carrier
of the containerized cargo simply admits the information furnished by the shipper
with regard to the goods it shipped as reflected in the bill of lading ("said to
contain")
but not where the carrier of the containerized cargo makes an explicit
admission as to the weight, measurement marks, numbers, quality
contents, and value, and more so, inscribed these admissions as
stipulations in the bill of lading itself, or made them an addendum
thereto, to which the carrier affixed its express acknowledgment as what
happened in this case.
In its stead, the dictum that the bill of lading shall be prima facie evidence of
the receipt by the carrier of the goods as therein described governs.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
We have already held that: A bill of lading operates both as a receipt and as a
contract.
It is a receipt for the goods shipped and a contract to transport and
deliver the same as therein stipulated.
o As a receipt, it recites the date and place of shipment, describes
the goods as to quantity, weight, dimensions, Identification
marks and condition, quality, and value.
o As a contract it names the contracting parties, which include the
consignee, fixes the route, destination, and freight rates or
charges, and stipulates the rights and obligations assumed by
the parties.
In addition, Reyma contends that it cannot possibly be held liable for the shortage of the
containerized goods because before the same came into its custody the same had
already passed through different hands so the shortage could have occurred perhaps
either in Australia, on board the carrier, at the piers or at RFM’s warehouse
Reyma contradicts itself because in its answer, it alleged that when the
shipments arrived in Manila, the containers arrived with their seals intact
o The container where there was 203 missing cartons, was received by
Reyma with its seal intact
It can therefore be concluded that Reyma received all the shipments as
itemized in the bill of lading.
For the rule is well-established that the facts alleged in a party's pleading
are deemed admissions of that party and binding upon it.
As Reyma prima facie received all the shipments in the sealed containers, it has the
burden to rebut the conclusion that it received the same without shortage.
However, Reyma had not overthrown this presumption by contrary evidence.
o The CA found that the vessal arrived in Manila on Oct 12. It was only
on 1am of Oct 22 when Reyma delivered the goods to RFM and
arrived in RFM’s warehouse Pasig. And on Oct 23 in the morning, it
was discovered that 203 cartons were missing upon inspection.
o In other words, containers were delivered to RFM’s warehouse in
Pasig, after more than 9hrs which is highly suspicious as the trip from
the piers to Pasig, takes only 1hr and there were no heavy traffic
along the route.
This will militate against Reyma’s stand that the loss of the
203 cartons of hard frozen boneless beef meat occurred
while it was outside its custody as the contrary had been
proven by Phil Home.
2nd issue: RE: defense of Prescription under the COGSA:
Belatedly, Reyma raises the issue of prescription citing sec. 2(6), paragraph 4 of the
Carriage of Goods by Sea Act which provides:
35
... the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered: ...
Reyma has waived/or abandoned this defense.
Other than the allegation of prescription in the answer, Reyma never pursued
this matter either in the later proceedings of the trial court or in the Court of
Appeals.
Reyma can not now be allowed to raise this issue to this Court after such
waiver or abandonment.
Granting arguendo Reyma can still put up prescription as its defense, it will not prosper
considering that it is not a carrier or a vessel or a charterer or the legal holder of the bill
of lading.
Reyma is the broker and Phil Home is the insurer.
The prescriptive period of this cause of action is ten years.
In the present case, ten years have not yet lapsed from the delivery of the shipment.
17 SWEET LINES, INC. V. TEVES, 83 SCRA 361 -CRUZ NENZO
SWEET LINEs, INC v. CA
G.R. No. L-37750. May 19, 1978.]
SWEET LINE, INC., petitioner, vs. HON. BERNARDO TEVES, Presiding Judge, CFI of
Misamis Oriental, Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO
TIRO, respondents.
PRELIMINARY DATA
Carrier : Sweet Line Inc.
Passengers : Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by professions
Problem : there was a stipulation on the back of their tickets which said that the venue
for all claims is in Cebu ONLY. Is this valid and enforceable merely by buying the ticket?
Who won : Passengers, this stipulation was unfair, subversive and against public policy.
