Art. 1744.

A stipulation between the common carrier

and the shipper or owner limiting the liability of the
former for loss, destruction, or deterioration of the
goods to a degree less than extraordinary diligence
shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than
the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar stipulations
shall be considered unreasonable, unjust and contrary
to public policy:
(1) that the goods are transported at the risk of the
owner or shipper;
(2) that the common carrier will not be liable for any
loss, destruction, or deterioration of the goods;
(3) that the common carrier need not observe any
diligence in the custody of the goods;
(4) that the common carrier shall exercise a degree of
diligence less than that of a good father of a family, or
of a man of ordinary prudence in the vigilance over the
movables transported;
(5) That the common carrier shall not be responsible
for the acts or omission of his or its employees;
(6) That the common carriers liability for acts
committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is
dispensed with or diminished.
(7) That the common carrier is not responsible for the
loss, destruction, or deterioration of goods on account
of the defective condition of the car, vehicle, ship,
airplane or other equipment used in the contract of
carriage.
Art. 1746. An agreement limiting the common carriers
liability may be annulled by the shipper or owner if
the common carrier refused to carry the goods unless
the former agreed to such stipulation.
Art. 1747. If the common carrier, without just cause,
delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the
common carriers liability cannot be availed of in case
of the loss, destruction, or deterioration of the goods.
Art. 1748. An agreement limiting the common carriers
liability for delay on account of strikes or riots is valid.
Art. 1749. A stipulation that the common carriers
liability is limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner
declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it
is reasonable and just under the circumstances, and
has been fairly and freely agreed upon.

Art. 1751. The fact that the common carrier has no

competitor along the line or route, or a part thereof, to
which the contract refers shall be taken into
consideration on the question of whether or not a
stipulation limiting the common carriers liability is
reasonable, just and in consonance with public policy.
Art. 1754. The provisions of Articles 1733 to 1753 shall
apply to the passengers baggage which is not in his
personal custody or in that of his employee. As to other
baggage, the rules in Articles 1998 and 2000 to 2003
concerning the responsibility of hotel-keepers shall be
applicable.
CODE OF COMMERCE
Art. 357. If the carrier by reason of well-founded
suspicions as to the correctness of the declaration of
the contents of a package should determine to examine
it, he shall do so before witnesses, in the presence of
the shipper or of the consignee.
Should the shipper or consignee to cited does not
appear, the examination shall be made before a notary,
who shall draft a certificate of the result of the
examination, for the proper purposes.
If the declaration of the shipper should be correct, the
expenses caused by the examination and those of
carefully repacking the packages shall be defrayed by
the carrier, and in a contrary case by the shipper.
Sec. 2530 (Tarrif & Customs Code) Property subject to
forfeiture under Tariff and Customs laws.- Any vessel
or aircraft, cargo, articles and other objects shall, under
the following conditions, be subject to forfeiture:
a) Any vessel or aircraft, including cargo, which shall
be used lawfully in the importation or exportation of
articles into or from any Philippine port or place except
a port of entry; and any vessel which being of less than
thirty tons capacity shall be used in the importation of
articles into any Philippine port or place except into a
port of the Sulu sea where importation in such vessel
may be authorized by the Commissioner, with the
approval of the department head.
b) Any vessel engaging in the coastwide trade which
shall have on board any article of foreign growth,
product or manufacture in excess of the amount
necessary for sea stores, without such article having
been properly entered or legally imported.
c) Any vessel or aircraft into which shall be transferred
cargo unladen contrary to law prior to the arrival of the
importing vessel or aircraft at her port of destination.

d) Any part of the cargo of a vessel or aircraft arriving

from a foreign port which is unladen before arrival at
the vessels or aircrafts port of destination and
without authority from the proper customs official; but
such cargo shall not be forfeited if such unlading was
due to accident, stress of weather or other necessity
and is subsequently approved by the collector.

1. Without going through a customhouse

whether the act was consummated, frustrated or
attempted

e) Any article which is fraudulently concealed in or

removed from any public or private warehouse under
customs supervision.

3. On the strength of a false declaration or

affidavit executed by the owner, importer, exporter or
consignee concerning the importation or exportation of
such article.

2. By failure to mention to a customs official,

articles found in the baggage of a person arriving from
abroad

f) Any article of prohibited importation or exportation,

the importation or exportation of which is effected or
attempted contrary to law, and all other articles which,
in the opinion of the Collector, have been used, are or
were intended to be used as instruments in the
importation or exportation of the former.

4. On the strength of a false invoice or other

document executed by the owner, importer, exporter or
consignee concerning the importation or exportation of
such article.

g) Unmanifested article found on any vessel or aircraft,

if manifest therefor is required.

5. Through any other fraudulent practice or

device by means of which such articles was entered
through a customhouse to the prejudice of the
government.

h) Sea stores or stores for aircraft adjudged by the

Collector to be excessive, when the duties assessed by
the Collector thereon are not paid or secured forthwith
upon assessment of the same.
i) Any package of imported article which is found by
the examining official to contain any article not
specified in the invoice or entry, including all other
packages purportedly containing imported articles
similar to those declared in the invoice or entry to be
the contents of the misdeclared package, provided the
Collector is of the opinion that the misdeclaration was
caused with fraudulent intent.
j) Boxes, cases, trunks, envelopers and other containers
of whatever character used as receptacles or as devices
to conceal article which is itself subject to forfeiture
under the customs and tariff laws or which is so
designed as to conceal the character of such article.
k) Any beast actually being used for the conveyance of
article subject to forfeiture under the customs and
tariff laws with its equipage or trappings, and any
vehicles similarly used, together with its equipage and
appurtenances, including the beast, team or other
motive power drawing or propelling the same; but the
forfeiture shall not be effected if it is established that
the owner of the means of conveyance used as
aforesaid or his agent in charge thereof at the time, has
no knowledge of the unlawful act.
l) any money or thing of value offered as a bribe or for
the purpose of exerting improper influence over a
customs official or employee.
m) any article sought to be imported or exported:

Sec. 2531. Conditions Affecting Forfeiture of Article.As regards imported or exported articles or articles
whereof the importation or exportation is merely
attempted, the forfeiture shall be effected only when
and while the article is in the custody or within the
jurisdiction of the customs authorities or in the hands
or subject to the control of the importer, exporter,
original owner, consignee, agent or other person
effecting the importation, entry or exportation in
question, or in the hands or subject to the control of
some person who shall receive, conceal, buy, sell or
transport the same or aid in any such acts, with
knowledge that the article was imported, or was the
subject of an attempt at importation or exportation,
contrary to law.
Art. 374. The consignee to whom the remittance may
have been made cannot defer the payment of the
expenses and transportation charges on the goods that
they received after 24 hours have elapsed from the time
of the delivery; and in case of delay in making this
payment, the carrier may request the judicial sale of
the goods he transported for a sufficient amount to
cover the transportation charges and the expenses
incurred.
Art. 375. The goods transported shall be specifically
obliged to answer for the transportation charges and
for the expenses and fees caused by the same during
their transportation, and until the time of their
delivery.
This special right shall be limited to eight days after
the delivery has been made, and after said
prescription, the carrier shall have no further right of
action than that corresponding to an ordinary creditor.

Art. 665. The cargo shall be specially liable for the

payment of the freightage expenses and duties arising
therefrom, which must be reimbursed by the shippers,
as well as for the part of the general average, which
may be due but it shall not be legal for the captain to
delay unloading on account of fear that the said
obligation may not be complied with.
Should there be reasons for distrust, the judge or court,
at the instance of the captain, may order the deposit of
the merchandise until he has been paid in full.
Art. 666. The captain may request the sale of the cargo
to the amount necessary to pay the freightage,
expenses, and averages due him, reserving the right to
demand the balance due him therefor if the proceeds
of the sale should not have sufficed to cover his credit.
Art. 704. The captain, in order to collect the price of the
passage and expenses of maintenance, may retain the
goods belonging to the passengers, and in case of their
sale, he shall be given preference over other creditors,
acting in the same way as in the collection of
freightage.
Art. 2241. With reference to specific movable property
of the debtor, the following claims or liens shall be
preferred:
(9) Credits for transportation, upon the goods carried,
for the price of the contract and incidental expenses,
until their delivery and for 30 days thereafter.
Art. 376. The preference of the carrier to the payment
of what is due him for the transportation and expenses
of goods delivered to the consignee shall not be
affected by the bankruptcy of the latter, provided the
action is brought within the eight days mentioned in
the foregoing article.
Art. 377. The carrier shall be liable for all the
consequences arising from non-compliance on his part
with the formalities prescribed by the laws and
regulations of the public administration during the
entire course of the trip and on the arrival at the point
of destination, except when his omission arises from
his having been induced into error or by false
statements of the shipper in the declaration of the
merchandise.
If the carrier has acted in accordance with a formal
order received from the shipper or consignee of the
merchandise, both shall incur liability.
Art. 378. Transportation agents shall be obliged to
keep a special registry, with the formalities required
by Article 36, in which there shall be entered, in
progressive order of number and dates, all the goods,

