1.(a) What do you understand by the hypothecary nature of maritime law? (b) What is the general rule concerning said principle? (c) What are the exceptions to the rule?
Answer: The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliest years when such trade was replete with innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply their trade. It was designed to offset such adverse conditions and to encourage people and entities to venture into maritime commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation served to induce capitalists into effectively wagering their resources against the consideration of the large profits attainable in the trade.x x xNonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment of the vessel, as where the loss or injury was due to the fault of the shipowner and the captain. The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or average was occasioned by the shipowner's own fault.[38] Likewise, the shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner x x x As a general rule, a ship owner's liability is merely co-extensive with his interest in the vessel, except where actual fault is attributable to the shipowner. Thus, as an exception to the limited liability doctrine, a shipowner or ship agent may be held liable for damages when the sinking of the vessel is attributable to the actual fault or negligence of the shipowner or its failure to ensure the seaworthiness of the vessel. X x x 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 shipowner, or to the concurring negligence of the shipowner and the captain (Manila Steamship Co., Inc. vs. Abdulhaman, supra);
(2) where the vessel is insured; and
(3) in workmen's compensation claims (Abueg vs. San Diego, supra). 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 respondents as shipowners, or to their concurrent negligence with the captain of the vessel.
2. Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private respondents 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.
In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V Luzviminda I" for shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did not reach Manila because somewhere between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo.
On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental Mindoro, a Complaint for damages based on breach of contract of carriage against private respondents (Civil Case No. R-3205).
In their Answer, private respondents averred that even assuming that the alleged cargo was truly loaded aboard their vessel, their liability had been extinguished by reason of the total loss of said vessel.
Question: Who is correct on this matter: the petitioner or respondent? Explain your answer.
Answer: In sum, it will have to be held that since the ship agent’s or shipowner's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. (Yangco vs. Laserna, supra), and none of the exceptions to the rule on limited liability being present, the liability of private respondents for the loss of the cargo of copra must be deemed to have been extinguished. There is no showing that the vessel was insured in this case. (CHUA YEK HONG, PETITIONER, VS. INTERMEDIATE APPELLATE COURT, MARIANO GUNO, AND DOMINADOR OLIT, RESPONDENTS. SECOND DIVISION[ G.R. No. 74811, September 30, 1988 ])
3. On July 18, 1990, petitioner entrusted for repair his Nissan pick-up car 1988 model to private respondent - which is engaged in the sale, distribution and repair of motor vehicles. Private respondent undertook to return the vehicle on July 21, 1990 fully serviced and supplied in accordance with the job contract. After petitioner paid in full the repair bill in the amount of P1,397.00,[3] private respondent issued to him a gate pass for the release of the vehicle on said date. But came July 21, 1990, the latter could not use the vehicle as its battery was weak and was not yet replaced. Left with no option, petitioner himself bought a new battery nearby and delivered it to private respondent for installation on the same day. However, the battery was not installed and the delivery of the car was rescheduled to July 24, 1990 or three (3) days later. When petitioner sought to reclaim his car in the afternoon of July 24, 1990, he was told that it was carnapped earlier that morning while being road-tested by private respondent’s employee along Pedro Gil and Perez Streets in Paco, Manila. Private respondent said that the incident was reported to the police. Having failed to recover his car and its accessories or the value thereof, petitioner filed a suit for damages against private respondent anchoring his claim on the latter’s alleged negligence. For its part, private respondent contended that it has no liability because the car was lost as a result of a fortuitous event - the carnapping.
Questions: (a) Is carnapping a fortuitous event? (b) Can the repair shop be made liable for the value of the car and pay damages? (c) What do you understand by “the assumption of risk”? (d) Is this principle applicable in the case at bar?
