G.R. No.

146018               June 25, 2003 "Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong
Shipping Lines, Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo
EDGAR COKALIONG SHIPPING LINES, INC., Petitioner,
consisting of one (1) carton of Christmas décor and two (2) sacks of plastic toys, to be
vs.
transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
from Cebu City, on December 12, 1991, for Tandag, Surigao del Sur. [Petitioner]
DECISION issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia was both
the shipper and consignee of the cargo valued, on the face thereof, in the amount
PANGANIBAN, J.: of P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two
The liability of a common carrier for the loss of goods may, by stipulation in the bill of (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat and one (1)
lading, be limited to the value declared by the shipper. On the other hand, the liability of bundle of various or assorted goods for transportation thereof from Cebu City to Tandag,
the insurer is determined by the actual value covered by the insurance policy and the Surigao del Sur, on board the said vessel, and said voyage. [Petitioner] issued Bill of
insurance premiums paid therefor, and not necessarily by the value declared in the bill of Lading No. 59 covering the cargo which, on the face thereof, was valued in the amount
lading. of P14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper and
consignee of the cargo.
The Case
"On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading
Before the Court is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to No. 59, with the UCPB General Insurance Co., Inc., [respondent] for brevity, for the
set aside the August 31, 2000 Decision 2 and the November 17, 2000 Resolution3 of the amount of P100,000.00 ‘against all risks’ under Open Policy No. 002/9 1/254 for which
Court of Appeals4 (CA) in CA-GR SP No. 62751. The dispositive part of the Decision reads: she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also
"IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from insured the cargo covered by Bill of Lading No. 58, with [respondent], for the amount
is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total amount of P50,000.00, under Open Policy No. 002/9 1/254 on the basis of which [respondent]
of P148,500.00, with interest thereon, at the rate of 6% per annum, from date of this issued Marine Risk Note No. 18410 on said date.
Decision of the Court. [Respondent’s] claim for attorney’s fees [is] DISMISSED. "When the vessel left port, it had thirty-four (34) passengers and assorted cargo on
[Petitioner’s] counterclaims are DISMISSED."5 board, including the goods of Legaspi. After the vessel had passed by the Mandaue-
The assailed Resolution denied petitioner’s Motion for Reconsideration. Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the
officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting
On the other hand, the disposition of the Regional Trial Court’s 6 Decision,7 which was in the loss of the vessel and the cargoes therein. The Captain filed the required Marine
later reversed by the CA, states: Protest.
"WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit. "Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the
cargo insured under Marine Risk Note No. 18409 and covered by Bill of Lading No. 59.
"No cost."8
She submitted, in support of her claim, a Receipt, dated December 11, 1991, purportedly
The Facts signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he
received from Feliciana Legaspi valued in the amount of P110,056.00. [Respondent]
The facts of the case are summarized by the appellate court in this wise:
approved the claim of Feliciana Legaspi and drew and issued UCPB Check No. 612939,
dated March 9, 1992, in the net amount of P99,000.00, in settlement of her claim after complaint stated no cause of action against [petitioner]; and (c) the shippers/consignee
which she executed a Subrogation Receipt/Deed, for said amount, in favor of had already been paid the value of the goods as stated in the Bill of Lading and, hence,
[respondent]. She also filed a claim for the value of the cargo covered by Bill of Lading [petitioner] cannot be held liable for the loss of the cargo beyond the value thereof
No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991 and Order declared in the Bill of Lading.
Slips, purportedly signed by Nestor Angelia for the goods he received from Feliciana
"After [respondent] rested its case, [petitioner] prayed for and was allowed, by the
Legaspi valued at P60,338.00. [Respondent] approved her claim and remitted to Feliciana
Court a quo, to take the depositions of Chester Cokaliong, the Vice-President and Chief
Legaspi the net amount of P49,500.00, after which she signed a Subrogation
Operating Officer of [petitioner], and a resident of Cebu City, and of Noel Tanyu, an
Receipt/Deed, dated March 9, 1992, in favor of [respondent].
officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to
"On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint be given before the Presiding Judge of Branch 106 of the Regional Trial Court of Cebu
anchored on torts against [petitioner], with the Regional Trial Court of Makati City, for City. Chester Cokaliong and Noel Tanyu did testify, by way of deposition, before the