EMERGENCY DIGEST
Two passengers of an inter-island vessel sued Petitioner Company in the Court of First
Instance of Misamis Oriental for breach of contract of carriage. Petitioner moved to
dismiss the complaint on the ground of improper venue. The motion was premised on
the condition printed att he back of the tickets that actions arising from "the provisions
of this ticket shall be filed in the competent courts in the City oif Cebu.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
The trial court denied the motion to dismiss as well as the motion for reconsideration.
The Supreme Court sustained the trial court and declared the condition void and
unenforceable as contrary to public policy which is to make the courts accessible to all
who may have need of their services.
CONTRACTS OF ADHESION
The validity or enforceability of contracts of adhesion are to be determined by the
peculiar circumstances obtaining in each case and the nature and conditions or terms
sought to be enforced. For, while generally, stipulations in a contract come about after
deliberate drafting by the parties thereto, in a contract of adhesion, however, all its
provisions have been drafted only by one party, usually a corporation, and the only
participation of the other party is the signing of his signature or his adhesion thereto.
Doctrine :
VENUE, SUBJECT TO PARTIES' AGREEMENT
A written agreement of the parties as to venue, as authorized by Section 3, Rule 4, is not
only binding between the parties but also enforceable by the courts. After an action has
been filed, change or transfer of venue by agreement of the parties is controllable in the
discretion of the court.
BUT WHEN CONTRARY TO PUBLIC POLICY
The Court may declare the agreement as to venue to be in effect contrary to public
policy, — despite that in general, changes and transfers of venue by written agreement
of the parties are allowable — whenever it is shown that a stipulation as to venue works
injustice by practically denying to the party concerned designated by the rules.
NATURE
This is an original action for Prohibition with Preliminary Injunction to restrain
respondent Judge from proceeding further with Civil Case entitled "Leovigildo D.
Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to
Dismiss the complaint, and the Motion for Reconsideration of said order.
FACTS
Respondents
36
Atty. Leovigildo Tandog and
Rogelio Tiro, a contractor by professions,
Bought tickets at the branch office of petitioner
Sweet Line Inc., a shipping company transporting inter-island passengers and
cargoes
Tandog and Tiro were to board petitioner's vessel, M/S "Sweet Hope" bound for
Tagbilaran City via the port of Cebu.
Upon learning that the vessel was not proceeding to Bohol, since many
passengers were bound for Surigao, private respondents per advice, went to
the branch office for proper relocation to M/S "Sweet Town".
Because the said vessel was already filled to capacity, they were forced to
agree "to hide at the cargo section to avoid inspection of the officers of the
Philippine Coastguard."
Private respondents alleged that they were, during the trip,"
"exposed to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits," and that
the tickets they bought at Cagayan de Oro City for Tagbilaran were not
honored and they were constrained to pay for other tickets.
In view thereof, private respondents sued petitioner for damages and for breach of
contract of carriage in the alleged sum of P110,000.00 before respondents Court of First
Instance of Misamis Oriental.
Petitioner moved to dismiss the complaint on the ground of improper venue.
( KEY FACT ALERT ) This motion was premised on the condition printed at the
back of the tickets, i.e., Condition No. 14, which reads:
"14.It is hereby agreed and understood that any and all actions arising out of
the conditions and provisions of this ticket, irrespective of where it is issued,
shall be filed in the competent courts in the City of Cebu." 3
The motion was denied by the trial court.
Petitioner moved to reconsider the order of denial, but to no avail.
Hence, this instant petition for prohibition with preliminary injunction,
alleging that the respondent judge had departed from the "accepted and usual
course of judicial proceeding" and "had acted without or in excess or in error
of his jurisdiction or in gross abuse of discretion."