Answer: It is a not a defense for a repair shop of motor vehicles to escape liability simply because the damage or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a thing was unlawfully and forcefully taken from another’s rightful possession, as in cases of carnapping, does not automatically give rise to a fortuitous event. To be considered as such, carnapping entails more than the mere forceful taking of another’s property. It must be proved and established that the event was an act of God or was done solely by third parties and that neither the claimant nor the person alleged to be negligent has any participation.[9] In accordance with the Rules of evidence, the burden of proving that the loss was due to a fortuitous event rests on him who invokes it[10]- which in this case is the private respondent. However, other than the police report of the alleged carnapping incident, no other evidence was presented by private respondent to the effect that the incident was not due to its fault. A police report of an alleged crime, to which only private respondent is privy, does not suffice to established the carnapping. Neither does it prove that there was no fault on the part of private respondent notwithstanding the parties’ agreement at the pre-trial that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the part of private respondent.
Even assuming arguendo that carnapping was duly established as a fortuitous event, still private respondent cannot escape liability. Article 1165[11] of the New Civil Code makes an obligor who is guilty of delay responsible even for a fortuitous event until he has effected the delivery. In this case, private respondent was already in delay as it was supposed to deliver petitioner’s car three (3) days before it was lost. Petitioner’s agreement to the rescheduled delivery does not defeat his claim as private respondent had already breached its obligation. Moreover, such accession cannot be construed as waiver of petitioner’s right to hold private respondent liable because the car was unusable and thus, petitioner had no option but to leave it.
Assuming further that there was no delay, still working against private respondent is the legal presumption under Article 1265 that its possession of the thing at the time it was lost was due to its fault.[12] This presumption is reasonable since he who has the custody and care of the thing can easily explain the circumstances of the loss. The vehicle owner has no duty to show that the repair shop was at fault. All that petitioner needs to prove, as claimant, is the simple fact that private respondent was in possession of the vehicle at the time it was lost. In this case, private respondent’s possession at the time of the loss is undisputed. Consequently, the burden shifts to the possessor who needs to present controverting evidence sufficient enough to overcome that presumption. Moreover, the exempting circumstances - earthquake, flood, storm or other natural calamity - when the presumption of fault is not applicable[13] do not concur in this case. Accordingly, having failed to rebut the presumption and since the case does not fall under the exceptions, private respondent is answerable for the loss.
It must likewise be emphasized that pursuant to Articles 1174 and 1262 of the New Civil Code, liability attaches even if the loss was due to a fortuitous event if “the nature of the obligation requires the assumption of risk”.[14] Carnapping is a normal business risk for those engaged in the repair of motor vehicles. For just as the owner is exposed to that risk so is the repair shop since the car was entrusted to it. That is why, repair shops are required to first register with the Department of Trade and Industry (DTI)[15] and to secure an insurance policy for the “shop covering the property entrusted by its customer for repair, service or maintenance” as a pre-requisite for such registration/accreditation.[16] Violation of this statutory duty constitutes negligence per se.[17] Having taken custody of the vehicle, private respondent is obliged not only to repair the vehicle but must also provide the customer with some form of security for his property over which he loses immediate control. An owner who cannot exercise the seven (7) juses or attributes of ownership – the right to possess, to use and enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate and to the fruits -[18] is a crippled owner. Failure of the repair shop to provide security to a motor vehicle owner would leave the latter at the mercy of the former. Moreover, on the assumption that private respondent’s repair business is duly registered, it presupposes that its shop is covered by insurance from which it may recover the loss. If private respondent can recover from its insurer, then it would be unjustly enriched if it will not compensate petitioner to whom no fault can be attributed. Otherwise, if the shop is not registered, then the presumption of negligence applies.
4. State the formula for computing the net earning capacity.
Answer: Net Earning Capacity = life expectancy* x (gross annual income - reasonable
living expenses),[53]
*Life expectancy = 2/3 (80 - age of the deceased)
5. In case a passenger dies by reason of the negligence of the driver what are the four possible damages that may be recovered by the heirs of the victim?