the collection of the total principal amount of P148,500.00, which it paid to Feliciana Court and declared inter alia, that: [petitioner] is a family corporation like the Chester
Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and Chester
against the [petitioner] as follows: Marketing, Inc., for years, and incurred an account with Chester Marketing, Inc. for his
purchases from said corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for
‘WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing,
the cargo described therein with Zosimo Mercado and Nestor Angelia as
judgment be rendered ordering [petitioner] to pay [respondent] the following.
shippers/consignees, respectively; the engine room of the M/V Tandag caught fire after
1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate it passed the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its
from the time of filing of this complaint until fully paid; cargo; an investigation was conducted by the Board of Marine Inquiry of the Philippine
Coast Guard which rendered a Report, dated February 13, 1992 absolving [petitioner] of
2. Attorney’s fees in the amount of P10,000.00; and any responsibility on account of the fire, which Report of the Board was approved by the
3. Cost of suit. District Commander of the Philippine Coast Guard; a few days after the sinking of the
vessel, a representative of the Legaspi Marketing filed claims for the values of the goods
‘[Respondent] further prays for such other reliefs and remedies as this Honorable Court under Bills of Lading Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia
may deem just and equitable under the premises.’ and Zosimo Mercado; [petitioner] was able to ascertain, from the shippers/consignees
"[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint and the representative of the Legaspi Marketing that the cargo covered by Bill of Lading
was delivered to, and received by, [petitioner] for transportation to Tandag, Surigao del No. 59 was owned by Legaspi Marketing and consigned to Zosimo Mercado while that
Sur under ‘Bill of Ladings,’ Annexes ‘A’ and ‘B’ of the complaint; that the loss of the cargo covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the Legaspi
was due to the negligence of the [petitioner]; and that Feliciana Legaspi had Marketing; that [petitioner] approved the claim of Legaspi Marketing for the value of the
executed Subrogation Receipts/Deeds in favor of [respondent] after paying to her the cargo under Bill of Lading No. 59 and remitted to Legaspi Marketing the said amount
value of the cargo on account of the Marine Risk Notes it issued in her favor covering the under Equitable Banking Corporation Check No. 20230486 dated August 12, 1992, in the
cargo. amount of P14,000.00 for which the representative of the Legaspi Marketing signed
Voucher No. 4379, dated August 12, 1992, for the said amount of P14,000.00 in full
"In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by payment of claims under Bill of Lading No. 59; that [petitioner] approved the claim of
the Board of Marine Inquiry of any negligence in the burning of the vessel; (b) the Nestor Angelia in the amount of P6,500.00 but that since the latter owed Chester
Marketing, Inc., for some purchases, [petitioner] merely set off the amount due to [respondent] for the total amount of P150,000.00, which amount may be considered as
Nestor Angelia under Bill of Lading No. 58 against his account with Chester Marketing, the face value of the goods."11
Inc.; [petitioner] lost/[misplaced] the original of the check after it was received by
Hence this Petition.12
Legaspi Marketing, hence, the production of the microfilm copy by Noel Tanyu of the
Equitable Banking Corporation; [petitioner] never knew, before settling with Legaspi Issues
Marketing and Nestor Angelia that the cargo under both Bills of Lading were insured
with [respondent], or that Feliciana Legaspi filed claims for the value of the cargo with Petitioner raises for our consideration the following alleged errors of the CA:
[respondent] and that the latter approved the claims of Feliciana Legaspi and paid the "I
total amount of P148,500.00 to her; [petitioner] came to know, for the first time, of the
payments by [respondent] of the claims of Feliciana Legaspi when it was served with the "The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in
summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x x holding that petitioner’s liability should be based on the ‘actual insured value’ of the
executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 goods and not from actual valuation declared by the shipper/consignee in the bill of
in favor of [respondent]; hence, [petitioner] was absolved of any liability for the loss of lading.
the cargo covered by Bills of Lading Nos. 58 and 59; and even if it was, its liability should "II
not exceed the value of the cargo as stated in the Bills of Lading.
"The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard,
"[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x as sustained by the trial court a quo, holding that the cause of loss of the aforesaid
x"9 (Citations omitted) cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due diligence
Ruling of the Court of Appeals was [exercised] by petitioner prior to, during and immediately after the fire on
[petitioner’s] vessel.
