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VOL. 383, JUNE 5, 2002 23

Belgian Overseas Chartering and Shipping N.V. vs.
Philippine First Insurance Co., Inc.
*
G.R. No. 143133. June 5, 2002.

BELGIAN OVERSEAS CHARTERING AND SHIPPING

N.V. and JARDINE DAVIES TRANSPORT SERVICES,
INC., petitioners, vs. PHILIPPINE FIRST INSURANCE
CO., INC., respondent.

Common Carriers; Well­settled 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.—Well­settled 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. 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.”
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.
Same; Negligence; Presumption of Fault or Negligence; Owing
to the 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.—
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. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to
avoid responsibility for any loss or damage, therefore, they have
the burden of proving that they observed such diligence.

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Same; Same; Same; Exceptions; The exceptions to the

presumption of fault or negligence is a closed list—if the cause of
destruction, loss or deterioration is other than the enumerated
circumstances, then the carrier is liable therefor.—However, the
presumption of fault or negligence will not arise 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

______________

* THIRD DIVISION.

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24 SUPREME COURT REPORTS ANNOTATED

Belgian Overseas Chartering and Shipping N.V. vs. Philippine

First Insurance Co., Inc.

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. 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.
Same; Same; Same; 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.— 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.
Same; Same; Same; Equipped with the proper knowledge of
the nature of steel sheets in coils and of the proper way of
transporting them, the master of the vessel and his crew should
have undertaken precautionary measures to avoid possible
deterioration of the cargo.—True, the words “metal envelopes rust
stained and slightly dented” were noted on the Bill of Lading;
however, there is no showing that petitioners exercised due
diligence to forestall or lessen the loss. Having been in the service
for several years, the master of the vessel should have known at

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the outset that metal envelopes in the said state would eventually
deteriorate when not properly stored while in transit. Equipped
with the proper knowledge of the nature of steel sheets in coils
and of the proper way of transporting them, the master of the
vessel and his crew should have undertaken precautionary
measures to avoid possible deterioration of the cargo. But none of
these measures was taken. Having failed to discharge the burden
of proving that they have exercised the extraordinary diligence
required by law, petitioners cannot escape liability for the damage
to the four coils.
Same; Same; Same; The exemption provided in Article 1734(4)
of the Civil Code refers to cases when goods are lost or damaged
while in transit as a result of the natural decay of perishable goods
or the fermentation or evaporation of substances liable therefor, the
necessary and natural wear of goods in transport, defects in
packages in which they are shipped, or the natural propensities of
animals.—In their attempt to escape liability, petitioners further
contend that they are exempted from liability under Article
1734(4) of the Civil Code. They cite the notation “metal envelopes
rust stained and slightly dented” printed on the Bill of Lading as
evidence

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VOL. 383, JUNE 5, 2002 25

Belgian Overseas Chartering and Shipping N.V. vs. Philippine

First Insurance Co., Inc.

that the character of the goods or defect in the packing or the

containers was the proximate cause of the damage. We are not
convinced. From the evidence on record, it cannot be reasonably
concluded that the damage to the four coils was due to the
condition noted on the Bill of Lading. The aforecited exception
refers to cases when goods are lost or damaged while in transit as
a result of the natural decay of perishable goods or the
fermentation or evaporation of substances liable therefor, the
necessary and natural wear of goods in transport, defects in
packages in which they are shipped, or the natural propensities of
animals. None of these is present in the instant case.
Same; Same; Same; Even if the fact of improper packing was
known to the carrier or its crew or was apparent upon ordinary
observation, it is not relieved of liability for loss or injury resulting
therefrom, once it accepts the goods notwithstanding such
condition.—Further, even if the fact of improper packing was
known to the carrier or its crew or was apparent upon ordinary
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observation, it is not relieved of liability for loss or injury