Answer: ART. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos ( now fifty thousand pesos), even though there may have been mitigating circumstances. In addition:(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death;(2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent’s inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court;(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.
6. What do you mean by the doctrine of “last clear chance”? When is it not applicable? What is its effect to a liability?
Answer: The doctrine of last clear chance applies to a situation where the plaintiff was guilty of prior or antecedent negligence, but the defendant − who had the last fair chance to avoid the impending harm and failed to do so − is made liable for all the consequences of the accident, notwithstanding the prior negligence of the plaintiff.[39] However, the doctrine does not apply where the party charged is required to act instantaneously, and the injury cannot be avoided by the application of all means at hand after the peril is or should have been discovered.[40]
7. Petitioner-spouses Samuel and Chinita Parilla and their co-petitioner-son Deodato Parilla, as dealers[4] of Pilipinas Shell Petroleum Corporation (Pilipinas Shell), have been in possession of a parcel of land (the property) located at the poblacion of Bantay, Ilocos Sur which was leased to it by respondent Dr. Prospero Pilar under a 10-year Lease Agreement[5] entered into in 1990.When the lease contract between Pilipinas Shell and respondent expired in 2000, petitioners remained in possession of the property on which they built improvements consisting of a billiard hall and a restaurant, maintained a sari-sari store managed by Leonardo Dagdag, Josefina Dagdag and Edwin Pugal, and allowed Flor Pelayo, Freddie Bringas and Edwin Pugal to use a portion thereof as parking lot.[6]Despite demands to vacate, petitioners[7] and the other occupants[8] remained in the property.Hence, respondent who has been residing in the United States,[9] through his attorney-in-fact Marivic Paz Padre, filed on February 4, 2002 a complaint for ejectment before the Bantay MTC with prayer for the issuance of a writ of preliminary injunction with damages[10] against petitioners and the other occupants of the property.After trial, the MTC, by Decision of February 3, 2003, ordered herein petitioners and their co-defendants and all persons claiming rights under them to vacate the property and to pay the plaintiff-herein respondent the amount of P50,000.00 as reasonable compensation for the use of the property and P10,000.00 as attorney's fees and to pay the cost of suit. And it ordered the plaintiff-herein respondent to reimburse defendants Samuel Parilla, Chinita Parilla and Deodato Parilla the amount of Two Million Pesos (P2,000,000.00) representing the value of the improvements introduced on the property.
QUESTION: Is the decision for reimbursement correct? In you opinion, what should be the correct ruling on the matter? What principle of law is applicable? Explain.
Answer: Petitioners' claim for reimbursement of the alleged entire value of the improvements does not thus lie under Article 1678. Not even for one-half of such alleged value, there being no substantial evidence, e.g., receipts or other documentary evidence detailing costs of construction. Besides, by petitioners' admission, of the structures they originally built — the billiard hall, restaurant, sari-sari store and a parking lot, only the "bodega-like" sari-sari store and the parking lot now exist.[27]
At all events, under Article 1678, it is the lessor who is given the option, upon termination of the lease contract, either to appropriate the useful improvements by paying one-half of their value at that time, or to allow the lessee to remove the improvements. This option solely belongs to the lessor as the law is explicit that "[s]hould the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby." It appears that the lessor has opted not to reimburse.
8. What is the effect if the lessor refuses to pay the lessee one-half of the value of the useful improvements introduced to a land leased?
Answer:The refusal of the lessor to pay the lessee one-half of the value of the useful improvements gives rise to the right of removal.
9. Sometime in 1956, Francisca Cardente, for and on behalf of her grandson, petitioner Ignacio Cardente, who was then a minor, and now married to his co-petitioner, purchased from Isidro Palanay one hectare of land. The property purchased is a part of a 9.2656-hectare parcel of land covered by Original Certificate of Title (O.C.T., for short) No. P-1380 in Palanay's name. Immediately after the purchase, the Cardentes took possession of the land and planted various crops and trees thereon. They have been in continuous possession ever since, adverse to the whole world. Unfortunately, however, the private document evidencing the sale of the one-hectare lot to petitioner Ignacio Cardente was lost and never found despite diligent efforts exerted to locate the same.