the transportation of which is undertaken, stating the

circumstances required by Art. 350at seq., for the
respective bill of lading.
Art. 379. The provisions contained in Article 349, et
seq., shall also be understood as relating to persons
who although they do not personally effect the
transportation of commercial goods, contract to do so
through others, either as contracts for a special and
fixed transaction or as freight and transportation
agents.
In either case they shall be subrogated to the place of
the carriers with regard to the obligations and liability
of the latter, as well as with regard to their rights.
Warsaw Convention. Article 23
Hague Protocol, Articles XI - XIV
Guadalajara Convention, Articles 3, 5, 6 and 9 (1st and
2nd paragraphs)
62. Sea Land Service Inc. v. Intermediate Apellate
Court 153 SCRA 552
Facts: Sea-Land, a foreign shipping and forwarding
company licensed to do business in the Philippines,
received from Sea-borne Trading Company in
California, a shipment consigned to Sen Hiap Hing,
the business name used by Cue. The shipper not having
declared the value of the shipment , no value was
indicated in the bill of lading. The shipment was
discharged in Manila, and while awaiting transshipment
to Cebu, the cargo was stolen and never recovered.
The trial court sentenced Sea-Land to pay Cue P186,048
representing the Philippine currency value of the
lost cargo, P55, 814 for unrealized profit and P25,000 for
attorneys fees. CA affirmed the trial courts decision.
Issue: Whether or not Sea-Land is liable to pay Cue.
Held: There is no question of the right of a consignee in
a bill of lading to recover from the carrier or shipper for
loss of, or damage to, goods being transported under
said bill, although that document may have been drawn
up only by the consignor and the carrier without the
intervention of the consignee.
Since the liability of a common carrier for loss of or
damage to goods transported by it under a contract of
carriage is governed by the laws of the country of
destination and the goods in question were shipped
from the United States to the Philippines, the liability of
Sea-Land has Cue is governed primarily by the Civil
Code, and as ordained by the said Code, supplementary,
in all matters not cluttered thereby, by the Code
of Commerce and
special
laws.
One
of
these supplementary special laws is the Carriage

of goods by Sea Act (COGSA), made applicable to all

contracts for the carriage by sea to and from the
Philippines Ports in Foreign Trade by Comm. Act. 65.
Even if Section 4(5) of COGSA did not list the validity
and binding effect of the liability limitation clause in the
bill of lading here are fully substantial on the basis alone
of Article 1749 and 1750 of the Civil Code. The justices of
such stipulation is implicit in its giving the owner or
shipper the option of avoiding accrual of liability
limitation by the simple expedient of declaring
the value of the shipment in the bill of lading.
The stipulation in the bill of lading limiting the liability
of Sea-Land for loss or damages to the shipment covered
by said rule to US$500 per package unless the shipper
declares the value of the shipment and pays additional
charges is valid and binding on Cue.
87. Mirasol v. Robert Dollar Co. 53 Phil 1214
Doctrine:
Shippers who are forced to ship goods on an ocean liner
or any other ship have some legal rights, and when
goods are delivered on board ship in good order and
condition, and the shipowner delivers them to the
shipper in bad order and condition, it then devolves
upon the shipowner to both allege and prove that the
goods were damaged by the reason of some fact which
legally exempts him from liability; otherwise, the
shipper would be left without any redress, no matter
what may have caused the damage.
Facts:
As a third special defense, defendant quoted clause 13 of
the bill of lading, in which it is stated that in no case
shall it be held liable for or in respect to said
merchandise or property beyond the sum of S250 for any
piece, package or any article not enclosed in a package,
unless a higher value is stated herein and ad valorem
freight paid or assessed thereon, and that there was no
other agreement.
The plaintiff wrote the defendant a letter as follows:
"I wish to file claim of damage." Plaintiff contends that
he is entitled to P700 for his Encyclopedia Britannica
which was damaged during shipment.
Defendant alleges that the damage, if any, was caused
by sea water, and that the bill of lading exempts
defendant from liability for that cause. That damage by
sea water is a shippers risk, and that defendant is not
liable.
Issue: Whether or not damage by sea water is a shipper's
risk.

Held:
In the case of The Kengsington decided by the Supreme
Court of the U.S.:
The stipulation in a steamship passenger's ticket, which
compels him to value his baggage, at a certain sum, far
less than it is worth, or, in order to have a higher value
put upon it, to subject it to the provisions of the Harter
Act, by which the carrier would be exempted from all
the liability therefore from errors in navigation or
management of the vessel of other negligence is
unreasonable and in conflict with public policy.
In the case, defendant having received the two boxes in
good condition, its legal duty was to deliver them to the
plaintiff in the same condition in which it received them.
From the time of their delivery to the defendant in New
York until they are delivered to the plaintiff in Manila,
the boxes were under the control and supervision of the
defendant and beyond the control of the plaintiff. The
defendant having admitted that the boxes were
damaged while in transit and in its possession, the
burden of proof then shifted, and it devolved upon the
defendant to both allege and prove that the damage was
caused by reason of some fact which exempted it from
liability. As to how the boxes were damaged, when or
where, was a matter peculiarly and exclusively within
the knowledge of the defendant and in the very nature
of things could not be in the knowledge of the plaintiff.
To require the plaintiff to prove as to when and how the
damage was caused would force him to call and rely
upon the employees of the defendants ship, which in
legal effect would be to say that he could not recover
any damage for any reason. That is not the law.
Shippers who are forced to ship goods on an ocean liner
or any other ship have some legal rights, and when
goods are delivered on board ship in good order and
condition, and the shipowner delivers them to the
shipper in bad order and condition, it then devolves
upon the shipowner to both allege and prove that the
goods were damaged by the reason of some fact which
legally exempts him from liability; otherwise, the
shipper would be left without any redress, no matter
what may have caused the damage.
The defendant has not even attempted to prove that the
two cases were wet with sea water by fictitious event,
force majeure or nature and defect of the things
themselves. Consequently, it must be presumed that it
was by causes entirely distinct and in no manner
imputable to the plaintiff, and of which the steamer
President Garfield or any of its crew could not have been
entirely unaware.
The fact that the cases were damaged by sea water,
standing alone and within itself, is not evidence that
they were damaged by force majeure or for a cause

beyond the defendants control. The words perils of the

sea, as stated in defendants brief apply to all kinds of
marine casualties, such as shipwreck, foundering,
stranding, and among other things, it is said: Tempest,
rocks, shoals, icebergs and other obstacles are within the
expression, and where the peril is the proximate cause
of the loss, the shipowner is excused. Something
fortuitous and out of the ordinary course is involved in
both words peril or accident.
88.. MRR v. La. Cia. Transatlantica et al. 38 Phil 875
Facts:
Steamship Alicante,
belonging
to
the Compaia
Transatlantica de Barcelona (Transatlantica), arrived at
Manila with two locomotive boilers aboard, the property
of The Manila Railroad Company (MRR).
The equipment of the ship for discharging heavy cargo
was not sufficiently strong to handle these boilers, so
Transatlantica sought the assistance of the Atlantic, Gulf
and Pacific Company (Atlantic Gulf). The service of
Atlantic Company consisted in bringing its floating
crane alongside the Alicante, lifting the boilers out of the
ship's hold, and transferring them to a barge which
would be placed ready to receive them.
Upon arrival of the Alicante, the Atlantic company sent
out its crane under the supervision of Leyden. In
preparing to hoist the first boiler, the sling was
unfortunately placed near the middle of the boiler so it
was thus raised nearly in a horizontal position. The
boiler was too long to pass through the hatch in this
nearly horizontal position. When one end of the boiler
passed through the hatch, the other end still remained
below. As the boiler was being hoisted further, a river
near the head of the boiler was caught under the edge of
the hatch as a result of which the weight on the crane
increased by a strain estimated at fifteen tons. This
resulted in the breaking of the sling so the boiler fell to
the bottom.
The sling was again adjusted to the boiler and was now
placed nearer one of the ends, as should have been done
at first. The boiler was again lifted. But as it was being
brought up, the bolt at the end of the derrick boom
(machine for hoisting and moving heavy objects,
according to thefreedictionary.com) broke, and again the
boiler fell.
The crane was repaired and the boiler discharged, but it
was found to be so badly damaged that it had to be
reshipped to England where it was rebuilt, and
afterwards returned to Manila.
To recover these damages the present action was
instituted by the MRR against Transatlantica, which

caused the Atlantic Gulf to be brought in as a codefendant, and insisted that whatever liability existed
should be fixed upon the Atlantic Gulf as an
independent contractor who had undertaken to
discharge the boilers and had become responsible for
such damage as had been done.
CFI gave judgment in favor of the MRR against the
Atlantic Gulf, but absolved the Transatlantica from the
complaint.
MRR appealed from the action of the court in failing to
give judgment against Transatlantica, while the Atlantic
Gulf has appealed from the judgment against it.
The mishap was undoubtedly due, as the lower court
found, to the negligence of one Leyden, the foreman in
charge; and we may add that the evidence tends to show
that his negligence was of a type which may without
exaggeration be denominated gross.
The foreman was therefore guilty of negligence in
attempting to hoist the boiler the second time under the
conditions that had thus developed namely, the sling
was in the first place improperly adjusted and when
Leyden was made aware of this by the man in charge of
the stevedores, he nevertheless proceeded and even
attempted to force it through the hatches despite the
position it took.
This defect was possibly such as not to be patent to
external observation but we are of the opinion that a
person of sufficient skill to be trusted with the operation
of machinery of this character should have known that
the crane had possibly been weakened by the jar
received in the first accident.
The accident is therefore to be attributed to the failure of
Leyden to exercise the degree of care which an
ordinarily competent and prudent person would have
exhibited under the circumstances which then
confronted him. He was entirely in control of the
operation and there is no evidence tending to show that
the first fall of the boiler might have been due to any
hidden defect in the lifting apparatus.
Issue:
Whether Transatlantica should be held liable
notwithstanding it was Atlantic Gulf which was failed to
perform its obligation satisfactorily and which failure
resulted in damages to the boilers?
Held:
Yes. It will be observed that a contractual relation
existed between (a) MRR and Transatlantica, and (b)
Transatlantica and Atlantic Gulf; and the duties owing
by the latter to the former are to be discovered by
considering the terms and legal effect of the contract. On