resulting therefrom, once it accepts the goods notwithstanding
such condition. Thus, petitioners have not successfully proven the
application of any of the aforecited exceptions in the present case.
Same; Carriage of Goods by Sea Act (COGSA); The notice of
claim required under Section 3, paragraph 6 of the COGSA need
not be given if the state of the goods, at the time of their receipt,
has been the subject of a joint inspection or survey.—Petitioners
claim that pursuant to Section 3, paragraph 6 of the Carriage of
Goods by Sea Act (COGSA), respondent should have filed its
Notice of Loss within three days from delivery. They assert that
the cargo was discharged on July 31, 1990, but that respondent
filed its Notice of Claim only on September 18, 1990. We are not
persuaded. First, the above­cited provision of COGSA provides
that the notice of claim need not be given if the state of the goods,
at the time of their receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior to unloading the
cargo, an Inspection Report as to the condition of the goods was
prepared and signed by representatives of both parties.
Same; Same; Prescription; A claim is not barred by
prescription as long as the one­year period has not lapsed.—As
stated in the same provision, a failure to file a notice of claim
within three days will not bar recovery if it is nonetheless filed
within one year. This one­year prescriptive period also applies to
the shipper, the consignee, the insurer of the goods or any legal
holder of the bill of lading. In Loadstar Shipping Co., Inc. v. Court
of Appeals, we ruled that a claim is not barred by prescription as

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26 SUPREME COURT REPORTS ANNOTATED

Belgian Overseas Chartering and Shipping N.V. vs. Philippine

First Insurance Co., Inc.

long as the one­year period has not lapsed. Thus, in the words of
the ponente, Chief Justice Hilario G. Davide Jr.: “Inasmuch as the
neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea
Act (COGSA)—which provides for a one­year period of limitation
on claims for loss of, or damage to, cargoes sustained during
transit—may be applied suppletorily to the case at bar.”
Same; Same; Bills of Lading; Bill of lading serves two
functions as receipt for the goods shipped, and as a contract by
which three parties, namely, the shipper, the carrier, and the

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consignee, undertake specific responsibilities and assume

stipulated obligations.—A bill of lading serves two functions.
First, it is a receipt for the goods shipped. Second, it is a contract
by which three parties—namely, the shipper, the carrier, and the
consignee—undertake specific responsibilities and assume
stipulated obligations. 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.
Same; Same; Same; 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 is sanctioned by law.—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—is sanctioned by law. 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. The rationale for,
this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.
Same; Same; Same; 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—
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.—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. 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. 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

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VOL. 383, JUNE 5, 2002 27

Belgian Overseas Chartering and Shipping N.V. vs. Philippine

First Insurance Co., Inc.

lading. The provisions on limited liability are as much a part of

the bill of lading as though physically in it and as though placed
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there by agreement of the parties.

Same; Same; Same; A notation in the Bill of Lading which
indicates the amount of the Letter of Credit obtained by the shipper
for the importation of the articles does not effect a declaration of
the value of the goods as required by the bill—that notation is
made only for the convenience of the shipper and the bank
processing the Letter of Credit.—In the case before us, there was
no stipulation in the Bill of Lading 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. That notation was made only for the
convenience of the shipper and the bank processing the Letter of
Credit. Second, in Keng Hua Paper Products v. Court of Appeals,
we held that a bill of lading was separate from the Other Letter of
Credit arrangements.
Same; Same; Same; Words and Phrases; “Package,”
Explained; 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 these
units and not the container constitutes the “package” referred to in
the liability limitation provision of COGSA.— 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. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court, 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.”

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

     Del Rosario and Del Rosario for petitioners.
     Astorga & Repol Law Offices for private respondent.
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Belgian Overseas Chartering and Shipping N.V. vs.
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PANGANIBAN, J.:

Proof of the delivery of goods in good order to a common

carrier and of their arrival in bad order at their destination
constitutes prima facie fault or negligence on the part of
the carrier. If no adequate explanation is given as to how
the loss, the destruction or the deterioration of the goods
happened, the carrier shall be held liable therefor.