PARTY CONTENTIONS
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
Petitioner contends that Condition No. 14 is valid and enforceable, ( basically : ticket
conditions are valid, clear, and passengers consented )
since private respondents acceded to it when they purchased passage tickets at
its Cagayan de Oro branch office and took its vessel M/S "Sweet Town" for
passage to Tagbilaran, Bohol;
that the condition fixing the venue of actions in the City of Cebu is proper since
venue may be validly waived, citing cases;
that is an effective waiver of venue, valid and binding as such, since it is printed
in bold and capital letters and not in fine print and merely assigns the place
where the action arising from the contract is instituted, likewise citing
cases; and
thatcondition No. 14 is unequivocal and mandatory, the words and phrases
"any and all", "irrespective of where it is issued," and "shall" leave no doubt
that the intention of Condition No. 14 is to fix the venue in the City of Cebu, to
the exclusion of all other places;
that the orders of the respondent Judge are an unwarranted departure from
established jurisprudence governing the case, and that he acted without or in
excess of his jurisdiction in issuing the orders complained of.
On the other band, private respondents claim that Condition No. 14 is not valid;
(essentially that there was really no consent, and that the conditions were unfair)
that the same is not an essential element of the contract of carriage, being in
itself a different agreement which requires the mutual consent of the parties to
it;
that they had no say in its preparation, the existence of which they could not
refuse, hence, they had no choice but to pay for the tickets and to avail of
petitioner's shipping facilities out of necessity;
that the carrier "has been exacting too much from the public by inserting
impositions in the passage tickets too burdensome to bear;"
that the condition which was printed in fine letters is an imposition on the
riding public and does not bind respondents, citing cases; that while venue of
actions may be transferred from one province to another, such arrangement
requires the "written agreement of the parties", not to be imposed unilaterally;
and that assuming that the condition is valid, it is not exclusive and does not,
therefore, exclude the filing of the action in Misamis Oriental,
ISSUE
Is Condition No. 14 printed at the back of the petitioner's passage tickets purchased by
private respondents, which limits the venue of actions arising from the contract of
carriage to the Court of First Instance of Cebu, valid and enforceable?
Otherwise stated, may a common carrier engaged in inter-island shipping
stipulate thru a condition printed at the back of passage tickets to its vessels
37
that any and all actions arising out of the contract of carriage should be filed
only in a particular province or city, in this case the City of Cebu, to the
exclusion of all others?
HELD/RATIO
SIDE TOPICS
Elements of contracts;
There is no question that there was a valid contract of carriage and that the passage
tickets, upon which the latter based their complaint, are the best evidence thereof.
All the essential elements of a valid contract are present, i.e.,
consent,
cause or consideration and
object
o "It is a matter of common knowledge that whenever a passenger
boards a ship for transportation from one place to another he is
issued a ticket by the shipper which has all the elements of a written
contract, Namely:
1. the consent of the contracting parties manifested by the fact
that the passenger boards the ship and the shipper consents
or accepts him in the ship for transportation;
2. cause or consideration which is the fare paid by the
passenger as stated in the ticket;
3. object, which is the transportation of the passenger from
the place of departure to the place of destination which are
stated in the ticket."
Contracts of Adhesion, Validity Of depends on circumstances.
With respect to the fourteen (14) conditions — one of which is "Condition No. 14" which
is in issue in this case — printed at the back of the passage tickets, these are commonly
known as "contracts of adhesion,"
The validity or enforceability of contracts of adhesion are to be determined by the
peculiar circumstances obtaining in each case and the nature and conditions or terms
sought to be enforced.
For, while generally, stipulations in a contract come about after deliberate
drafting by the parties thereto, in a contract of adhesion, however, all its
provisions have been drafted only by one party, usually a corporation, and the
only participation of the other party is the signing of his signature or his
adhesion thereto.
in this instance the passengers, private respondents, who cannot change the
same and who are thus made to adhere thereto on the "take it or leave it" basis
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
- certain guidelines in the determination of their validity and/or enforceability
have been formulated in order to insure that justice and fair play characterize
the relationship of the contracting parties.
Thus, this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law
Union and Rock Insurance Co., 17 and later through Justice Fernando
in Fieldman Insurance v. Vargas, 18 held —
"The courts cannot ignore that nowadays, monopolies, cartels and
concentration of capital, endowed with overwhelming economic
power, manage to impose upon parties dealing with them cunningly
prepared 'agreements that the weaker party may not change one
whit, his participation in the 'agreement' being reduced to the
alternative 'to take it or leave it,' labelled since Raymond Saleilles
'contracts by adherence' (contracts d' adhesion) in contrast to those
entered into by parties bargaining on an equal footing. Such contracts
(of which policies of insurance and international bill of lading are
prime examples) obviously call for greater strictness and vigilance on
the part of the courts of justice with a view to protecting the weaker
party from abuses and imposition, and prevent their becoming traps
for the unwary."