the other hand, no contractual relation existed directly

between the MRR and the Atlantic Gulf.
We are all agreed, that, under the contract for
transportation from England to Manila, Transatlantica is
liable to MRR for the injury done to the boiler while it
was being discharged from the ship. The obligation to
transport the boiler necessarily involves the duty to
convey and deliver it in a proper condition according to
its nature, and conformably with good faith, custom,
and the law (art. 1258, Civ. Code). The contract to
convey imports the duty to convey and deliver safely
and securely with reference to the degree of care which,
under the circumstances, are required by law and
custom applicable to the case. The duty to carry and to
carry safely is all one.
Such being the contract of Transatlantica, said company
is necessarily liable, under articles 1103 and 1104 of the
Civil Code, for the consequences of the omission of the
care necessary to the proper performance of this
obligation. The contact to transport and deliver at the
port of Manila a locomotive boiler, which was received
by it in proper condition, is not complied with the
delivery at the port of destination of a mass of iron the
utility of which had been destroyed.
Nor does the Transatlantica escape liability by reason of
the fact that it employed a competent independent
contractor to discharge the boilers. It is observed that it
has never yet been held that the failure to comply with a
contractual obligation can be excused by showing that
such delinquency was due to the negligence of one to
whom the contracting party had committed the
performance of the contract.
89.. Metro Port Service v. Court of Appeals 131 SCRA
365
FACTS:
Union Sales Marketing Corporation (UNION) ordered
from Union Carbide of Antwerp, Belgium, 99,540
kilograms of Low Density Polyethylene, valued at US
$.245 per kilogram or a total purchase price of US
$24,417.30, at the conversion rate of P6.848 to a US
Dollar.
The shipment was packed in 4,000 bags of 25 net
kilograms, more or less, for each bag, and was loaded at
Antwerp, Belgium, in good order condition on board the
S/S Dingalan Bay, owned and operated by Universal
Shipping Lines, Inc. (CARRIER) and consigned to
UNION in Manila. The shipment was covered by a
Marine Risk Note issued by Charter Insurance Co.
(INSURER) for P212,738.17 against all risks.
The CARRIER arrived in Manila on 22 June 1973 and
arrastre services were handled by E. Razon, Inc.

(ARRASTRE), now called Metro Port Service, Inc. Out of

the 4,000 bags, 1,050 bags were received by the
consignee UNION in bad order condition. As a
consequence of the damage and loss, the INSURER paid
UNION the sum of P35,709.11 in full settlement of the
claim, and the INSURER became the subrogee of all of
UNIONs rights to recover from the parties concerned.
On 1 July 1974, the INSURER sued for damages with the
then CFI Manila against the CARRIER and the
ARRASTRE in the amount of P35,709.11, in addition to
exemplary damages and attorneys fees. In its Decision,
the Trial Court ordered (1) the Universal Shipping Lines,
Inc., to pay Charter Insurance Co. the amount of
P12,285.94 plus 12% interest per annum from July 1,
1974 until full payment thereof; (2) E. Razon Inc. to pay
Charter Insurance Co. the amount of P9,763.94 plus 12%
interest per annum from July 1, 1974 until full payment
thereof; (3) both Universal Shipping and E. Razon to pay
the costs; and (4) both Universal Shipping and E. Razon
to pay Charter Insurance, in solidum, P2,000.00 as
attorneys
fees.
On appeal by the CARRIER and ARRASTRE, the then
Court of Appeals, on 23 March 1981, absolved the
CARRIER of any and all liability and held the
ARRASTRE solely liable. Reconsideration filed by the
ARRASTRE was denied by the Appellate Court.
HELD:
The Supreme Court reversed and set aside the appealed
judgment of Court of Appeals, and reinstated that of the
CFI Manila, Branch XI; without costs.
2. In absolving the CARRIER, the appellate court
completely disregards the evidence of the CARRIER and
the ARRASTRE that 619 bags were discharged by the
CARRIER to the ARRASTRE in bad order condition, as
evidenced by the original and duplicate copies of the
Cargo Receipts issued by the CARRIER to the
ARRASTRE
and
signed
by
their
respective
representatives. The condition of the 619 bags before the
turnover to the ARRASTRE from the CARRIER was loss
or spoilage of up to 50%, as reflected in the Survey of
Bad Order Cargoes, signed by the CARRIER and
ARRASTRE representatives. Accordingly, the Trial
Court held the CARRIER liable only for the value of a
total of 443 bags, as this is the evidence of the plaintiff
(INSURER), at 16.8209 kilograms per bag, less than the
actual weight of 25 kilograms net per bag due to some
recovery of spoilage, or a total liability of P12,285.94.
Since 619 bags were discharged from the CARRIER
already in bad order condition, it follows that the
remaining 431 bags were damaged while in the
ARRASTREs custody for which it should be held liable.

3. ARRASTREs liability fixed to 351 bags, as INSURER

failed to appeal award

was missing and expressed fear that it might be used

illegally.

However, since the Trial Court computed the liability of

the ARRASTRE at 351 bags, notwithstanding the
ARRASTREs admission that 80 bags were not included
in the bad order cargo certificate, and the INSURER did
not appeal said award by the Trial Court in its desire to
have the case terminated soonest, the INSURER may
not, in this appeal, have the judgment modified. The
liability of the ARRASTRE for P9,763.94 fixed by the
Trial Court is thus in order.

The captain of the vessel claimed that he was not able to

bring the boat back to Manila due to bad weather; that
while in Mindoro, Fructuoso Maniego, whom he knew
since 1962 approached and asked him if he could load
the former's fishes on board M/B "Maria Victoria-P" for
a fee of P20,000.00; that the fishes were out in the sea
aboard a disabled boat; that he agreed and upon
reaching the place where the boatload of fishes is
located, they found a kumpit with seven armed Muslims
on board and that the kumpit was loaded with blue seal
cigarettes; that at gun points, he was forced to load the
blue seal cigarettes which allegedly belong to one Datu
Jacob of Jolo, Sulo.

90. C.F. Sharp & Co. v. Comm. of Customs 22 SCRA

760
91. Comm. of Customs v. Court of Tax Appeals &
Pascual 138 SCRA 581
FACTS
Private Respondent JOSE PASCUAL is the registered
owner of the M/B Maria Victoria-P, a motor boat duly
licensed by the Commissioner of Customs to engage in
coastwide trade.
On 16 Dec 1963, the vessel was apprehended by the Phil.
Navy off the coast of Naic, Cavite for carrying untaxed
105 cases and 90 packs of Salem Cigarrettes and 414
cases of Union cigarettes.
The authorities turned over the vessel, its crew and its
cargo of blue seal cigarettes to the Small Craft Unit of the
Navy for disposition. Seizure Identification Case nos
8006 and 8006-A were instituted against the vessel and
the cargo before the Collector of Customs. For failure to
claim ownership over the cigarettes, the same were
forfeited in favor of the government.
Private Respondents Allegations: During the forfeiture
proceedings against the vessel private respondent
claimed that on December 4, 1963, his vessel with
fourteen (14) crew and a captain went to Bulalakao,
Mindoro to catch fish; that after three days of fishing, all
the fishing nets were destroyed; that Jose Joloc captain of
the boat, notified private respondent in Manila about the
nets and the latter ordered the former to bring the boat
back to Manila; that for failure of the boat to arrive in
Manila on the date expected by private respondent, he
sent a telegram addressed to the captain reiterating his
previous order, but no answer was received; that private
respondent sent a certain Artemio Buenvenuto to
Mindoro on December 13, 1963 to fetch the boat; that on
even date Buenvenuto sent a telegram to private
respondent that the boat had left Mindoro; that after
receiving the telegram on the same date, private
respondent notified the Philippine Navy that his boat

On 3 July 1964, the Collector of Customs rendered a

decision declaring the vessel forfeited in favor of the
government. It ruled that since the vessel was hired for a
fee of 20,000 thru its captain to ferry the cigarettes, there
was a contract of carriage entered into bet. Jose Joloc and
the owner of the cigarettes. Jose Pascual, being the
owner of the vessel, is bound by the acts of his agent.
Commissioner of Customs: Affirmed the Collector of
Customs.
CTA: Modified the decision; Ordered Pascual to pay
P5,000 instead of forfeiture of the vessel.
Respondent Court stated that there is no question that
the vessel was used in the illegal importation of blue seal
cigarettes; hence, subject to penalty imposed by Section
2530 of the Tariff and Customs Code. However, the
penalty of forfeiture appears to be excessive since herein
private respondent took all the necessary action to
prevent the vessel from being used illegally by notifying
the Philippine Navy of the disappearance of the vessel.
ISSUE: Whether or not the motor boat is subject to
forfeiture under the Tariff and Customs Code,
particularly paragraphs (a) and (b) of Sec 2530.
HELD: YES.
RULING:
M/B "Maria Victoria-P" was a vessel duly authorized to
engage in coastwise trade. It is undisputed and, in fact,
established that it was used in the illegal importation of
blue seal cigarettes. Thus, the law applicable is
paragraphs (a) and (b), Section 2530 of the Tariff and
Customs Code which states:
SEC. 2530. Property Subject to Forfeiture Under Tariff
and Customs Law.- Any vehicle, vessel or aircraft, cargo,
article and other objects shall under the following
conditions be subject to forfeiture