Some four years later, on August 18, 1960, Isidro Palanay sold the entire property covered by O.C.T. No. P-1380, including the one-hectare portion already sold to Cardente, this time to the private respondents, Ruperto Rubin and his wife. The deed of sale was registered and a new title, Transfer Certificate of Title (T.C.T., for short) No. 1173, was issued in favor of the Rubin spouses. Notwithstanding the second sale, or because of it, Isidro Palanay, with the written conforme of his wife, Josepha de Palanay, on December 9, 1972, executed a public document in favor of petitioner Ignacio Cardente confirming the sale to him (Cardente) in 1956 of the one hectare portion. The deed of confirmation likewise states that the subsequent vendee, respondent Ruperto Rubin, was informed by Palanay of the first sale of the one-hectare portion to Cardente.
By virtue of having the property titled in the name of Ruperto Rubin, he now claims that he is the owner of the whole property in question. Question: (a) Is the claim of Rubin correct? (b) Is this a case of double sale? (c) In case it is, what principle of law will you apply regarding double sale? Explain.
Answer: Admittedly, this case involves a double sale. While the private respondents allegedly bought from Isidro Palanay on August 18, 1960 the entire property comprising 9.2656 hectares and covered by O.C.T. No. P-1380, the petitioners, on the other hand, lay claim to one hectare thereof which they undeniably purchased from the same vendor earlier, in 1956. The conflict, therefore, falls under, and can be resolved by, Article 1544 of the Civil Code which sets the rules on double sales.
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
It is undisputed that the private respondents, the second vendees, registered the sale in their favor whereas the petitioners, the first buyers, did not. But mere registration of the sale is not enough. Good faith must concur with the registration. Bad faith renders the registration nothing but an exercise in futility. The law and jurisprudence are very clear on this score.
The heart of the problem is whether or not the private respondents acted in good faith when they registered the deed of sale dated August 18, 1960 more than six months later, on March 7, 1961. Inextricably, the inquiry must be directed on the knowledge, or lack of it, of the previous sale of the one-hectare portion on the part of the second buyers at the time of registration. The trial court found that the second vendees had such knowledge.
It is true that good faith is always presumed while bad faith must be proven by the party alleging it. In this case, however, viewed in the light of the circumstances obtaining, we have no doubt that the private respondents' presumed good faith has been sufficiently overcome and their bad faith amply established.
The "Confirmation Of A Deed Of Absolute Sale Of A Portion Of A Registered Agricultural Land" executed by the late Ignacio Palanay on December 9, 1972 and which was exhibited in the trial court below, admitted the sale of the one hectare portion to the petitioners sometime in 1956. The same deed likewise explicitly stated that the "fact of the previous sale, was well known and acknowledged by Mr. Ruperto Rubin (the private respondent)." These recitals were further buttressed by Concepcion Salubo, a daughter of Isidro Palanay, who testified that she knew of the previous sale of the one-hectare portion to petitioner Ignacio Cardente and that private respondent Ruperto Rubin was properly informed of the said sale. On this regard, no ill-motive had been attributed to the vendor Isidro Palanay and to his daughter Concepcion Salubo for testifying the way they did -- against the private respondents. They were disinterested persons who stood to gain nothing except, perhaps, the satisfaction of setting the record straight, or, in the words of the seller, "for the purpose of giving efficacy to the Deed of Sale I made to Ignacio Cardente which was made in a private document x x x."