To the same effect and import, and, in recognition of the peculiar character of
contracts of this kind, the protection of the disadvantaged is expressly enjoined
by the New Civil Code —
"In all contractual, property or other relations, when one of the
parties is at a disadvantage on account of his moral dependence, is
ignorance, indigence, mental weakness, tender age and other
handicap, the courts must be vigilant for his protection."
Condition 14 Void because it is 1. Not fair and 2. It is against public policy
Considered in the light of the foregoing norms and in the context of circumstances
prevailing in the inter-island shipping industry in the country today, we find and hold
that Condition No. 14 printed at the back of the passage tickets should be held as void
and unenforceable for the following reasons —
1. first, under circumstances obtaining in the inter-island shipping industry, it is
not just and fair to bind passengers to the terms of the conditions printed at
the back of the passage tickets,
2. second, Condition No. 14 subverts the public policy on transfer of venue of
proceedings of this nature, since the same will prejudice rights and interests of
innumerable passengers in different parts of the country who, under Condition
No. 14, will have to file suits against petitioner only in the City of Cebu.
38
Current Conditions in the inter-island vessel transportation industry are terrible.
Unjust to expect tickets conditions to be read them (most can’t even read).
Moreover they are contracts of adhesion yet passengers really have no choice in
the matter nor alternatives.
We can take judicial notice, that there is an acute shortage in inter-island vessels and the
facilities they offer leave much to be desired.
Thus, even under ordinary circumstances, the piers are congested with
passengers and their cargo waiting to be transported, The conditions are even
worse at peak and/or the rainy seasons, when passengers literally scramble to
secure whatever accommodations may be availed of, even through circuitous
routes, and/or at the risk of their safety
their immediate concern, for the moment, being to be able to board vessels
with the hope of reaching their destinations.
The schedules are — as often as not if not more so — delayed or altered.
o This was precisely the experience of private respondents when they
were relocated to M/S "Sweet Town" from M/S "Sweet Hope" and
then allegedly "exposed to the scorching heat of the sun and the dust
coming from the ship's cargo of corn grits," because even the latter
vessel was filled to capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to
examine their tickets received from crowded/congested counters, especially if there are
a number of such conditions in fine print, as in this case.
Again, it should be noted that Condition No. 14 was prepared solely at the instance of
the petitioner; respondents had no say in its preparation.
passengers alleged adhesion is presumed only from the fact that they
purchased the passage tickets.
It should also be stressed that shipping companies are franchise holders of
certificates of public convenience and, therefore, possess a virtual monopoly
over the business of transporting passengers between the ports covered by
their franchise. Petitioner, engaged in inter-island shipping, have a virtual
monopoly of the business of transporting passengers and may thus dictate
their terms of passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities.
Finally, judicial notice may be taken of the fact that the bulk of those who board these
inter-island vessels come from the low-income groups and are less literate, and who
have little or no choice but to avail of petitioner's vessels.
Condition no. 14 is subversive of public policy on transfers of venue of actions. It
defeats the purpose of the rule of choice of venue and will frustrate legitimate
claims.
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil. 39

For, although venue may be changed or transferred from one province to WHEREAS, the 74th Congress of the United States enacted Public Act No. 521, entitled
another by agreement of the parties in writing pursuant to Rule 4, Section 3, of Carriage of Goods by Sea Act;
the Rules of Court, such an agreement will not be held valid where it practically
negates the action of the claimants, such as the private respondents herein. WHEREAS, the primordial purpose of the said Acts is to bring about uniformity in ocean
The philosophy underlying the provisions on transfer of venue of actions is the bills of lading and to give effect to the Brussels Treaty, signed by the United States with
convenience of the plaintiffs as well as his witnesses and to promote the ends other powers;
of justice.