Statement of the Case

Before us is a Petition for Review under Rule 45 of1 the

Rules of Court, assailing the
2
July 15, 1998 Decision3 and
the May 2, 2000 Resolution of the Court of Appeals (CA)
in CA­GR CV No. 53571. The decretal portion of the
Decision reads as follows:

“WHEREFORE, in the light of the foregoing disquisition, the

decision appealed from is hereby REVERSED and SET ASIDE.
Defendants­appellees are ORDERED to jointly and severally pay
plaintiffs­appellants the following:

‘1) FOUR Hundred Fifty One Thousand Twenty­Seven Pesos

and 32/100 (P451,027.32) as actual damages, representing
the value of the damaged cargo, plus interest at the legal
rate from the time of filing of the complaint on July 25,
1991, until fully paid;
‘2) Attorney’s fees amounting to 20% of the claim; and
4
‘3) Costs of suit.’ ”

The assailed Resolution denied petitioner’s Motion for

Reconsideration.
The CA reversed the Decision of the Regional Trial
Court (RTC) of Makati City (Branch 134), which had
disposed as follows:

______________

1 Rollo, pp. 48­55.

2 Ibid., p. 57.
3 Written by Justice Jainal D. Rasul (Division chairman); concurred in
by Justices Delilah Vidallon­Magtolis and Rodrigo V. Cosico (members).
4 CA Decision, pp. 7­8; Rollo, pp. 54­55.

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Philippine First Insurance Co., Inc.

“WHEREFORE, in view of the foregoing, judgment is hereby

rendered, dismissing the complaint, as well as defendant’s
5
counterclaim.”

The Facts

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 M/V
‘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, M/V
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, defendants­appellees
refused to submit to the consignee’s claim. Consequently,
plaintiff­appellant 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, plaintiff­appellant 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,
defendants­appellees 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
6
shipment.”

______________

5 RTC Decision, p. 4; Rollo, p. 108; penned by Acting Presiding Judge

Paul T. Arcangel.
6 CA Decision, pp. 1­3; Rollo, pp. 48­50.

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Belgian Overseas Chartering and Shipping N.V. vs.
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Ruling of the Trial Court

The RTC dismissed the Complaint because respondent had

failed to prove 7 its claims with the quantum of proof
required by law.
It likewise debunked petitioners’ counterclaim, because
respondent’s suit was not8 manifestly frivolous or primarily
intended to harass them.

Ruling of the Court of Appeals

In reversing the trial court, the CA ruled that petitioners

were liable for the loss or the damage of the goods shipped,
because they had failed to overcome the presumption of
negligence imposed on common carriers.
The CA further held as inadequately proven petitioners’
claim that the loss or the deterioration
9
of the goods was
due to preshipment damage. It likewise opined that the
notation “metal envelopes rust stained and slightly dented”
placed on the Bill of Lading had not been 10
the proximate
cause of the damage to the four (4) coils.
As to the extent of petitioners’ liability, the CA held that
the package limitation under COGSA was not applicable,
because the words “L/C No. 90/02447” indicated that a
higher valuation of the cargo had been declared by the
shipper. The CA, however, affirmed the award of attorney’s
fees. 11
Hence, this Petition.

______________

7 RTC Decision, p. 3; Rollo, p. 107.

8 Ibid., pp. 4 & 108.
9 CA Decision; p. 5; Rollo, p. 52.
10 Ibid., pp. 6 & 53.
11 The case was deemed submitted for decision on March 29, 2001, upon
the Court’s receipt of respondent’s Memorandum signed by Atty. Baltazar
Y. Repol. Petitioners’ Memorandum, filed on February 9, 2001, was signed
by Atty. Lancelot S. Limqueco.

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VOL. 383, JUNE 5, 2002 31

Belgian Overseas Chartering and Shipping N.V. vs.
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Issues

In their Memorandum, petitioners raise the following

issues for the Court’s consideration:

“Whether or not plaintiff by presenting only one witness who has

never seen the subject shipment and whose testimony is purely
hearsay is sufficient to pave the way for the applicability of
Article 1735 of the Civil Code;

II

“Whether or not the consignee/plaintiff filed the required notice

of loss within the time required by law;

III

“Whether or not a notation in the bill of lading at the time of

loading is sufficient to show pre­shipment damage and to exempt
herein defendants from liability;

IV

“Whether or not the “PACKAGE LIMITATION” of liability

12
under Section 4 (5) of COGSA is applicable to the case at bar.”