Further, the notorious and continuous possession and full enjoyment by petitioners of the disputed one-hectare property long (four years) before the private respondents purchased the same from Palanay bolsters the petitioners' position. That possession would have been enough to arouse the suspicion of the private respondents as to the ownership of the entire area which they were about to purchase. Their failure to inquire and to investigate the basis of the petitioners' actual occupation of the land forming a substantial part of what they were buying militates against their posited lack of knowledge of the first sale. "A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor." We have warned time and again that a buyer of real property which is in the possession of persons other than the seller must be wary and should investigate the rights of those in possession. Otherwise, without such inquiry, the buyer can hardly be regarded as a buyer in good faith.
The private respondents' avowals that they had never known of the prior sale until the issues were joined at the trial court, for, before that, they merely tolerated the continued presence of the original occupants, Francisca and Eugenia Cardente, and Ignacio, in the premises, out of simple pity for the two old women, is too pat to be believed. For if these were so, the reason why the private respondents' continued to tolerate the occupation by the petitioners of the contested property even after the demise of the two old women escapes us. Rubin's allegation that this was because they were still in good terms with the petitioners is too lame an excuse to deserve even a scant consideration. The private respondents' total lack of action against the actual occupants of a good portion of the land described in their torrens title can only be construed as acceptance on their part of the existence of the prior sale and their resignation to the fact that they did not own the one-hectare portion occupied by the petitioners. Present these facts, the foisted ignorance of the respondents as to the first sale is an empty pretense. Their seventeen years of inaction and silence eloquently depict a realization of lack of right.
10.The factual antecedents of the case are summarized by the Court of Appeals in this wise:
“On June 13, 1990, CMC Trading A.G. shipped on board the MN ‘Anangel Sky’ at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss.
“Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee’s claim. Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter’s rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured.
“Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In addition thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.
Question: Is the argument of the defendants-appellees correct? Explain your answer.
Answer: Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.[13] Thus, common carriers are required to render service with the greatest skill and foresight and “to use all reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.”[14] The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them.[15]
This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a contract of transportation with common carriers.[16] Even if it wants to, it cannot submit its own stipulations for their approval.[17] Hence, it merely adheres to the agreement prepared by them.
Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed.[18] That is, unless they prove that they exercised extraordinary diligence in transporting the goods.[19] In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence.[20]
However, the presumption of fault or negligence will not arise[21] if the loss is due to any of the following causes:
(1) flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) an act of the public enemy in war, whether international or civil;
(3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the container; or
(5) an order or act of competent public authority.[22] This is a closed list. If the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor.[23]
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.[24]
x x x
A bill of lading serves two functions. First, it is a receipt for the goods shipped.[55] Second, it is a contract by which three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities and assume stipulated obligations.[56] In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract.[57]
Further, a stipulation in the bill of lading limiting to a certain sum the common carrier’s liability for loss or destruction of a cargo -- unless the shipper or owner declares a greater value[58] -- is sanctioned by law.[59] There are, however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by the parties.[60] The rationale for, this rule is to bind the shippers by their agreement to the value (maximum valuation) of their goods.[61]
It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per package.[62] In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws.[63] Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the bill of lading.[64] The provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties.[65]
In the case before us, there was no stipulation in the Bill of Lading[66] limiting the carrier’s liability. Neither did the shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words “L/C No. 90/02447 cannot be the basis for petitioners’ liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.[67] That notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.[68]
Second, in Keng Hua Paper Products v. Court of Appeals,[69] we held that a bill of lading was separate from the Other Letter of Credit arrangements. We ruled thus:
“(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis-à-vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioner’s obligation to private respondent arising from the contract of transportation.”[70]
In the light of the foregoing, petitioners’ liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.[71] In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court[72] we explained the meaning of package:
“When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the ‘package’ referred to in the liability limitation provision of Carriage of Goods by Sea Act.”
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as the shipping unit subject to the US$500 limitation.(BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. AND JARDINE DAVIES TRANSPORT SERVICES, INC., PETITIONERS, VS. PHILIPPINE FIRST INSURANCE CO., INC., RESPONDENT THIRD DIVISION[ G.R. No. 143133, June 05, 2002 ]
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