o Considering the expense and trouble a passenger residing outside of
WHEREAS, the Government of the United States has left it to the Philippine Government
Cebu City would incur to prosecute a claim in the City of Cebu, he
to decide whether or not the said Act shall apply to carriage of goods by sea in foreign
would most probably decide not to file the action at all. The condition
will thus defeat, instead of enhance, the ends of justice. trade to and from Philippine ports;
o Upon the other hand, petitioner has branches or offices in the
respective ports of call of its vessels and can afford to litigate in any of WHEREAS, the said Act contains advanced legislation, which is in consonance with
these places. Hence, the filing of the suit in the CFI of Misamis modern maritime rules and the practices of the great shipping countries of the world;
Oriental, as was done in the instant case, will not cause inconvience
to, much less prejudice, petitioner. WHEREAS, shipping companies, shippers, and marine insurance companies, and various
chambers of commerce, which are directly affected by such legislation, have expressed
Public policy is .. their desire that said Congressional Act be made applicable and extended to the
Philippines; therefore, be it enacted by the National Assembly of the Philippines:
". . . that principle of the law which holds that no subject or citizen can lawfully do that
which has a tendency to be injurious to the public or against the public good . . .". Under
Section 1. That the provisions of Public Act No. 521 of the 74th Congress of the United
this principle ". . . freedom of contract or private dealing is restricted by law for the good
States, approved on April 16, 1936, be accepted, as it is hereby accepted to be made
of the public."
applicable to all contracts for the carriage of goods by sea to and from Philippine ports
in foreign trade: Provided, that nothing in this Act shall be construed as repealing any
Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest, existing provision of the Code of Commerce which is now in force, or as limiting its
since it will frustrate in meritorious cases, actions of passenger claimants outside of
application.
Cebu City, thus placing petitioner company at a decided advantage over said persons,
who may have perfectly legitimate claims against it. The said condition should,
therefore, be declared void and unenforceable, as contrary to public policy — to make Section 2. This Act shall take effect upon its approval.
the courts accessible to all who may have need of their services.
(Approved: October 22,1936).

D. CA R R IA GE O F GO O D S BY SE A A CT
TITLE I

Section 1. When used in this Act —

XV. 15TH WEEK (COGSA) (A) The term “carrier” includes the owner or the charterer who enters into a contract of
carriage with a shipper.
Study: Carriage of Goods by Sea Act (CA No. 65)
(B) The term “contract of carriage” applies only to contracts of carriage covered by a bill
COMMONWEALTH ACT NO. 65 of lading or any similar document of title, insofar as such document relates to the
carriage of goods by sea, including any bill of lading or any similar document as
aforesaid issued under or pursuant to a charter party from the moment at which such
IN ACT TO DECLARE THAT PUBLIC ACT NUMBERED FIVE HUNDRED AND bill of lading or similar document of title regulates the relations between a carrier and a
TWENTY-ONE, KNOWN AS “CARRIAGE OF GOODS BY SEA ACT,” ENACTED BY THE holder of the same.
SEVENTY-FOURTH CONGRESS OF THE UNITED STATES, BE ACCEPTED, AS IT IS
HEREBY ACCEPTED BY THE NATIONAL ASSEMBLY
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
(C) The term “goods” includes goods, wares, merchandise, and articles of every kind
whatsoever, except live animals and cargo which by the contract of carriage is stated as
being carried on deck and is so carried.
(D) The term “ship” means any vessel used for the carriage of goods by sea.
(E) The term “carriage of goods” covers the period from the time when the goods are
loaded on to the time when they are discharged from the ship.
RISKS
Section 2. Subject to the provisions of section 6, under every contract of carriage
of goods by sea, the carrier in relation to the loading handling, stowage, carriage,
custody, care, and discharge of such goods, shall be subject to the responsibilities and
liabilities and entitled to the rights and immunities hereinafter set forth.
RESPONSIBILITIES AND LIABILITIES
Section 3. (1) The carrier shall be bound, before and at the beginning of the voyage,
to exercise due diligence to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in
which goods are carried, fit and safe for their reception carriage and preservation.
