Aboitiz Shipping Corp. v.

Insurance Co, of North America

Re: Notice of claim filed 2 days late but SC said that there is substantial compliance of the
notice requirement for the recovery of damages.
Facts:
This was for a transshipment of certain wooden work tools and workbenches purchased for
the consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon
Lahug, Cebu City, Philippines.
The cargo, packed inside one container van, was shipped freight prepaid
from Hamburg, Germany on board M/S Katsuragi. A clean bill of lading was issued by HapagLloyd which stated the consignee to be STIP.
The container van was then off-loaded at Singapore and transshipped on board M/S
Vigour Singapore. On July 18, 1993, the ship arrived and docked at the Manila International
Container Port where the container van was again off-loaded. On July 26, 1993, the cargo
was received by petitioner Aboitiz Shipping Corporation (Aboitiz) through its duly authorized
booking representative, Aboitiz Transport System. The bill of lading issued by Aboitiz
contained the notation grounded outside warehouse.
The container van was stripped and transferred to another crate/container van without any
notation on the condition of the cargo on the Stuffing/Stripping Report. On August 1, 1993,
the container van was loaded on board petitioners vessel, MV Super Concarrier I. The vessel
left Manila en route to Cebu City on August 2, 1993.
On August 3, 1993, the shipment arrived in Cebu City and discharged onto a receiving apron
of the Cebu International Port. It was then brought to the Cebu Bonded Warehousing
Corporation pending clearance from the Customs authorities. In the Stripping
Report dated August 5, 1993, petitioners checker noted that the crates were slightly broken
or cracked at the bottom.
On August 11, 1993, the cargo was withdrawn by the representative of the consignee,
Science Teaching Improvement Project (STIP) and delivered to Don Bosco Technical High
School, Punta Princesa, Cebu City. It was received by Mr. Bernhard Willig. On August 13,
1993, Mayo B. Perez, then Claims Head of petitioner, received a telephone call from Willig
informing him that the cargo sustained water damage. Perez, upon receiving the call,
immediately went to the bonded warehouse and checked the condition of the container and
other cargoes stuffed in the same container. He found that the container van and other
cargoes stuffed there were completely dry and showed no sign of wetness.
Perez found that except for the bottom of the crate which was slightly broken, the crate itself
appeared to be completely dry and had no water marks. But he confirmed that the tools
which were stored inside the crate were already corroded. He further explained that the
grounded outside warehouse notation in the bill of lading referred only to the container van
bearing the cargo.
On September 21, 1993, the STIP filed a formal claim with Aboitiz.
In a Supplemental Report dated October 20, 1993, it was reported that based on official
weather report from the PAG-ASA, it would appear that heavy rains on July 28 and 29, 1993
caused water damage to the shipment. It noted that the shipment was placed outside the
warehouse of Pier No. 4, North Harbor, Manila when it was delivered on July 26, 1993. The
shipment was placed outside the warehouse as can be gleaned from the bill of lading issued

by Aboitiz which contained the notation "grounded outside warehouse". It was only on July
31, 1993 when the shipment was stuffed inside another container van for shipment to Cebu.
Aboitiz refused to settle the claim. Despite follow-ups, however, no reply was received from
Aboitiz.

July 26, 1993 shipment was received by Aboitiz in Manila

August 3, 1993 shipment arrived in Cebu
August 11, 1993 - shipment was delivered to STIP and Don Bosco.
August 13, 1993 informed by telephone Mr. Mayo B. Perez, Claims Head of Aboitiz of
the damage. Mr. Perez then immediately went to the warehouse and to the delivery
site to inspect the goods.
August 15, 1993 - letter informing Aboitiz (carrier) of the damage
September 21, 1993 received by Aboitiz that letter, together with the notice of
claim.

Issue/s:
Was there a timely filing of the notice of claim as required under Article 366 of the Code of
Commerce?
If so, can petitioner be held liable on the claim for damages?
Held:
YES.