The CA held that petitioner had failed "to prove that the fire which consumed the vessel
and its cargo was caused by something other than its negligence in the upkeep, "III
maintenance and operation of the vessel."10 "The Court of Appeals erred in not holding that respondent UCPB General Insurance has
Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading no cause of action against the petitioner."13
No. 59. The CA, however, held that the payment did not extinguish petitioner’s In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable,
obligation to respondent, because there was no evidence that Feliciana Legaspi (the what is the extent of its liability?
insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the
impropriety of treating the claim under Bill of Lading No. 58 -- covering cargo valued This Court’s Ruling
therein at P6,500 -- as a setoff against Nestor Angelia’s account with Chester Enterprises,
The Petition is partly meritorious.
Inc.
First Issue:
Finally, it ruled that respondent "is not bound by the valuation of the cargo under the
Bills of Lading, x x x nor is the value of the cargo under said Bills of Lading conclusive on Liability for Loss
the [respondent]. This is so because, in the first place, the goods were insured with the
Petitioner argues that the cause of the loss of the goods, subject of this case, was force The law provides that a common carrier is presumed to have been negligent if it fails to
majeure. It adds that its exercise of due diligence was adequately proven by the findings prove that it exercised extraordinary vigilance over the goods it transported. Ensuring
of the Philippine Coast Guard. the seaworthiness of the vessel is the first step in exercising the required vigilance.
Petitioner did not present sufficient evidence showing what measures or acts it had
We are not convinced. The uncontroverted findings of the Philippine Coast Guard show
undertaken to ensure the seaworthiness of the vessel. It failed to show when the last
that the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary
inspection and care of the auxiliary engine fuel oil service tank was made, what the
engine fuel oil service tank. Fuel spurted out of the crack and dripped to the heating
normal practice was for its maintenance, or some other evidence to establish that it had
exhaust manifold, causing the ship to burst into flames. The crack was located on the
exercised extraordinary diligence. It merely stated that constant inspection and care
side of the fuel oil tank, which had a mere two-inch gap from the engine room walling,
were not possible, and that the last time the vessel was dry-docked was in November
thus precluding constant inspection and care by the crew.
1990. Necessarily, in accordance with Article 1735 17 of the Civil Code, we hold petitioner
Having originated from an unchecked crack in the fuel oil service tank, the fire could not responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.
have been caused by force majeure. Broadly speaking, force majeure generally applies to
Second Issue:
a natural accident, such as that caused by a lightning, an earthquake, a tempest or a
public enemy.14 Hence, fire is not considered a natural disaster or calamity. In Eastern Extent of Liability
Shipping Lines, Inc. v. Intermediate Appellate Court,15 we explained:
Respondent contends that petitioner’s liability should be based on the actual insured
"x x x. This must be so as it arises almost invariably from some act of man or by human value of the goods, subject of this case. On the other hand, petitioner claims that its
means. It does not fall within the category of an act of God unless caused by lighting or liability should be limited to the value declared by the shipper/consignee in the Bill of
by other natural disaster or calamity. It may even be caused by the actual fault or privity Lading.
of the carrier.
The records18 show that the Bills of Lading covering the lost goods contain the stipulation
"Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event that in case of claim for loss or for damage to the shipped merchandise or property,
refers to leases or rural lands where a reduction of the rent is allowed when more than "[t]he liability of the common carrier x x x shall not exceed the value of the goods as
one-half of the fruits have been lost due to such event, considering that the law adopts a appearing in the bill of lading."19 The attempt by respondent to make light of this
protective policy towards agriculture. stipulation is unconvincing. As it had the consignees’ copies of the Bills of Lading, 20 it
could have easily produced those copies, instead of relying on mere allegations and
"As the peril of fire is not comprehended within the exceptions in Article 1734, supra,
suppositions. However, it presented mere photocopies thereof to disprove petitioner’s
Article 1735 of the Civil Code provides that in all cases other than those mentioned in
evidence showing the existence of the above stipulation.
Article 1734, the common carrier shall be presumed to have been at fault or to have
acted negligently, unless it proves that it has observed the extraordinary diligence A stipulation that limits liability is valid21 as long as it is not against public policy.
required by law." In Everett Steamship Corporation v. Court of Appeals, 22 the Court stated:

Where loss of cargo results from the failure of the officers of a vessel to inspect their ship "A stipulation in the bill of lading limiting the common carrier’s liability for loss or
frequently so as to discover the existence of cracked parts, that loss cannot be attributed destruction of a cargo to a certain sum, unless the shipper or owner declares a greater
to force majeure, but to the negligence of those officials. 16 value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provides:
‘Art. 1749. A stipulation that the common carrier’s liability is limited to the value of the unit (whichever is least) unless the value of the goods higher than this amount is
goods appearing in the bill of lading, unless the shipper or owner declares a greater declared in writing by the shipper before receipt of the goods by the carrier and inserted
value, is binding.’ in the Bill of Lading and extra freight is paid as required.’

‘Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for "The above stipulations are, to our mind, reasonable and just. In the bill of lading, the
the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just carrier made it clear that its liability would only be up to One Hundred Thousand
under the circumstances, and has been freely and fairly agreed upon.’ (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was higher than the limited liability of the
"Such limited-liability clause has also been consistently upheld by this Court in a number
carrier. Considering that the shipper did not declare a higher valuation, it had itself to
of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:
blame for not complying with the stipulations." (Italics supplied)
‘It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not
In the present case, the stipulation limiting petitioner’s liability is not contrary to public
exist, the validity and binding effect of the liability limitation clause in the bill of lading
policy. In fact, its just and reasonable character is evident. The shippers/consignees may
here are nevertheless fully sustainable on the basis alone of the cited Civil Code
recover the full value of the goods by the simple expedient of declaring the true value of
Provisions. That said stipulation is just and reasonable is arguable from the fact that it
the shipment in the Bill of Lading. Other than the payment of a higher freight, there was
echoes Art. 1750 itself in providing a limit to liability only if a greater value is not
nothing to stop them from placing the actual value of the goods therein. In fact, they
declared for the shipment in the bill of lading. To hold otherwise would amount to
committed fraud against the common carrier by deliberately undervaluing the goods in
questioning the justness and fairness of the law itself, and this the private respondent
their Bill of Lading, thus depriving the carrier of its proper and just transport fare.
does not pretend to do. But over and above that consideration, the just and reasonable
character of such stipulation is implicit in it giving the shipper or owner the option of Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the
avoiding accrual of liability limitation by the simple and surely far from onerous common carrier. Such stipulation obliges the shipper/consignee to notify the common
expedient of declaring the nature and value of the shipment in the bill of lading.’ carrier of the amount that the latter may be liable for in case of loss of the goods. The
common carrier can then take appropriate measures -- getting insurance, if needed, to
"Pursuant to the afore-quoted provisions of law, it is required that the stipulation
cover or protect itself. This precaution on the part of the carrier is reasonable and
limiting the common carrier’s liability for loss must be ‘reasonable and just under the
prudent. Hence, a shipper/consignee that undervalues the real worth of the goods it
circumstances, and has been freely and fairly agreed upon.
seeks to transport does not only violate a valid contractual stipulation, but commits a
"The bill of lading subject of the present controversy specifically provides, among others: fraudulent act when it seeks to make the common carrier liable for more than the
amount it declared in the bill of lading.
’18. All claims for which the carrier may be liable shall be adjusted and settled on the
basis of the shipper’s net invoice cost plus freight and insurance premiums, if paid, and in Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods
no event shall the carrier be liable for any loss of possible profits or any consequential in their respective Bills of Lading. Hence, petitioner was exposed to a risk that was
loss. deliberately hidden from it, and from which it could not protect itself.

‘The carrier shall not be liable for any loss of or any damage to or in any connection with, It is well to point out that, for assuming a higher risk (the alleged actual value of the
goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency goods) the insurance company was paid the correct higher premium by Feliciana Legaspi;
(¥100,000.00) or its equivalent in any other currency per package or customary freight while petitioner was paid a fee lower than what it was entitled to for transporting the
goods that had been deliberately undervalued by the shippers in the Bill of Lading.
Between the two of them, the insurer should bear the loss in excess of the value
declared in the Bills of Lading. This is the just and equitable solution.

In Aboitiz Shipping Corporation v. Court of Appeals,23 the description of the nature and

We find no cogent reason to disturb the CA’s finding that Feliciana Legaspi was the
owner of the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods
were merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus,
Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of
loss, to compensation therefor. There is no evidence showing that petitioner paid her for
the loss of those goods. It does not even claim to have paid her.

On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods
under Bill of Lading No. 59, for which the latter subsequently paid P14,000. But nothing
in the records convincingly shows that the former was the owner of the goods.
Respondent was, however, able to prove that it was Feliciana Legaspi who owned those
goods, and who was thus entitled to payment for their loss. Hence, the claim for the
goods under Bill of Lading No. 59 cannot be deemed to have been extinguished, because
payment was made to a person who was not entitled thereto.

With regard to the claim for the goods that were covered by Bill of Lading No. 58 and
valued at P6,500, the parties have not convinced us to disturb the findings of the CA that
compensation could not validly take place. Thus, we uphold the appellate court’s ruling
on this point.

WHEREFORE, the Petition is hereby PARTIALLY GRANTED.  The assailed Decision

SO ORDERED.