a. Any vehicle, vessel or aircraft, including cargo, which

shall be used unlawfully in the importation or
exportation of articles or in conveying and or
transporting contraband, or smuggled article in
commercial quantities into or from any Philippine port
or place, and any vessel which, being of less than thirty
tons capacity shall be used in the importation of articles
into any Philippine Port or place. The mere carrying or
holding on board of contraband or smuggled articles
in commercial quantities shall subject such vessel
vehicle, aircraft or any other craft to forfeiture:
Provided, That the vessel, vehicle, aircraft or any other
craft is not used as a duly authorized common carrier
and as such a carrier it is not chartered or leased;
b. Any vessel engaging in the coastwise trade which
shall have on board any article of foreign growth,
produce, or manufacture in excess of the amount
necessary for sea stores, without such article having
been properly entered or legally imported.
Pursuant to the said provisions, the vessel is clearly
subject to forfeiture in favor of the government.
Forfeiture proceedings are in rem and are directed
against the res. The fact that Pascual had no knowledge
that his vessel was illegally used does not render it
immune from forfeiture. This is because the forfeiture
proceedings was instituted against the vessel itself.
Pascuals defense is personal to him and cannot absolve
the vessel from liability. Moreover, the aforequoted
provision prescribes in an unequivocal term the
imposition of the penalty of forfeiture in cases of
unlawful importation of foreign articles regardless of
whether such importation occurred with or without the
knowledge of the owner of the vessel.
In United States vs. Steamship "Rubi" (32 Phil. 239), this
Court, in resolving the question of whether or not the
innocence of the owner in the illegal importation of
foreign articles can withdraw the ship from the penalty
of confiscation, said:
The vessel which commits the aggression is treated as
the offender, without any reference whatsoever to the
character or conduct of the owner. ... This is done from
the necessity of the case, as the only adequate means of
suppressing the offense or wrong. ... The doctrine also is
familiarly applied to cases of smuggling and other
misconduct under our revenue laws; and ... embargo
and non-intercourse acts. ... The same thing applies to
proceeding in rem or seizures in admiralty ... The acts of
the master and crew, in cases of this sort, bind the
interest of the owner of the ship, whether he be innocent
or guilty.
92. Heacock v. Macondray 42 Phil 205

93.. Freixas & Co. v. Pacific Mail S/S Co. 42 Phil 198
Facts:
On May 1918, the plaintiff, a regular general
copartnership, caused to be delivered on board the
defendant's steamship Colusa, then in the harbor of San
Francisco, California, one case of hat bands, described in
the bill of lading as one case of dry goods, properly
boxed and marked of transportation to the port of
Manila. The plaintiff paid the freight not on ad
valorem value but on space on said merchandise from
San Francisco to Manila, in advance, to the defendant's
authorized representatives in San Francisco. The master
of the said steamship issued and delivered to the
plaintiff his bill of lading for said merchandise, which
bill of lading was introduced in evidence as Exhibit B.
The said steamship Colusa arrived in the port of Manila
on June 1918, but neither the master nor the defendant
delivered to the plaintiff the one case of hat bands
despite demand, and the said steamship departed
without landing the merchandise.
The plaintiff claimed the invoice value of the hat bands
at the time of delivery at the sum of P1,624.78 from the
defendant as damages for failure to deliver, but the
defendant tendered to the plaintiff only the sum of US
$100, which tender plaintiff rejected. Whereupon the
present action was instituted.
Upon the foregoing facts and clauses 25 & 27 of the bill
of lading, Judge Harvey rendered a judgment in favor of
the plaintiff for the sum of P200, with costs against the
plaintiff, prompting the plaintiff to appeal said
judgment.
Issue:
W/N clauses 25 & 27 of the bill of lading are valid.
W/N the lower court erred in limiting the amount
recovered to P200.
Held:
1. Yes. Clauses 25 and 27 of the bill of lading read as
follows:
25. All liability for loss or damage to goods shall be
determined by their invoice cost plus freight. It is
expressly understood that the Steamship Company is
not accountable for weight, leakage, breakage, insecure
packages, change to goods in bales, nor for loss or
damage from the effects of climate or decay, or caused
by other cargo in contact or otherwise when properly
stowed; nor for explosion of articles on freight or

otherwise, nor from unavoidable detention or delay, and

it is expressly agreed that the goods named in this Bill of
Lading are hereby valued at not exceeding $100 per
package, and unless a different or other value is
expressly written and declared herein, the liability of the
companies therefor, in case of the total loss of all or any
of the said goods from any cause, shall not exceed $100
per package, and in case of the partial loss of or damage
to any of said goods, the liability of the carriers shall not
exceed such proportion therefor per package as the loss
or damage on each package shall bear to the sum of
$100.
27. The shipper hereby represents and declares that the
value of each package described on the face of this bill of
lading does not exceed the sum of $100, unless the
shipper shall expressly declare and there shall be written
on the face thereof a different value; and upon such basis
of valuation of said packages, the rate of freight thereon
is adjusted.
The appellants indirectly attacks the validity of the said
clauses upon grounds that (1) these contravene article
1601 of the Civil Code, which provides same obligations
to carriers as those of innkeepers; (2) that said clauses
"were probably not within the contemplation of the
parties" when the bill of lading was executed; and (3)
that there was no consideration for said clauses.
Appellant contends "that the Civil Code does not permit
any limitation of liability on the carrier's part unless the
loss or damage occurred through force majeure or an act
of God," for such limitation would be contrary to public
policy. In H. E. Heacock Co. vs. Macondray and Co., the
Supreme Court said:
Three kinds of stipulations have often been made in a
bill of lading. The first is one exempting the carrier from
any and all liability for loss or damage occasioned by its
own negligence. The second is one providing for an
unqualified limitation of such liability to an agreed
valuation. And the third is one limiting the liability of the
carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight.
According to an almost uniform weight of authority, the
first and second kinds of stipulations are invalid as
being contrary to public policy, but the third is valid and
enforceable. (See cases cited.)
The clauses in question fall within the third kind of
stipulation above described, and are therefore valid and
enforceable.
That the said clauses clearly appears on the face of said
bill of lading is also conclusive against the plaintiff in the
absence of error or fraud and debunks the theory that it
is not within the contemplation of the parties when the
bill of lading was executed.

2. No. It is undisputed that the appellant did not declare

the merchandise to be a higher value than $100 per
package, but paid the freight therefor upon the express
understanding and agreement between the parties that
its value did not exceed $100 per package. If the shipper
had declared that each package was of the value of
P1,624.78 instead of P200, he would have had to pay a
much higher rate than that which he did pay on the
basis of a valuation of P200 per package. Therefore, there
was sufficient consideration for the clauses.
The appellant further contends that the appellee, not
having shown what became of the merchandise in
question, is liable for the entire value thereof, as
otherwise it would enrich itself by appropriating the
goods and then pleading limited liability. While it was
possible for the defendant to have appropriated the
goods in question, the defendant cannot be presumed to
have done so by the mere fact that it admits the loss of
said goods through its negligence and carelessness, as
alleged in the complaint.
Where a contract of the kind, signed by the shipper, is
fairly made, agreeing on the valuation of the property
carried, with the rate of freight based on the condition
that the carrier assumes liability only to the extent of the
agreed valuation, even in case of loss or damage her the
negligence of the carrier, the contract will be upheld as a
proper and lawful mode of securing a due proportion
between the amount for which the carrier may be
responsible and the freight he receives, and of protecting
himself against extravagant and fanciful valuations.
94. Shewaram v. PAL 17 SCRA 606; 64 OG 3261
Doctrine:
Pursuant to the pertinent provisions in the Civil Code, a
common carrier is liable for the loss or damage to goods
that a passenger brings onto the carrier. The only by
which they can be exempt from liability is upon showing
that they exercised due diligence or if the circumstances
fall under any of the mentioned-circumstances in Art.
1354.
A common carrier cannot, generally, limit its liability by
simply printing a non-liability clause on the ticket.
Facts: Parmanand Shewaram, the plaintiff herein, was a
paying passenger with ticket No. 4-30976, on
defendant's aircraft flight No. 976/910 from Zamboanga
City bound for Manila;
Defendant is a common carrier engaged in air line
transportation in the Philippines, offering its services to
the public to carry and transport passengers and cargoes
from and to different points in the Philippines;

Shewaram checked in three (3) pieces of baggages a

suitcase and two (2) other pieces; that the suitcase was
mistagged by defendant's personnel in Zamboanga City,
as I.G.N. (for Iligan) with claim check No. B-3883,
instead of MNL (for Manila).

Common Carriers, by virtue of their business and for

reasons of public policy, are bound to observe
extraordinary due diligence with their handling not only
of the passengers, but also of the goods and baggage that
they bring.

When Shewaram arrived in Manila, his suitcase did not

arrive with his flight because it was sent to Iligan.

The liability of common carriers is based of Art. 1734,

NCC, which provides for the liability of common
carriers for loss of goods, unless certain exceptions have
been met (such as when the loss is due to force majeure).