(2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried.
(3) After receiving the goods into his charge the carrier, or the master or agent of the
carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing
among other things —
(a) The leading marks necessary for identification of the goods as the same are
furnished in writing by the shipper before the loading of such goods starts, provided
such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on
the cases or coverings in which such goods are contained, in such a manner as should
ordinarily remain legible until the end of the voyage.
40
(b) Either the number of packages or pieces, or the quantity or weight, as the case may
be, as furnished in writing by the shipper.
(c) The apparent order and conditions of the goods: Provided, That no carrier, master,
or agent of the carrier, shall be bound to state or show in the bill of lading any marks,
number, quantity, or weight which he has reasonable ground for suspecting not
accurately to represent the goods actually received, or which he has had no reasonable
means of checking.
(4) Such a bill of lading shall be PRIMA FACIE evidence of the receipt by the carrier of
the goods as therein described in accordance with paragraphs (3) (a), (b), and (c) of
this section: (The rest of the provision is not applicable to the Philippines).
(5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at
the time of shipment of the marks, number, quantity, and weight, as furnished by him;
and the shipper shall indemnify the carrier against all loss, damages, and expenses
arising or resulting from inaccuracies in such particulars. The right of the carrier to such
indemnity shall in no way limit his responsibility and liability under the contract of
carriage to any person other than the shipper.
(6) Unless notice or loss or damage and the general nature of such loss or damage by
given in writing to the carrier or his agent at the port of discharge or at the time of the
removal of the goods into the custody of the person entitled to delivery thereof under
the contract of carriage, such removal shall be PRIMA FACIE evidence of the delivery by
the carrier of the goods as described in the bill of lading. If the loss or damage is
not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods given by
the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered: Provided, that, if a notice of loss or
damage, either apparent or concealed, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit within one year
after the delivery of the goods or the date when the goods should have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver
shall give all reasonable facilities to each other for inspecting and tallying the goods.
(7) After the goods are loaded the bill of lading to be issued by the carrier, master,
or agent of the carrier to the shipper shall if the shipper so demands, be a “shipped” bill
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
of lading: Provided, that if the shipper shall have previously taken up any document of
title to such goods, he shall surrender the same as against the issue of the “shipped” bill
of lading, but at the option of the carrier such document of title may be noted at the
port of shipment by the carrier, master, or agent with the name or names of the ship or
ships upon which the goods have been shipped and the date or dates of shipment, and
when so noted the same shall for the purpose of this section be deemed to constitute a
“shipped” bill of lading.
(8) Any clause, covenant, or agreement in a contract of carriage relieving the carrier
of the ship from liability for loss or damage to or in connection with the goods, arising
from negligence, fault, or failure in the duties and obligations provide in this section
or lessening such liability otherwise than as provided in this Act, shall be null and void
and of no effect. A benefit of insurance in favor of the carrier, or similar clause, shall
be deemed to be a clause relieving the carrier from liability.
RIGHTS AND IMMUNITIES
Section 4. (1) Neither the carrier nor the ship shall be liable for loss or damage arising
or resulting from unseaworthiness unless caused by want of due diligence on the part of
the carrier to make the ship seaworthy, and to secure that the ship is properly
manned, equipped, and supplied, and to make to the holds, refrigerating and cool
chambers, and all other parts of the ship in which goods are carried fit and safe for
their reception, carriage, and preservation in accordance with the provisions of
paragraph (1) of section 3. Whenever loss or damage has resulted from
unseaworthiness, the burden of proving the exercise of due diligence shall be on the
carrier or other persons claiming exemption under the section.