In sum, the issues boil down to three:

1. Whether petitioners have overcome the

presumption of negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is
applicable

This Court’s Ruling

The Petition is partly meritorious.

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First Issue:
Proof of Negligence

Petitioners contend that the presumption of fault imposed

on common carriers should not be applied on the basis of
the lone

______________

12 Pages 5­6; Rollo, pp. 172­173.

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Belgian Overseas Chartering and Shipping N.V. vs.
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testimony offered by private respondent. The contention is

untenable.
Well­settled 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 13the safety of the goods and the passengers
they transport. 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
14
such methods as their nature requires.” 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 the15consignee or to the person
who has a right to receive them.
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 16into a contract of
transportation with common carriers. Even if it wants to, 17
it cannot submit its own stipulations for their approval.
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 18
they transported
deteriorated or got lost or destroyed. That is, unless they

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prove that they exercised

19
extraordinary diligence in
transporting the goods. In order to avoid re­

______________

13 Art. 1733, Civil Code.

14 Compania Maritima v. Court of Appeals, 164 SCRA 685, 692, August
29, 1988, per Fernan, CJ.
15 Art. 1736, Civil Code.
16 Valenzuela Hardwood and Industrial Supply, Inc. v. Court of
Appeals, 274 SCRA 642, June 30, 1997.
17 Ibid.
18 Philippine American General Insurance Co, Inc. v. MGG Marine
Services, Inc., G.R. No. 135645, March 8, 2002, 378 SCRA 650.
19 Art. 1735 Civil Code. “In all cases other than those mentioned in Nos.
1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to

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Belgian Overseas Chartering and Shipping N.V. vs.
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sponsibility for any loss or damage, therefore, they have 20

the burden of proving that they observed such diligence.
However,
21
the presumption of fault or negligence will not
arise 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;
22
or (5) an order or
act of competent public authority. This is a closed list. If
the cause of destruction, loss or deterioration is other than
the enumerated
23
circumstances, then the carrier is liable
therefor.
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 24goods happened, the
transporter shall be held responsible.
That petitioners failed to rebut the prima facie
presumption of negligence is revealed in the case at bar by

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a review of the records 25

and more so by the evidence
adduced by respondent.
First, as stated in the Bill of Lading, petitioners received
the subject shipment 26
in good order and condition in
Hamburg, Germany.

______________

have acted negligently, unless they prove that they observed

extraordinary diligence as required in Article 1733.”
20 Tabacalera Insurance Co. v. North Front Shipping Services, Inc., 272
SCRA 527, May 16, 1997.
21 Philippine American General Insurance Co, Inc. v. MGG Marine
Services, Inc., supra.
22 Art. 1734, Civil Code.
23 Tabacalera Insurance Co. v. North Front Shipping Services, Inc.
supra.
24 Compania Maritima v. Court of Appeals, supra; Mirasol v. Robert
Dollar Co., 53 Phil. 129, March 27, 1929; Ynchausti Steamship Co. v.
Dexter and Unson, 41 Phil. 289, December 14, 1920.
25 Tabacalera Insurance Co. v. North Front Shipping Services, Inc.,
supra.
26 See Exhibit “A”; Records, p. 31.

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Second,27 prior to the unloading of the cargo, an Inspection

Report prepared and signed by representatives of both
parties showed the steel bands broken, the metal envelopes
rust­stained and heavily buckled, and the contents thereof
exposed and rusty. 28
Third, Bad Order Tally Sheet No. 154979 issued by
Jardine Davies Transport Services, Inc., stated that the
four coils were in bad order and condition. Normally, a
request for a bad order survey is made 29in case there is an
apparent or a presumed loss or damage. 30
Fourth, the Certificate of Analysis stated that, based
on the sample submitted and tested, the steel sheets found
in bad order were wet with fresh water.
31
Fifth, petitioners—in a letter addressed to the
Philippine Steel Coating Corporation and dated October 12,
1990—admitted that they were aware of the condition of
the four coils found in bad order and condition.