Shawaram made a claim with defendant's personnel in

Manila airport and another suitcase similar to his own
which was the only baggage left for that flight, the rest
having been claimed and released to the other
passengers of said flight, was given to the plaintiff for
him to take delivery but he did not and refused to take
delivery of the same on the ground that it was not his,
alleging that all his clothes were white and the National
transistor 7 and a Rollflex camera were not found inside
the suitcase, and moreover, it contained a pistol which
he did not have nor placed inside his suitcase;
After inquiries made by defendant's personnel in Manila
from different airports where the suitcase in question
must have been sent, it was found to have reached Iligan
and the station agent of the PAL in Iligan caused the
same to be sent to Manila for delivery to Mr. Shewaram
it was also found out that the suitcase shown to and
given to the plaintiff for delivery which he refused to
take delivery belonged to a certain Del Rosario who was
bound for Iligan in the same flight with Mr. Shewaram;

As a common carrier, PAL was obligated to exercise

extraordinary due diligence. They are liable for the
goods. The circumstances likewise do not fall under any
of the mentioned exceptions in the NCC.
Further, PAL cannot limit its liability from the claim
stub. By express provision of Art. 1750 (NCC), A
contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable
and just under the circumstances, and has been fairly
and freely agreed upon.
In accordance with Article 1750 of the New Civil
Code, the pecuniary liability of a common
carrier may, by contract, be limited to a fixed
amount. It is required, however, that the contract must
be reasonable and just under the circumstances and has
been fairly and freely agreed upon.

In this case, PALs main contention is that the ticket stub

actually contained a provision exempting them from
liability for all lost baggage.

Herein, the requirements of said article have not been

met. It cannot be said that Shewaram had actually
entered into a contract with PAL, embodying the
conditions as printed at the back of the ticket stub that
was issued by PAL to Shewaram. The fact that those
conditions are printed at the back of the ticket stub in
letters so small that they are hard to read would not
warrant the presumption that Shewaram was aware
of those conditions such that he had fairly and
freely agreed to those conditions. Inasmuch as
passengers do not sign the ticket, much less did
Shewaram sign his ticket when he made the flight
on 23 November 1959, Shewaram is not, and cannot be,
bound by the conditions of carriage found at the back of
the ticket stub issued to him when he made the flight on PALs
plane

Issue: Was PAL remiss in its duties to take care of the

baggage?

95.OngYiu v. Court of Appeals 91 SCRA 223; 75 OG

(No. 48) 9659

When he received his baggage, several items were

missing, namely: his Transistor Radio 7 and the Rollflex
Camera;
Shewaram made demand for these two (2) items or for
the value thereof but the same was not complied with by
defendant.
CFI of Zamboanga ruled in favor of Shewaram,
contending that PAL failed to exercise extraordinary due
diligence in handling the baggage.

Held: YES, PAL failed to exercise the required

extraordinary due diligence.
Ratio:

Facts:
Petitioner was a fare paying passenger of respondent
Philippine Air Lines, Inc. (PAL) bound for Butuan City.
He was scheduled to attend the trial of a civil case and
special proceeding in the Court of First Instance of
Butuan City. As a passenger, he checked in one piece of

luggage, a blue "maleta" for which he was issued a claim

check. Upon arrival at Butuan City, petitioner claimed
his luggage but it could not be found. According to
petitioner, it was only after reacting indignantly to the
loss that the matter was attended by the porter clerk.
When the luggage was finally retrieved, it was delivered
to the petitioner with the information that the lock was
opened. Petitioner also found out that the folder
containing documents and transcripts were missing,
aside from the two gift items for his parents-in-law.
Petitioner refused to accept the luggage. Petitioner filed
a Complaint against PAL for damages for breach of
contract of transportation.
The lower Court found PAL to have acted in bad faith
and with malice and declared petitioner entitled to
moral damages. Upon appeal by PAL, the CA held that
PAL was guilty only of simple negligence, reversed the
judgment of the trial Court granting petitioner moral
and exemplary damages, but ordered PAL to pay
plaintiff the sum of P100.00, the baggage liability
assumed by it under the condition of carriage printed at
the back of the ticket. Hence the present petition.
ISSUES:
1. W/N PAL acted with gross negligence
2. W/N the stipulation printed at the back of Petitioner's
ticket, which limits the liability of PAL, is valid.
HELD:
1. No. From the facts of the case, we agree with
respondent Court that PAL had not acted in bad faith.
Bad faith means a breach of a known duty through some
motive of interest or ill will. It was the duty of PAL to
look for petitioner's luggage which had been miscarried.
PAL exerted due diligence in complying with such duty.
Neither was the failure of PAL Cebu to reply to
petitioner's rush telegram indicative of bad faith. Thus,
In the absence of a wrongful act or omission or of fraud
or bad faith, petitioner is not entitled to moral damages.

8. BAGGAGE LIABILITY ... The total liability of the

Carrier for lost or damaged baggage of the passenger is
LIMITED TO P100.00 for each ticket unless a passenger
declares a higher valuation in excess of P100.00, but not
in excess, however, of a total valuation of P1,000.00 and
additional charges are paid pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any
higher value for his luggage, much less did he pay any
additional transportation charge.
While it may be true that petitioner had not signed the
plane ticket, he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a part of
the contract of carriage, and valid and binding upon the
passenger regardless of the latter's lack of knowledge or
assent to the regulation". It is what is known as a
contract of "adhesion", in regards which it has been said
that contracts of adhesion wherein one party imposes a
ready made form of contract on the other, as the plane
ticket in the case at bar, are contracts not entirely
prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his
consent. And as held in Randolph v. American Airlines,
103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans
World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting
liability upon an agreed valuation does not offend
against the policy of the law forbidding one from
contracting against his own negligence.
Considering, therefore, that petitioner had failed to
declare a higher value for his baggage, he cannot be
permitted a recovery in excess of P100.00.
96. Panam v. IAC 164 SCRA 268
FACTS:
-

On April 25, 1978, plaintiff Rene Pangan,

president and general manager of the Sotang
Bastos and Archer Production, while in San
Francisco, entered into an agreement with Primo
Quesada of Prime Films, San Francisco,
California, whereby the former, for and in
consideration of US $2,500 per picture, bound
himself to supply the latter with three films:
'Ang Mabait, Masungit at ang Pangit,' 'Big
Happening with Chikiting and Iking,' and
'Kambal Dragon' for exhibition in the United
States. It was also agreed that plaintiff would
provide promotional and advertising materials
for said films on or before May 30, 1978.

Pangan visited Guam where he entered into a

verbal agreement with Leo Slutchnick of the
Hafa Adai Organization for the exhibition of
two of the films above-mentioned at the Hafa

Petitioner is neither entitled to exemplary damages. In

contracts, as provided for in Article 2232 of the Civil
Code, exemplary damages can be granted if the
defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner, which has not been
proven in this case.
2. Yes, the Court held that such stipulation is valid.
Petitioner contends that respondent Court committed
grave error when it limited PAL's carriage liability to the
amount of P100.00 as stipulated at the back of the ticket.
However, we agree with the foregoing finding. The
pertinent Condition of Carriage printed at the back of
the plane ticket reads:

Adai Theater in Guam on May 30, 1978 for the

consideration of P7,000 per picture. Similarly,
Pangan undertook to provide promotional and
advertising materials for said films on or before
the exhibition date on May 30,1978.
-

Pursuant to these agreements, Pangan prepared

the promotional handbills and still pictures for
which he paid P12,900. In preparation for his
trip abroad to comply with his contracts, Pangan
purchased 14 clutch bags, 4 capiz lamps and 4
barong tagalog, with a total value of P4,400.

On May 18, 1978, Pangan purchased through

Your Travel Guide, a regular-fare Pan Am
economy class ticket from Manila to Guam.

On May 27, 1978, two hours before departure

time Pangan was at the Pan AM ticket counter at
the Manila International Airport and presented
his ticket and checked in his two luggages, for
which he was given two baggage claim tickets.
The luggages contained the promotional and
advertising materials, the clutch bags, barong
tagalog and his personal belongings.

The IAC affirmed the trial court decision hence,

this appeal. Petitioner contends that based on
the stipulations printed at the back of the ticket,
its liability for the lost baggage of private
respondent Pangan is limited to $600.00 ($20.00
x 30 kilos) as the latter did not declare a higher
value for his baggage and pay the
corresponding additional charges.

ISSUE:
Whether or not the IAC erred when it awarded actual
damages beyond the limit of liability set forth in the
Warsaw Convention and the contract of carriage.
(consisting of alleged lost profits)
HELD: Yes.

Subsequently, Pangan was informed that his

name was not in the manifest and so he could
not take the flight in the economy class. Pangan
decided to take first class and paid an additional
$112, in order to be on time in Guam to comply
with his commitment.

When Pangan arrived in Guam, his two

luggages did not arrive with his flight. As a
consequence, his agreements with Slutchnick
and Quesada for the exhibition of the films were
cancelled.

Thereafter, he filed a written claim for his

missing luggages. Upon arrival in the
Philippines, Pangan contacted his lawyer, who
made the necessary representations to protest as
to the treatment which he received from the
employees of Pan Am and the loss of his
luggages.

Pan Am assured Pangan that his grievances

would be investigated and given immediate
consideration. Pan Am failed to communicate
with Pangan about the action taken on his
protests, hence Pangan filed this complaint.

The CFI found for Pangan and ordered PanAm

to pay Pangan actual damages, interest, and
attorneys fees.