(2) Neither the carrier nor the ship shall be responsible for loss or damage arising or
resulting from —
(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in
the navigation or in the management of the ship;
(b) Fire, unless caused by the actual fault or privity of the carrier;
(c) Perils, dangers, and accidents of the sea or other navigable waters;
(d) Act of God;
(e) Act of war,
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers, or people, or seizure under legal process;
41
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the goods, his agent or representative;
(j) Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether
partial or general; PROVIDED, That nothing herein contained shall be construed to
relieve a carrier from responsibility for the carrier’s own acts;
(k) Riots and civil commotions
(l) Saving or attempting to save life or property at sea;
(m) Wastage in bulk or weight or any other loss or damage arising from inherent defect,
quality, or vice of the goods;
(n) Insufficiency of packing;
(o) Insufficiency of inadequacy of marks;
(p) Latent defects not discoverable by due diligence; and
(q) Any other cause arising without the actual fault and privity of the carrier and
without the fault or neglect of the agents or servants of the carrier, but the burden of
proof shall be on the person claiming the benefit of this exception to show that neither
the actual fault or privity of the carrier nor the fault or neglect of the agents or servants
of the carrier contributed to the loss or damage.
(3) The shipper shall not be responsible for loss or damage sustained by the carrier or
the ship arising from any cause without the act, fault, or neglect of the shipper, his
agents, or servants.
(4) Any deviation in saving or attempting to save life or property at sea, or any
reasonable deviation shall not be deemed to be an infringement or breach of this Act or
of the contract of carriage, and the carrier shall not be liable for any loss or damage
resulting therefrom: Provided, however, That if the deviation is for the purpose of
loading cargo or unloading cargo or passengers it shall, PRIMA FACIE, be regarded as
unreasonable.
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding
$500 per package lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil.
shipment and inserted in the bill of lading. This declaration, if embodied in the bill of
lading, shall be PRIMA FACIE evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the figure above named. In no event
shall the carrier be liable for more than the amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any event for loss or damage to
or in connection with the transportation of the goods if the nature or value thereof has
been knowingly and fraudulently misstated by the shipper in the bill of lading.
(6) Goods of an inflammable, explosive, or dangerous nature to the shipment whereof,
the carrier, master or agent of the carrier, has not consented with knowledge of their
nature and character, may at any time before discharge be landed at any place or
destroyed or rendered innocuous by the carrier without compensation, and the shipper
of such goods shall be liable for all damages and expenses directly or indirectly arising
out of or resulting from such shipment. If any such goods shipped with such knowledge
and consent shall become a danger to the ship or cargo, they may in like manner be
landed at any place, or destroyed or rendered innocuous by the carrier without liability
on the part of the carrier except to general average, if any.
SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF
RESPONSIBILITIES AND LIABILITIES
Section 5. A carrier shall be at liberty to surrender in whole or in part all or any of
his rights and immunities or to increase any of his responsibilities and liabilities under
this Act, provided such surrender or increase shall be embodied in the bill of lading
issued to the shipper.
The provisions of this Act shall not be applicable to charter parties; but if bills of
lading are issued in the case of a ship under charter party, they shall comply with the
terms of this Act. Nothing in this Act shall be held to prevent the insertion in a bill of
lading of any lawful provision regarding general average.
SPECIAL CONDITIONS
Section 6. Notwithstanding the provisions of the preceding section, a carrier, master
or agent of the carrier, and a shipper shall, in regard to any particular goods be at
liberty to enter into any agreement in any terms as to the responsibility and liability of
the carrier for such goods, and as to the rights and immunities of the carrier in respect
of such goods, or his obligation as to seaworthiness (so far as the stipulation regarding
seaworthiness is not contrary to public policy), or the care or diligence of his servants
or agents in regard to the loading, handling stowage, carriage, custody, care, and
discharge of the goods carried by sea: Provided, That in this case no bill of lading has
42
been or shall be issued and that the terms agreed shall be embodied in a receipt which
shall be a non-negotiable document and shall be marked as such.
Any agreement so entered into shall have full legal effect: Provided, That this
section shall not apply to ordinary commercial shipments made in the ordinary course
of trade but only to other shipments where the character or condition of the property
to be carried or the circumstances, terms, and conditions under which the carriage is to
be performed are such as reasonably to justify a special agreement.
Section 7. Nothing contained in this Act shall prevent a carrier or a shipper from
entering into any agreement, stipulation, condition, reservation, or exemption as to
the responsibility and liability of the carrier or the ship for the loss or damage to or
in connection with the custody and care and handling of goods prior to the loading on
and subsequent to the discharge from the ship on which the goods are carried by sea.