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These facts were confirmed by Ruperto Esmerio, head

checker of BM Santos Checkers Agency. Pertinent portions
of his testimony are reproduced hereunder:

“Q. Mr. Esmerio, you mentioned that you are a Head

Checker. Will you inform the Honorable Court with
what company you are connected?
A. BM Santos Checkers Agency, sir.
Q. How is BM Santos Checkers Agency related or
connected with defendant Jardine Davies Transport
Services?
A. It is the company who contracts the checkers, sir.
Q. You mentioned that you are a Head Checker, will you
inform this Honorable Court your duties and
responsibilities?
A. I am the representative of BM Santos on board the
vessel, sir, to supervise the discharge of cargoes.
  x x x      x x x      x x x

______________

27 See Exhibit “F”; ibid., p. 39.

28 See Annex “C”, id., p. 61.
29 International Container Services, Inc. v. Prudential Guarantee &
Assurance Co., Inc., 320 SCRA 244, December 8, 1999.
30 Exhibit “I”; Records, p. 47.
31 See Exhibit “L”; ibid., p. 51.

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Belgian Overseas Chartering and Shipping N.V. vs.
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Q. On or about August 1, 1990, were you still connected or

employed with BM Santos as a Head Checker?
A. Yes, sir.
Q. And, on or about that date, do you recall having
attended the discharging and inspection of cold steel
sheets in coil on board the MV/AN ANGEL SKY?
A. Yes, sir, I was there.
  x x x      x x x      x x x
Q. Based on your inspection since you were also present at
that time, will you inform this Honorable Court the
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condition or the appearance of the bad order cargoes

that were unloaded from the MV/ANANGEL SKY?
ATTY. MACAMAY:
  Objection, Your Honor, I think the document itself
reflects the condition of the cold steel sheets and the
best evidence is the document itself, Your Honor that
shows the condition of the steel sheets.
COURT:
  Let the witness answer.
A. The scrap of the cargoes is broken already and the
32
rope
is loosen and the cargoes are dent on the sides.”

All these conclusively prove the fact of shipment in good

order and condition and the consequent damage 33
to the four
coils while in the possession
34
of petitioner, who notably
failed to explain why.
Further, petitioners failed to prove that they observed
the extraordinary diligence and precaution which the law
requires a common carrier to know and to follow to avoid
damage to or destruction 35of the goods entrusted to it for
safe carriage and delivery.
True, the words “metal envelopes rust stained and
slightly dented” were noted on the Bill of Lading; however,
there is no showing that petitioners exercised due diligence
to forestall or

______________

32 TSN, December 13, 1993, pp. 4­10.

33 Tabacalera Insurance Co. v. North Front Shipping Services, Inc.,
supra.
34 Ibid.
35 Campania Maritima v. Court of Appeals, supra.

36

36 SUPREME COURT REPORTS ANNOTATED

Belgian Overseas Chartering and Shipping N.V. vs.
Philippine First Insurance Co., Inc.
36
lessen the loss. Having been in the service for several
years, the master of the vessel should have known at the
outset that metal envelopes in the said state would
eventually
37
deteriorate when not properly stored while in
transit. Equipped with the proper knowledge of the
nature of steel sheets in coils and of the proper way of
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transporting them, the master of the vessel and his crew

should have undertaken precautionary measures to avoid
possible deterioration 38of the cargo. But none of these
measures was taken. Having failed to discharge the
burden of proving that they have exercised the
extraordinary diligence required by law, petitioners
39
cannot
escape liability for the damage to the four coils.
In their attempt to escape liability, petitioners further
contend that they are exempted from liability under Article
1734(4) of the Civil Code. They cite the notation “metal
envelopes rust stained and slightly dented” printed on the
Bill of Lading as evidence that the character of the goods or
defect in the packing or the containers was the proximate
cause of the damage. We are not convinced.
From the evidence on record, it cannot be reasonably
concluded that the damage to the four coils40
was due to the
condition noted on the Bill of Lading. The aforecited
exception refers to cases when goods are lost or damaged
while in transit as a result of the natural decay of
perishable goods or the fermentation or evaporation of
substances liable therefor, the necessary and natural wear
of goods in transport, defects in packages in which 41
they are
shipped, or the natural propensities of animals. None of
these is present in the instant case.