The IAC's reliance on Northwest Airlines, Inc. v. Cuenca to

sustain the view that "to apply the Warsaw Convention
which limits a carrier's liability to US$9.07 per pound or
US$20.00 per kilo in cases of contractual breach of
carriage ** is against public policy" is misplaced.
The rule laid down in Mendoza v. Philippine Air Lines, Inc.
is:
...Under Art.1107 of the Civil Code, a debtor in good faith like
the defendant herein, may be held liable only for damages that
were foreseen or might have been foreseen at the time the
contract of transportation was entered into. The trial court
correctly found that the defendant company could not have
foreseen the damages that would be suffered by Mendoza upon
failure to deliver the can of film on the 17th of September,
1948 for the reason that the plans of Mendoza to exhibit
that film during the town fiesta and his preparations,
specially the announcement of said exhibition by posters
and advertisement in the newspaper, were not called to
the defendant's attention.
Similar to the one at bar is Chapman vs. Fargo. Here, the
plaintiff in Troy, New York, delivered motion picture
films to the defendant Fargo, an express company,
consigned and to be delivered to him in Utica. At the
time of shipment the attention of the express company
was called to the fact that the shipment involved motion
picture films to be exhibited in Utica, and that they
should be sent to their destination, rush. There was
delay in their delivery and it was found that the plaintiff
because of his failure to exhibit the film in Utica due to
the delay suffered damages or loss of profits. The
highest court in the State of New York refused to award
him special damages. Said appellate court observed:
But before defendant could be held to special damages, such as
the present alleged loss of profits on account of delay or failure
of delivery, it must have appeared that he had notice at the

time of delivery to him of the particular circumstances

attending the shipment, and which probably would lead to
such special loss if he defaulted. Or, as the rule has been stated
in another form, in order to purpose on the defaulting party
further liability than for damages naturally and directly, i.e.,
in the ordinary course of things, arising from a breach of
contract, such unusual or extraordinary damages must have
been brought within the contemplation of the parties as the
probable result of breach at the time of or prior to contracting.
Generally, notice then of any special circumstances which will
show that the damages to be anticipated from a breach would
be enhanced has been held sufficient for this effect.
Applying the foregoing ruling to the instant case, in the
absence of a showing that Pan Am's attention was called
to the special circumstances requiring prompt delivery
of Pangan's luggages, PanAm is not liable for the
cancellation of Pangans contracts as it could not have
foreseen such an eventuality when it accepted the
luggages for transit.
The proximate cause of the cancellation of the contracts
was Pangan's failure to deliver the promotional and
advertising materials on the dates agreed upon. For this
petitioner cannot be held liable. Pangan had not
declared the value of the two luggages he had checked
in and paid additional charges. Neither was Pan Am
privy to the contracts nor was its attention called to the
condition therein requiring delivery of the promotional
and advertising materials on or before a certain date.
Petitioner's liability is limited to the amount stated in the
ticket. The award of attorney's fees, which is grounded
on the alleged unjustified refusal of petitioner to satisfy
private respondent's just and valid claim, loses support
and must be set aside. Petition granted.

97. Aboitiz Shipping Corp. v. Court of Appeals 188

SCRA 387
Facts:
On October 28, 1990, the vessel M/V P.Aboitiz, operated
and owned by Aboitiz Shipping Corp (Aboitiz) took on
board in Hongkong for shipment to Manila 2 containers
containing goods for apparel which were consigned to
Philippine Apparel, Inc. The shipment was also insured
by General Accident Fire and Life Assurance
Corporation (insurer).
On October 31, 1990, on its way to Manila, the vessel
sunk and was declared lost with all its cargoes. The
insurer paid the insured Philippine Apparel the
amounts of USD 39,885.85 or PHP319,086.80 for the
FIRST container and USD 94,190.55 or PHP753,524.40 for

the SECOND container.

Having been subrogated to the rights, interests and
actions of the insured-consignee, the insurer, On October
28, 1981, filed an action for damages with RTC Manila
against the carrier, claiming that the loss was due to the
fault and negligence of Aboitiz and of its master and
crew on the vessel because they did not observe
extraordinary diligence required by law for common
carriers.
RTC Manila ruled in favor of the insurer and ordered
Aboitiz to pay actual damages amounting to PHP
1,072,611.20, plus legal interest from the filing of the
complaint (Oct 28, 1981) until full payment.
Aboitiz appealed to the CA but the CA affirmed the RTC
decision. A subsequent MR with the CA was also
denied.
Aboitiz thus filed a Petition for Review of the CA
decision alleging that the CA decided the case NOT in
accordance with law. In this petition for review, Aboitiz
claims that there were proceedings and investigation
was conducted by the Board of Marine Inquiry (BMI),
the results of which concluded that the sinking of the
vessel may be attributed to FORCE MAJEURE because
of a typhoon. Since previous rulings have already
established that the BMI "possesses the required
expertise in shipping matters and is imbued with quasijudicial powers," then its findings must be considered
conclusive on the courts.
Aboitiz also claims that the bills of lading stipulated a
fixed liability for Aboitiz amounting to USD 500.00 per
package container. The CA therefore erred in using the
actual value of the shipment in computing for its
liability.
ISSUES:
1) Whether the BMI findings must be considered as
conclusive and therefore followed by the court
NOT CONCLUSIVE IN THIS CASE AS TO THE
INSURER
2) Whether the amount of liability of Aboitiz
should be based on the amount as stipulated on
the bill of lading or on actual amount of loss
ACTUAL AMOUNT OF GOODS LOST
HELD:
1) As a general rule, administrative findings of fact
are not disturbed by the courts when supported
by substantial evidence unless tainted with

arbitrariness amounting to abuse of discretion or

lack of jurisdiction.

exception is when the nature and value of such

goods have been declared by the shipper before
shipment and inserted in the bill of lading. This
is provided for in Section 4(5) of the Carriage of
Goods by Sea Act1.

In the present case, the trial court was never

informed of the administrative investigation that
was proceeding alongside the trial. It was only
on March 22, 1985 that Aboitiz revealed the
DECISION to the trial court dated Dec.26, 1985,
which was rendered over 3 years after the case
was brought to court.
Furthermore, the insurer was never notified nor
given an opportunity to participate in the BMI
proceedings. the Insurer therefore CANNOT BE
BOUND by the rulings of the BMI regarding this
incident.
The findings of fact of both the RTC and the CA
reveal that the sinking of the ship was not
caused by the waves of typhoon Yoning but
instead was due to the fault and negligence of
the master and crew on board the ship. The
supporting facts are as follows:
a) the wind force at the time the ship
sunk was 10-15 knows which was
classified as Scale No. 4 and
described as moderate breeze,
small waves becoming longer, fairly
frequent white horses.
b) a meteorologist, Justo Iglesias, Jr.
testified that the weather between
October 28, 1990 and November 1,
1990 was usual and ordinary and
must have been foreseeable for an
experienced meteorologist like a
ship captain.
c) The ships own captain, Capt.
Racines, testified that the ship was
200 miles away from the storm
when it sank.
Article 1732 of the Civil Code gives a
presumption in law that the common carrier is
at fault or was negligent when goods are lost
while in its possession. The purpose of this rule
is to protect the interests of the shipper which is
at the mercy of the carrier. Because Aboitiz
failed to prove that it despite the exercise of
extraordinary diligigenc on its part, the cargo
was still lost, the presumption of fault or
negligence on its part was not rebutted.
2) On the second issue of liability amount, while it
is true that in the bill of lading there is such
stipulation that the liability of the carrier is
US$500.00 per package/container/customary
freight, there is an exception to this rule. The

The bill of lading, in the case at bar, in fact

contained a description of the nature and value
of the goods shipped. The amount of the
carriers liability must therefore be based on the
actual value of the goods lost.
Furthermore, the court held that it is absurd to construe
the term container in the bill of lading to mean the
large metal object which functionally forms a part of
the ship in which the carrier caused to be contained with
the goods it is shipping or the modern substitute for
the hold of the vessel when the value attached to such term
container is supposedly only USD500. The
package/container contemplated by the law which
limits the liability of the carrier should be sensibly related
to the unit used by the shipper to pack its goods.

98.. Aboitiz Shipping Corp. v. General Accident Fire &

Life Ins. Co. 217 SCRA 359
FACTS:
1

Section 4 (5), Carriage of Goods by Sea Act: 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 of 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 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 mis-stated by the
shipper in the bill of lading."

1.

2.

3.

4.

5.

6.

7.
8.

On October 28, 1980, the vessel M/V "P.

Aboitiz" took on board in Hongkong for
shipment to Manila some cargo consisting of
one (1) twenty (20)-footer container holding 271
rolls of goods for apparel covered by Bill of
Lading No. 515-M and one (1) forty (40)-footer
container holding four hundred forty- seven
(447) rolls, ten (10) bulk and ninety-five (95)
cartons of goods for apparel covered by Bill of
Lading No. 505-M.
The total value, including invoice value,
freightage, customs duties, taxes and similar
imports amounts to US$39,885.85 for the first
shipment while that of the second shipment
amounts to US$94,190.55.
Both shipments were consigned to the
Philippine Apparel, Inc. and insured with the
General Accident Fire and Life Assurance
Corporation, Ltd. (GAFLAC for short). The
vessel is owned and operated by Aboitiz
Shipping Corporation (Aboitiz for short)
On October 31, 1980 on its way to Manila the
vessel sunk and it was declared lost with all its
cargoes.
GAFLAC paid the consignee the amounts
US$39,885.85 or P319,086.80 and US$94,190.55 or
P753,524.40 for the lost cargo.
As GAFLAC was subrogated to all the rights,
interests and actions of the consignee against
Aboitiz, it filed an action for damages against
Aboitiz in the RTC of Manila alleging that the
loss was due to the fault and negligence of
Aboitiz and the master and crew of its vessel in
that they did not observe the extraordinary
diligence required by law as regards common
carriers.
Trial court rendered a decision in favour of the
GAFLAC and against the Aboitiz
Aboitiz appealed to the Court of Appeals
wherein which affirmed the trial courts decision
in toto. An MR was filed which was also denied.