Section 8. The provisions of this Act shall not affect the rights and obligations of
the carrier under the provisions of the Shipping Act, 1916, or under the provisions of
Section 4281 to 4289, inclusive, of the Revised Statutes of the United States, or of
any amendments thereto; or under the provisions of any other enactment for the time
being in force relating to the limitation of the liability of the owners of seagoing vessels.
TITLE II
Section 9. Nothing contained in this Act shall be construed as permitting a
common carrier by water to discriminate between competing shippers similarly place
in time and circumstances, either (a) with respect to the right to demand and receive
bills of lading subject to the provisions of this Act; or (b) when issuing such bills of
lading, either in the surrender of any of the carrier’s rights and immunities or in the
increase of any of the carrier’s responsibilities and liabilities pursuant to section 6, title
I, of this Act or (c) in any other way prohibited by the Shipping Act, 1916, s amended.
Section 10. (Not applicable to the Philippines.).
Section 11. Where under the customs of any trade the weight of any bulk cargo
inserted in the bill of lading is a weight ascertained or accepted by a third party other
than the carrier or the shipper, and the fact that the weight is so ascertained or
accepted is stated in the bill of lading, then, notwithstanding anything in this Act, the bill
of lading shall not be deemed to be PRIMA FACIE evidence against the carrier of the
receipt of goods of the weight so inserted in the bill of lading, and the accuracy thereof at
the time of shipment shall not be deemed to have been guaranteed by the shipper.
Section 12. (Not applicable to the Philippines.).
Section 13. This Act shall apply to all contracts for carriage of goods by sea to or
from ports of the United States in foreign trade. As used in this Act the term “United
 12 Transpo Compiled Digests. Week 14 cases + Week 15 COGSA codal . Atty. Ampil. 43

States” includes its districts, territories, and possessions: Provided, however, That the
Philippine legislature may by law exclude its application to transportation to or from
ports of the Philippine Islands. The term “foreign trade” means the transportation of
goods between the ports of the United States and ports of foreign countries. Nothing in
this Act shall be held to apply to contracts for carriage of goods by sea between any port
of the United States or its possessions, and any other port of the United States or its
possession: Provided, however, That any bill of lading or similar document of title
which is evidence of a contract for the carriage of goods by sea between such ports,
containing an express statement that it shall be subject to the provisions of this Act, shall
be subjected hereto as fully as if subject hereto as fully as if subject hereto by the
express provisions of this Act: Provided, further, That every bill of lading or similar
document of title which is evidence of a contract for the carriage of goods by sea from
ports of the United States, in foreign trade, shall contain a statement that it shall have
effect subject to the provisions of this Act.

Section 14. Upon the certification of the Secretary of Commerce that the
foreign commerce of the United States in its competition with that of foreign nations
is prejudiced the provisions, or any of them, of Title I of this Act, or by the laws of
any foreign country or countries relating to the carriage of goods by sea, the President
of the United States, may, from time to time, by proclamation, suspend any or all
provisions of Title I of this Act for such periods of time or indefinitely as may be
designated in the proclamation. The President may at any time rescind such suspension
of Title I hereof, and any provisions thereof which may have been suspended shall
thereby be reinstated and again apply to contracts thereafter made for the carriage of
goods by sea. Any proclamation of suspension or rescission of any such suspension shall
take effect on a date named therein, which date shall be not less than ten days from the
issue of the proclamation.

Any contract for the carriage of goods by sea, subject to the provisions of this
Act, effective during any period when title I hereof, or any part thereof, is suspended,
shall be subject to all provisions of law now or hereafter applicable to that part of Title I
which may have thus been suspended.

Section 15. This Act shall take effect ninety days after the date of its approval; but
nothing in this Act shall apply during a period not to exceed one year following
its approval to any contract for the carriage of goods by sea, made before the date on
which this Act is approved, nor to any bill of lading or similar document of title issued,
whether before or after such date of approval in pursuance of any such contract as
aforesaid.

Section 16. This Act may be cited as the “Carriage of Goods by Sea Act.”

Approved, April 16, 1936.