______________

36 Article 1742, Civil Code. “Even if the loss, destruction or

deterioration of the goods should be caused by the character of the goods,
or the faulty nature of the packing or of the containers, common carriers
exercised due diligence to forestall or lessen the loss.”
37 Tabacalera Insurance Co. v. North Front Shipping Services, Inc.,
supra.
38 Ibid.
39 Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, supra.
40 Compania Maritima v. Court of Appeals, supra.
41 Tolentino, Civil Code of the Philippines, Vol. V, 1992 ed., p. 301,
citing 9 Am. Jur., pp. 862­863.

37

VOL. 383, JUNE 5, 2002 37

Belgian Overseas Chartering and Shipping N.V. vs.
Philippine First Insurance Co., Inc.

Further, even if the fact of improper packing was known to

the carrier or its crew or was apparent upon ordinary

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observation, it is not relieved of liability for loss or injury

resulting therefrom, once it 42
accepts the goods
notwithstanding such condition. Thus, petitioners have
not successfully proven the application 43
of any of the
aforecited exceptions in the present case.

Second Issue:
Notice of Loss

Petitioners claim that pursuant to 44Section 3, paragraph 6

of the Carriage of Goods by Sea Act (COGSA), respondent
should have filed its Notice of Loss within three days from
delivery. They assert that the cargo was discharged on July
31, 1990, but that respondent
45
filed its Notice of Claim only
on September 18, 1990.
We are not persuaded. First, the above­cited provision of
COGSA provides that the notice of claim need not be given
if the state of the goods, at the time of their receipt, has
been the subject of a joint inspection or survey. As stated 46
earlier, prior to unloading the cargo, an Inspection Report
as to the condition of the goods 47was prepared and signed by
representatives of both parties.

______________

42 Southern Lines v. Court of Appeals, 4 SCRA 258, January 31, 1962;

Philippine Airlines v. Court of Appeals, 255 SCRA 48, March 14, 1996; 9
Am. Jur. p. 869.
43 Vlasons Shipping, Inc. v. Court of Appeals, 283 SCRA 45, December
12, 1997.
44 Commonwealth Act No. 65. “Section 1. That the provisions of Public
Act No. 521 of the 74th Congress of the United States, approved on April
16, 1936, be accepted, as it is hereby accepted to be made applicable to all
contracts for the carriage of goods by sea to and from Philippine ports in
foreign trade: Provided, That nothing in this Act shall be construed as
repealing any existing provision of the Code of Commerce which is now in
force or as limiting its application.” Approved on April 22, 1936.
45 Exhibit “K”; Records, p. 50.
46 Exhibit “F”; ibid., p. 39.
47 §3(6) COGSA provides:

“Unless notice of loss or damage and the general nature of such loss or damage be
given in writing to the carrier or his agent at the port of discharge or at the time of
the removal of the goods into the custody of the person entitled to delivery thereof
under the contract

38

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38 SUPREME COURT REPORTS ANNOTATED

Belgian Overseas Chartering and Shipping N.V. vs.
Philippine First Insurance Co., Inc.

Second, as stated in the same provision, a failure to file a

notice of claim within three days will not48bar recovery if it
is nonetheless filed within one year. This one­year
prescriptive period also applies to the shipper, the
consignee, the insurer
49
of the goods or any legal holder of
the bill of lading. 50
In Loadstar Shipping Co., Inc. v. Court of Appeals, we
ruled that a claim is not barred by prescription as long as
the one­year period has not lapsed. Thus, in the words of
the ponente, Chief Justice Hilario G. Davide Jr.:

“Inasmuch as the neither the Civil Code nor the Code of

Commerce states a specific prescriptive period on the matter, the
Carriage of Goods by Sea Act (COGSA)—which provides for a one­
year period of limitation on claims for loss of, or damage to,
cargoes sustained during transit—may be applied suppletorily to
the case at bar.”