ISSUE: WON the findings of Board of Marine inquiry is

binding to the court
HELD: NO
RATIO:
The trial court did not err in not giving weight
to the finding of the BMI that the vessel sank
due to a fortuitous event. Findings of
administrative bodies are not always binding on
courts. This is especially so in the case at bar
where plaintiff was not a party in the BMI
proceedings and which proceeding was not
adversary in character.
As a general rule, administrative findings of
facts are not disturbed by the courts when
supported by substantial evidence unless it is

tainted with unfairness or arbitrariness that

would amount to abuse of discretion or lack of
jurisdiction.
Said administrative investigation was conducted
unilaterally. Private respondent GAFLAC was
not notified or given an opportunity to
participate therein. It cannot thereby be bound
by said findings and conclusions of the BMI.
The trial court and the appellate court found
that the sinking of the M/V "P. Aboitiz" was not
due to the waves caused by tropical storm
"Yoning" but due to the fault and negligence of
petitioner, its master and crew.
Evidence shows that the wind force when the illfated ship foundered was 10 to 15 knots.
According to the Beaufort Scale, which is
admittedly an accurate reference for measuring
wind velocity, the wind force of 10 to 15 knots is
classified as scale No. 4 and described as
"moderate breeze," small waves, becoming
longer, fairly frequent white horses.
Meteorologist Justo Iglesias, Jr. himself affirms
the above description of a wind force of 10 to 15
knots and adds that the weather condition
prevailing under said wind force is usual and
forseeable.

ISSUE: Whether the effect that the liability of the

petitioner should be fixed at US$500.00 per
package/container.
HELD: NO
RATIO:
While it is true that in the bill of lading there is
such stipulation that the liability of the carrier is
US$500.00 per package/container/customary
freight, there is an exception, that is, when the
nature and value of such goods have been
declared by the shipper before shipment and
inserted in the bill of lading2.

This is provided for in Section 4(5) of the Carriage of

Goods by Sea Act to wit

(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 of 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 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

In this case the description of the nature and the

value of the goods shipped are declared and
reflected in the bills of lading. Thus, it is the
basis of the liability of the carrier as the actual
value of the loss.
Moreover, it is absurd to interpret "container," as
provided in the bill of lading to be valued at
US$500.00 each, to refer to the container which
is the modern substitute for the hold of the
vessel. The package/container contemplated by
the law to limit the liability of the carrier should
be sensibly related to the unit in which the
shipper packed the goods and described them,
not a large metal object, functionally a part of
the ship, in which the carrier used them to be
contained. Such "container" must be given the
same meaning and classification as a "package"
and "customary freight unit."
In the case at bar, the goods shipped on the
M/V "P. Aboitiz" were insured for P278,530.50,
which may be taken as their value. To limit the
liability of the carrier to $500.00 would
obviously put it in its power to have taken the
whole cargo as against public policy." That
ruling applies to this case.
A carrier cannot limit its liability for injury or
loss of goods shipped where such injury or loss
was caused by its own negligence. To limit the
liability of Aboitiz Shipping to $500.00 would
nullify the policy of the law imposing on
common carriers the duty to observe
extraordinary diligence in the carriage of goods.

Nevertheless, the ship owner or agent is personally

liable for claims under the Workmen's Compensation
Act and for repairs of the vessel before its loss.
D: In case of illegal or tortious acts of the captain the
liability of the shipowner and agent is subsidiary. In
such instance the shipowner or agent may avail of the
provisions of Article 837 of the Code by abandoning
the vessel. However, if the injury or damage is caused
by the shipowner's fault as where he engages the
services of an inexperienced and unlicensed captain or
engineer, he cannot avail of the provisions of Article
837 of the Code by abandoning the vessel. He is
personally liable for the damages arising thereby
Facts:
1.

2.

3.

4.
99. Luzon Stevedoring Co. v. Court of Appeals 156
SCRA 169
D: Hence the rule is that in case of collision there
should be abandonment of the vessel by the ship
owner or agent in order to enjoy the limited liability
provided for under said Article 837. The exception to
this rule is when the vessel is totally lost in which case
there is no vessel to abandon so abandonment is not
required. Because of such total loss the liability of the
ship owner or agent for damages is extinguished.

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 mis-stated by the
shipper in the bill of lading. (Emphasis supplied.)

5.

On May 30, 1968 at past 6 in the morning, a

maritime collision occurred within the vicinity
of the entrance to North Harbor, Manila
between the tanker LSCO Cavite owned by
petitioner Luzon Stevedoring Corporation (LSC)
and MV Fernando Escano a passenger ship
owned by respondent Hijos de F. Escano
As a result of the collision, the passenger ship
sunk. Thus, respondents Hijos and Domestic
Insurance Company of the Phil filed an
admiralty action against petitioner in CFI of
Cebu
In the course of trial, two commissioner
representing plaintiffs Hijos and DIC and
defendant LSC were appointed to determine the
value of LCSO Cavite. The commissioner
found the value thereof to be 180k
CFI rendered decision finding LSCO Cavite
solely to blame for the collision. As for
defendant LSCs defense that its liability is
limited to the value of LCSO Cavite and freight
earned invoking Art 837 of the Code of
Commerce, CFI held that such defense was not
established
Thus, LSC interposed an appeal which was
denied by CA. LSCs MR was also denied.
Hence, it filed a petition for certiorari in SC
which denied such for lack of merit. MR was
denied again but a second MR was denied
raising the issue below

Issue: WON abandonment is required under Article 837

of commerce
Held: Yes. The exception however is when the vessel is
totally lost.
Ratio:
1. Articles 587, 590 and 837 of the Code of
Commerce provide as follows:
ART. 587. The ship agent shall also be civilly liable for
the indemnities in favor of third persons which arise
from the conduct of the captain in the vigilance over the

goods which the vessel carried; but he may exempt

himself therefrom by abandoning the vessel with all her
equipment and the freight he may have earned during
the voyage.
xxx xxx xxx

affect the liability of the owner for repairs of

the vessel completed before its loss,
interpreting the provision of Article 591 of
the Code of Commerce in relation with the
other Articles of the same Code
c) Yangco v. Laserna- citing PSC v. Garcia that
if the shipowner or agent may in any way be
held civilly liable at all for injury to or death
of passengers arising from the negligence of
the captain in cases of collisions or
shipwrecks, his liability is merely
coextensive with his interest in the vessel
such that a total loss thereof results in its
extinction. HOWEVER, abandonment
would be an idle ceremony if the vessel had
totally perished. In this case, abandonment
would be immaterial
d) Abueg v. San Diego- in this case, the Court
reiterated that the liability of the shipowner
or agent under the provision of Articles 587
and 837 of the Code of Commerce is limited
to the value of the vessel with all her
equivalent and freight earned during the
voyage if the shipowner or agent abandoned
the ship with all the equipment and freight.
However, it does not apply to the liability
under the Workmen's Compensation Act
where even as in said case the vessel was
lost the liability thereunder is still
enforceable against the employer or
shipowner
e) Manila Steamship Company, Inc v. Lim
tong Ho it is a general principle that
shipowners and ship agents are civilly liable
for the acts of the captain and for the
indemnities due to 3rd persons so that
injured parties may immediately look for
reimbursement to the owner of the ship, it
being universally recognized that the ship
master or captain is primarily the
representative of the owner. This direct
liability, moderated and limited by the
owner's right of abandonment of the vessel
and earned freight (Article 587) has been
declared to exist not only in case of breached
contracts, but also in cases of tortious
negligence. HOWEVER, the defense of
abandonment does not apply to cases where
the injury or the average is due to
SHIPOWNERs OWN FAULT

ART. 590. The co-owners of the vessel shall be civilly

liable in the proportion of their contribution to the
common fund for the results of the acts of the captain,
referred to in Article 587.
Each co-owner may exempt himself from this liability by
the abandonment, before a notary, of that part of the
vessel belonging to him.
xxx xxx xxx
ART. 837. The civil liability incurred by the shipowners
in the cases prescribed in this section, shall be
understood as limited to the value of the vessel with all
her appurtenances and freight earned during the
voyage.
2.

SC then cited a lot of case which explains the

above articles:
a) Philippine Shipping Company v. Garcia3
from the case, SC gleaned that the rule is
that in the case of collision, abandonment of
the vessel is necessary in order to limit the
liability of the shipowner or the agent to the
value of the vessel, its appurtenances and
freightage earned in the voyage in
accordance with Article 837 of the Code of
Commerce. The only instance where such
abandonment is dispensed with is when the
vessel was entirely lost. In such case, the
obligation is thereby extinguished.
b) Philippines v. Maritime - citing Philippine
Shipping stated the exception thereto in that
while "the total destruction of the vessel
extinguishes a maritime lien, as there is no
longer any risk to which it can attach, but
the total destruction of the vessel does not
3

This is an action for damages instituted by PSC

for the loss of steamship Ntra. Sra. De Lourdes

as a result of the collision with the Steamship
Navarra of Garcia. It was found that the
Navarra was responsible for the collision. The
claim of PSC is that defendant should pay 18k,
the value of Navarra at the time of its loss in
accordance with Art 837 of the Code of
Commerce, and that it was immaterial that the
Navarra had been entirely lost provided the
value could be ascertained since the extent of
liability of owner of the colliding vessel is to be
determined by its value

3.