There was substantial compliance with the notice requirement in this case.

The giving of notice of loss or injury is a condition precedent to the action for loss
or injury or the right to enforce the carrier's liability. Circumstances peculiar to
this case lead us to conclude that the notice requirement was complied with. As
held in the case of Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., this
notice requirement protects the carrier by affording it an opportunity to make an
investigation of the claim while the matter is still fresh and easily investigated. It is meant to
safeguard the carrier from false and fraudulent claims.
Under the Code of Commerce, the notice of claim must be made within twenty four (24)
hours from receipt of the cargo if the damage is not apparent from the outside of the
package. For damages that are visible from the outside of the package, the claim must be
made immediately. The law provides:
Article 366. Within twenty four hours following the receipt of the merchandise, the
claim against the carrier for damages or average which may be found therein upon
opening the packages, may be made, provided that the indications of the damage or
average which give rise to the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered. (Emphasis supplied)

The periods above, as well as the manner of giving notice may be modified in the terms of
the bill of lading, which is the contract between the parties. Notably, neither of the parties in
this case presented the terms for giving notices of claim under the bill of lading issued by
petitioner for the goods.
Stipulations requiring notice of loss or claim for damage as a condition precedent to the right
of recovery from a carrier must be given a reasonable and practical construction, adapted to
the circumstances of the case under adjudication, and their application is limited to cases
falling
fairly
within
their
object
and
purpose.
Provisions specifying a time to give notice of damage to common carriers are ordinarily to be
given a reasonable and practical, rather than a strict construction. We give due
consideration to the fact that the final destination of the damaged cargo was a school
institution where authorities are bound by rules and regulations governing their actions.
Understandably, when the goods were delivered, the necessary clearance had to be made
before the package was opened. Upon opening and discovery of the damaged condition of
the goods, a report to this effect had to pass through the proper channels before it could be
finalized and endorsed by the institution to the claims department of the shipping company.
The call to petitioner was made two days from delivery, a reasonable period considering that
the goods could not have corroded instantly overnight such that it could only have sustained
the damage during transit. Moreover, petitioner was able to immediately inspect the
damage while the matter was still fresh. In so doing, the main objective of the prescribed
time period was fulfilled. Thus, there was substantial compliance with the notice requirement
in this case.

Liable for the water damage sustained by the goods due to its failure to satisfactorily
prove that it exercised the extraordinary diligence required of common carriers.

The rule as stated in Article 1735 of the Civil Code is that in cases where the
goods are lost, destroyed or deteriorated, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence required by law. Extraordinary diligence is that extreme
measure of care and caution which persons of unusual prudence and circumspection use for
securing and preserving their own property rights. This standard is intended to grant favor to
the shipper who is at the mercy of the common carrier once the goods have been entrusted
to the latter for shipment.
Appellee carrier having failed to discharge the burden of proving that it exercised
extraordinary diligence in the vigilance over such goods it contracted for carriage, the
presumption of fault or negligence on its part from the time the goods were unconditionally
placed in its possession (July 26, 1993) up to the time the same were delivered to the
consignee (August 11, 1993), therefore stands. The presumption that the carrier was at fault
or that it acted negligently was not overcome by any countervailing evidence.
To prove the exercise of extraordinary diligence, petitioner must do more than merely show
the possibility that some other party could be responsible for the damage. It must prove that
it used "all reasonable means to ascertain the nature and characteristic of the goods
tendered for transport and that it exercised due care in handling them. Extraordinary
diligence must include safeguarding the shipment from damage coming from natural
elements such as rainfall.
Aside from denying that the "grounded outside warehouse" notation referred not to the crate
for shipment but only to the carrier van, petitioner failed to mention where exactly the goods

were stored during the period in question (between July 26-31). It failed to show that the
crate was properly stored indoors during the time when it exercised custody before shipment
to Cebu.