______________

of carriage, such removal shall be prima facie evidence of the delivery by the
carrier of the goods as described in the bill of lading. If the loss or damage is not
apparent, the notice must be given within three days of delivery.
“Said notice of loss or damage may be endorsed upon the receipt for the goods
given by the person taking delivery thereof.
“The notice in writing need not be given if the state of the goods has at the time
of their receipt been the subject of joint survey or inspection.
“In any event the carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after delivery of
the goods or the date when the goods should have been delivered; Provided, That,
if a notice of loss or damage, either apparent or concealed, is not given as provided
for in this section, that fact shall not affect or prejudice the right of the shipper to
bring suit within one year after the delivery of the goods or the date when the
goods should have been delivered.
“In the case of any actual or apprehended loss or damage, the carrier and the
receiver shall give all reasonable facilities to each other for inspecting and tallying
the goods.”

48 Vitug, Pandect of Commercial Law and Jurisprudence, 3rd ed., 1997,

p. 333.
49 Ibid., citing Filipino Merchants Insurance Co., Inc. v. Alejandro, 145
SCRA 42, October 14, 1986.
50 315 SCRA 339, September 28, 1999, per Davide, Jr., CJ.

39
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VOL. 383, JUNE 5, 2002 39

Belgian Overseas Chartering and Shipping N.V. vs.
Philippine First Insurance Co., Inc.

In the present case, the cargo

51
was discharged on July 31,
1990, while the Complaint was filed by respondent on
July 25, 1991, within the one­year prescriptive period.

Third Issue:
Package Limitation

Assuming arguendo they are liable for respondent’s claims,

petitioners contend that their liability should be limited to
US$500 per package
52
as provided
53
in the Bill of Lading and
by Section 4(5) of COGSA.
On the other hand, respondent argues that Section 4(5)
of COGSA is inapplicable, because the value of the subject
shipment was declared by petitioners beforehand, as
evidenced by the reference to and the insertion of the
Letter of
54
Credit or “L/C No. 90/02447” in the said Bill of
Lading.

______________

51 Records, p. 1.
52 This section provides:

“(5) Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of goods
not shipped in packages, per customary freight unit, or the equivalent of that sum
in other currency, unless the nature and value of such goods have been declared by
the shipper before the shipment and inserted in bill of lading. This declaration if
embodied in the bill of lading shall be prima facie evidence, but shall not be
conclusive on the carrier.
“By agreement between the carrier, master or agent of the carrier, and the
shipper another maximum amount than that mentioned in this paragraph may be
fixed; Provided, That such maximum shall not be less than the figure above
named. In no event shall the carrier be liable for more than the amount of damage
actually sustained.
“Neither the carrier nor the ship shall be responsible in any event for loss or
damage to or in connection with the transportation of the goods if the nature or
value thereof has been knowingly and fraudulently misstated by the shipper in the
bill of lading.”

53 Petitioners’ Memorandum, p. 14; Rollo, p. 181.

54 Respondent’s Memorandum, p. 14; Rollo, p. 203.
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40

40 SUPREME COURT REPORTS ANNOTATED

Belgian Overseas Chartering and Shipping N.V. vs.
Philippine First Insurance Co., Inc.

A bill of lading serves

55
two functions. First, it is a receipt for
the goods shipped. Second, it is a contract by which three
parties—namely, the shipper, the carrier, and the
consignee—undertake 56specific responsibilities and assume
stipulated obligations. 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 57
that it constituted a perfected and binding contract.
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—unless58
the shipper or59 owner
declares a greater value —is sanctioned by law. There
are, however, two conditions to be satisfied: (1) the contract
is reasonable and just under the circumstances, and60(2) it
has been fairly and freely agreed upon by the parties. The
rationale for, this rule is to bind the shippers by their
agreement
61
to the value (maximum valuation) of their
goods.
It is to be noted, however, that the Civil Code does not
limit the liability
62
of the common carrier to a fixed amount
per package. In all matters not regulated by the Civil
Code, the right and the obligations of common carriers
shall 63be governed by the Code of Commerce and special
laws. 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