From the foregoing, it is clear that in case of

collision of vessels, in order to avail of the
benefits of Article 837 of the Code of Commerce
the shipowner or agent must abandon the
vessel. In such case the civil liability shall be
limited to the value of the vessel with all the

4.

5.

6.

7.

8.

9.

appurtenances and freight earned during the

voyage. However, where the injury or average is
due to the ship-owner's fault as in said case, the
shipowner may not avail of his right to limited
liability by abandoning the vessel.
SC reiterated what they said in previous
decisions that the real and hypothecary nature
of the liability of the shipowner or agent is
embodied in the provisions of the Maritime
Law, Book III, Code of Commerce. Articles 587,
590 and 837 of the same code are precisely
intended to limit the liability of the shipowner
or agent to the value of the vessel, its
appurtenances and freightage earned in the
voyage, provided that owner or agent abandons
the vessel. Although it is not specifically
provided for in Article 837 of the same code that
in case of collision there should be such
abandonment to enjoy such limited liability,
said article on collision of vessels is a mere
amplification of the provisions of Articles 587
and 590 of same code where abandonment of
the vessel is a pre-condition. Even without said
article, the parties may avail of the provisions of
Articles 587 and 590 of same code in case of
collision. This is the reason why Article 837 of
the same code is considered a superfluity
Hence the rule is that in case of collision there
should be abandonment of the vessel by the ship
owner or agent in order to enjoy the limited
liability provided for under said Article 837
The exception to this rule is when the vessel is
totally lost in which case there is no vessel to
abandon so abandonment is not required.
Because of such total loss the liability of the
shipowner or agent for damages is extinguished.
Nevertheless, the shipowner or agent is
personally liable for claims under the
Workmen's Compensation Act and for repairs of
the vessel before its loss
In case of illegal or tortious acts of the captain
the liability of the shipowner and agent is
subsidiary. In such instance the shipowner or
agent may avail of the provisions of Article 837
of the Code by abandoning the vessel
However, if the injury or damage is caused by
the shipowner's fault as where he engages the
services of an inexperienced and unlicensed
captain or engineer, he cannot avail of the
provisions of Article 837 of the Code by
abandoning the vessel. He is personally liable
for the damages arising thereby
In the case now before the SC there is no
question that the action arose from a collision
and the fault is laid at the doorstep of LSCO
"Cavite" of petitioner. Undeniably petitioner has
not abandoned the vessel. Hence petitioner

cannot invoke the benefit of the provisions of

Article 837 of the Code of Commerce to limit its
liability to the value of the vessel, all the
appurtenances and freightage earned during the
voyage
10. Thus, the petition was denied

100. De la Torre v. Court of Appeals 653 SCRA 714

101.Yangco v. Laserna 73 Phil 330

D: If the shipowner or agent may in any way be held
civilly liable at all for injury to or death of passengers
arising from the negligence of the captain in cases of
collisions or shipwrecks, his liability is merely coextensive with his interest in the vessel such that a
total loss thereof results in its extinction.
FACTS:
1. At about one o'clock in the afternoon of May 26,
1927, the steamer S. S. Negros, belonging to
petitioner Teodoro R. Yangco, left the port of
Romblon on its return trip to Manila
2. Typhoon signal No. 2 was then up, of which fact
the captain was duly advised and his attention
thereto called by the passengers themselves
before the vessel set sail
3. The boat was overloaded as indicated by the
load-line which was 6 to 7 inches below the
surface of the water. Baggage, trunks and other
equipments were heaped on the upper deck, the
hold being packed to capacity
4. In addition, the vessel carried thirty sacks of
crushed marble and about one hundred sacks of
copra and some lumber. The passengers,
numbering about 180, were overcrowded, the
vessel's capacity being limited to only 123
passengers
5. After two hours of sailing, the boat encountered
strong winds and rough seas between the
islands of Banton and Simara
6. As the sea became increasingly violent, the
captain ordered the vessel to turn left, evidently
to return to port, but in the maneuver, the vessel
was caught sidewise by a big wave which
caused it to capsize and sink. Many of the
passengers died in the mishap, the heirs of
respondents in the instant case included.
7. Several civil claims for damages were then filed
as a result of the incident against the petitioner.
The trial court held in favour of the victims.
After the rendition of the judgment to this effect,
petitioner, by a verified pleading, sought to
abandon the vessel to the plaintiffs in the three
cases, together with all its equipments, without
prejudice to his right to appeal. The

abandonment having been denied, an appeal

was taken to the Court of Appeals, wherein all
the judgments were affirmed except that which
awarded to the Aldanas the sum of P2,000,
which sum was increased to P4,000. Petitioner,
now deceased, appealed and is here represented
by his legal representative
ISSUE: May the shipowner or agent, notwithstanding
the total loss of the vessel as a result of the negligence of
its captain, be properly held liable in damages for the
consequent death of its passengers?
HELD: No, as explicitly provided for by Article 587 of
the Code of Commerce4
1.

2.

3.

4.

5.

The agent shall also be civilly liable for the

indemnities in favor of third persons which arise
from the conduct of the captain in the care of the
goods which the vessel carried; but he may
exempt himself therefrom by abandoning the
vessel with all her equipments and the freight he
may have earned during the voyage
The provisions accords a shipowner or agent the
right of abandonment; and by necessary
implication, his liability is confined to that
which he is entitled as of right to abandon
"the vessel with all her equipment and the
freight it may have earned during the voyage."
Lawful acts and obligations of the captain
beneficial to the vessel may be enforced as
against the agent for the reason that such
obligations arise from the contract of agency
while as to any liability incurred by the captain
through his unlawful acts, the ship agent is
simply subsidiarily civilly liable. This liability of
the agent is limited tothe vessel and it does not
extend further. For this reason the Code of
Commerce makes the agent liable to the extent
of the value of the vessel, as the codes of the
principal maritime nations provide with the
vessel, and not individually
If the shipowner or agent may in any way be
held civilly liable at all for injury to or death of
passengers arising from the negligence of the
captain in cases of collisions or shipwrecks, his
liability is merely co-extensive with his interest
in the vessel such that a total loss thereof results
in its extinction.
Assuming that petitioner is liable for a breach of
contract of carriage, the exclusively "real and
hypothecary nature" of maritime law operates to

"The agent shall also be civilly liable for the indemnities in

favor of third persons which arise from the conduct of the
captain in the care of the goods which the vessel carried; but
he may exempt himself therefrom by abandoning the vessel
with all her equipments and the freight he may have earned
during the voyage."

limit such liability to the value of the vessel, or

to the insurance thereon, if any. In the instant
case it does not appear thatthe vessel was
insured. Whether the abandonment of the
vesselsought by the petitioner in the instant case
was in accordance with law of not, is
immaterial. The vessel having totally perished,
any act of abandonment would be an idle
ceremony. Hence, Yangco is therefore absolved
from the complaints
102 Phil. Charter Ins. v. Neptune Orient
Lines/Overseas Agency Services, 554 SCRA 325

103. ChuaYek Hong v. IAC 168 SCRA 472

FACTS:
1. Chua is a duly licensed copra dealer based at
Puerta Galera, Oriental Mindoro.
2. Guno and Olit are the owners of the vessel,
"M/V Luzviminda I," a common carrier engaged
in coastwise trade from the different ports of
Oriental Mindoro to the Port of Manila.
3. Chua engaged the transportation services of
Guno et. Al. for the transport of 1,000 sacks of
copra from Puerto Galera to Manila. The cargo
never reached the port of destination because
the ship capsized somewhere in between Cape
Santiago and Calatagan, Batangas.
4. Chua filed a case against Guno et al for breach
of contract of carriage
5. Guno el al argued that their liability was
extinguished due to the complete loss of the
vessel.
6. RTC: Guno et al should pay damages. CA:
Reversed RTC and applied Art. 587 of the Code
of Commerce arguing that the
ISSUE: WON the ship owner is liable for the lost copra
HELD: No
RATIO:
Article 587 of the Code of Commerce provides that The
ship agent shall also be civilly liable for the indemnities
in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he
loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all the
equipments and the freight it may have earned during
the voyage.
The term "ship agent" as used in the foregoing provision
is broad enough to include the ship owner , hence, both

the ship owner and ship agent are civilly and directly
liable for the indemnities in favor of third persons,
which may arise from the conduct of the captain in the
care of goods transported, as well as for the safety of
passengers transported
However, this direct liability is moderated and limited
by the ship agent's or ship owner's right of abandonment
of the vessel and earned freight. This expresses the
universal principle of limited liability under maritime
law.
The most fundamental effect of abandonment is the
cessation of the responsibility of the ship agent/owner.
It has thus been held that by necessary implication, the
ship agent's or ship owner's liability is confined to that
which he is entitled as of right to abandon the vessel
with all her equipment and the freight it may have
earned during the voyage," and "to the insurance thereof
if any" (Yangco vs. Lasema). In other words, the ship
owner's or agent's liability is merely co-extensive with
his interest in the vessel such that a total loss thereof
results in its extinction. "No vessel, no liability"
expresses in a nutshell the limited liability rule. The
total destruction of the vessel extinguishes maritime
liens as there is no longer any res to which it can attach.
The limited liability rule, however, is not without
exceptions, namely:
(1) where the injury or death to a passenger is due either
to the fault of the ship owner, or to the concurring
negligence of the ship owner and the captain
(2) where the vessel is insured; and
(3) in workmen's compensation claims
In this case, there is nothing in the records to show that
the loss of the cargo was due to the fault of the private
respondent as shipowners, or to their concurrent
negligence with the captain of the vessel.