______________

55 Keng Hua Paper Products Co., Inc. v. Court of Appeals, 286 SCRA
257, February 12, 1998.
56 Magellan Mftg. Marketing Corp. v. Court of Appeals, 201 SCRA 102,
August 22, 1991.
57 Saludo, Jr. v. Court of Appeals, 207 SCRA 498, March 23, 1992.
58 Art. 1749, Civil Code.
59 Everett Steamship Corporation v. Court of Appeals, 297 SCRA 496,
October 8, 1998.
60 Art. 1750, Civil Code.

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61 Vitug, Compendium of Civil Law and Jurisprudence, 1993 rev. ed., p.

702.
62 Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, supra.
63 Art. 1766, Civil Code.

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VOL. 383, JUNE 5, 2002 41

Belgian Overseas Chartering and Shipping N.V. vs.
Philippine First Insurance Co., Inc.
64
lading. The provisions on limited liability are as much a
part of the bill of lading as though physically in65 it and as
though placed there by agreement of the parties.
In the case
66
before us, there was no stipulation in the Bill
of Lading 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
67
of the value of the goods as required by the
bill. That notation was made only for the convenience68of
the shipper and the bank processing the Letter of Credit.
Second, 69
in Keng Hua Paper Products v. Court of
Appeals, 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 vis­à­vis
the commercial invoice and the letter of credit. Thus, the
discrepancy between the

______________

64 Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, supra.

65 Phoenix Assurance Company v. Macondray, 64 SCRA 15, May 13, 1975.

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66 Exhibit “A”; Records, p. 31.

67 Hernandez & Penasales, Philippine Admiralty and Maritime Law, 1st ed.,
1987, p. 291, citing McCarthy v. Barber Steamship Lines, 45 Phil. 488, December
10, 1923.
68 Ibid.
69 Supra.

42

42 SUPREME COURT REPORTS ANNOTATED

Belgian Overseas Chartering and Shipping N.V. vs. Philippine
First Insurance Co., Inc.

amount of goods indicated in the invoice and the amount in the

bill of lading cannot negate petitioner’s obligation to private
70
respondent arising from the contract of transportation.”

In the light of the foregoing, petitioners’ liability should be

computed based on US$500 per package and not on the71 per
metric ton price declared in the Letter of Credit. In
Eastern
72
Shipping Lines, Inc. v. Intermediate Appellate
Court, 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.
WHEREFORE, the Petition is partly granted and the
assailed Decision MODIFIED. Petitioners’ liability is
reduced to US$2,000 plus interest at the legal rate of six
percent from the time of the filing of the Complaint on July
25, 1991 until the finality of this Decision, and 12 percent
thereafter until fully paid. No pronouncement as to costs.
SO ORDERED.

     Sandoval­Gutierrez and Carpio, JJ., concur.

     Puno, J. (Chairman), Abroad, on official leave.

Judgment modified.

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70 Ibid., pp. 269­270, per Panganiban, J.

71 Assailed Decision, p. 7; Rollo, p. 54.
72 150 SCRA 463, May 29, 1967, citing Mitsui & Co., Ltd. v. American
Export Lines, 636 F 2d 807 (1981).

43

VOL. 383, JUNE 5, 2002 43

People vs. Domingo

Notes.—Presumption of negligence of common carriers;

Mere proof of delivery of goods in good order to a carrier
and the subsequent arrival of the same goods at the place
of destination in bad order makes for a prima facie case
against the carrier. (Coastwise Lighterage Corporation vs.
Court of Appeals, 245 SCRA 796 [1995])
A common carrier is liable as such to a stevedore who
was hired by a shipper to help load cargo, even if such
stevedore was not himself a passenger. (Sulpicio Lines, Inc.
vs. Court of Appeals, 246 SCRA 299 [1995])

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