Code of Commerce

Article 349 – A contract of transportation by land or water ways of any kind shall be considered commercial:

1. When it has for its object merchandise or any Article of commerce.

2. When, whatever its object may be, the carrier is a merchant or is habitually engaged in transportation for the

public.
Article 350 – The shipper as well as the carrier of merchandise or goods may mutually demand that a bill of lading be
made, stating:

1. The name, surname and residence of the shipper.

2. The name, surname and residence of the carrier.

3. The name, surname and residence of the person to whom or to whose order the goods are to be sent or

whether they are to be delivered to the bearer of said bill.

4. The description of the goods, with a statement of their kind, of their weight, and of the external marks or

signs of the packages in which they are contained.

5. The cost of transportation.

6. The date on which shipment is made.

7. The place of delivery to the carrier.

8. The place and the time at which delivery to the consignee shall be made.

9. The indemnity to be paid by the carrier in case of delay, if there should be any agreement on this matter.
Article 351 – In transportation made by railroads or other enterprises subject to regulation rate and time schedules, it
shall be sufficient for the bills of lading or the declaration of shipment furnished by the shipper to refer, with respect to
the cost, time and special conditions of the carriage, to the schedules and regulations the application of which he
requests; and if the shipper does not determine the schedule, the carrier must apply the rate of those which appear to
be the lowest, with the conditions inherent thereto, always including a statement or reference to in the bill of lading
which he delivers to the shipper.

Article 352 – The bills of lading, or tickets in cases of transportation of passengers, may be diverse, some for persons
and others for baggage; but all of them shall bear the name of the carrier, the date of shipment, the points of
departure and arrival, the cost, and, with respect to the baggage, the number and weight of the packages, with such
other manifestations which may be considered necessary for their easy identification.

Article 353 – The legal evidence of the contract between the shipper and the carrier shall be the bills of lading, by the
contents of which the disputes which may arise regarding their execution and performance shall be decided, no
exceptions being admissible other than those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and
by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall be
considered cancelled, unless in the same act the claim which the parties may wish to reserve be reduced to writing,
with the exception of that provided for in Article 366.

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of
its loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading.

Article 354 – In the absence of a bill of lading, disputes shall be determined by the legal proofs which the parties may
present in support of their respective claims, according to the general provisions established in this Code for
commercial contracts.

Article 355 – The responsibility of the carrier shall commence from the moment he receives the merchandise,
personally or through a person charged for the purpose, at the place indicated for receiving them.

Article 356 – Carriers may refuse packages which appear unfit for transportation; and if the carriage is to be made by
railway, and the shipment is insisted upon, the company shall transport them, being exempt from all responsibility if
its objections, is made to appear in the bill of lading.

Article 357 – If by reason of well-founded suspicion of falsity in the declaration as to the contents of a package the
carrier should decide to examine it, he shall proceed with his investigation in the presence of witnesses, with the
shipper or consignee in attendance.

If the shipper or consignee who has to be cited does not attend, the examination shall be made before a notary, who
shall prepare a memorandum of the result of the investigation, for such purposes as may be proper.

If the declaration of the shipper should be true, the expense occasioned by the examination and that of carefully
repacking the packages shall be for the account of the carrier and in a contrary case for the account of the shipper.

Article 358 – If there is no period fixed for the delivery of the goods the carrier shall be bound to forward them in the
first shipment of the same or similar goods which he may make point where he must deliver them; and should he not
do so, the damages caused by the delay should be for his account.

Article 359 – If there is an agreement between the shipper and the carrier as to the road over which the conveyance
is to be made, the carrier may not change the route, unless it be by reason of force majeure; and should he do so
without this cause, he shall be liable for all the losses which the goods he transports may suffer from any other cause,
beside paying the sum which may have been stipulated for such case.

When on account of said cause of force majeure, the carrier had to take another route which produced an increase in
transportation charges, he shall be reimbursed for such increase upon formal proof thereof.

Article 360 – The shipper, without changing the place where the delivery is to be made, may change the consignment
of the goods which he delivered to the carrier, provided that at the time of ordering the change of consignee the bill of
lading signed by the carrier, if one has been issued, be returned to him, in exchange for another wherein the novation
of the contract appears.
The expenses which this change of consignment occasions shall be for the account of the shipper.

Article 361 – [The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not
been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason
of fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of
the shipper.

Proof of these accidents is incumbent upon the carrier.]

Article 362 – Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes
mentioned in the preceding Article if it is proved, as against him, that they arose through his negligence or by reason
of his having failed to take the precautions which usage has established among careful persons, unless the shipper
has committed fraud in the bill of lading, representing the goods to be of a kind or quality different from what they
really were.

If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on
account of their nature or by reason of unavoidable accident, there being no time for their owners to dispose of them,
the carrier may proceed to sell them, placing them for this purpose at the disposal of the judicial authority or of the
officials designated by special provisions.

Article 363 – Outside of the cases mentioned in the second paragraph of Article 361, the carrier shall be obliged to
deliver the goods shipped in the same condition in which, according to the bill of lading, they were found at the time
they were received, without any damage or impairment, and failing to do so, to pay the value which those not
delivered may have at the point and at the time at which their delivery should have been made.

If those not delivered form part of the goods transported, the consignee may refuse to receive the latter, when he
proves that he cannot make use of them independently of the others.

Article 364 – If the effect of the damage referred to in Article 361 is merely a diminution in the value of the goods, the
obligation of the carrier shall be reduced to the payment of the amount which, in the judgment of experts, constitutes
such difference in value.

Article 365 – If, in consequence of the damage, the goods are rendered useless for sale and consumption for the
purposes for which they are properly destined, the consignee shall not be bound to receive them, and he may have
them in the hands of the carrier, demanding of the latter their value at the current price on that day.

If among the damaged goods there should be some pieces in good condition and without any defect, the foregoing
provision shall be applicable with respect to those damaged and the consignee shall receive those which are sound,
this segregation to be made by distinct and separate pieces and without dividing a single object, unless the
consignee proves the impossibility of conveniently making use of them in this form.
The same rule shall be applied to merchandise in bales or packages, separating those parcels which appear sound.

Article 366 – Within the twenty-four hours following the receipt of the merchandise, the claim against the carrier for
damage or average be found therein upon opening the packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be ascertained from the outside part of such packages, in
which case the claim shall be admitted only at the time of receipt.

After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted
against the carrier with regard to the condition in which the goods transported were delivered.

Article 367 – If doubts and disputes should arise between the consignee and the carrier with respect to the condition
of the goods transported at the time their delivery to the former is made, the goods shall be examined by experts
appointed by the parties, and, in case of disagreement, by a third one appointed by the judicial authority, the results
to be reduced to writing; and if the interested parties should not agree with the expert opinion and they do not settle
their differences, the merchandise shall be deposited in a safe warehouse by order of the judicial authority, and they
shall exercise their rights in the manner that may be proper.

Article 368 – The carrier must deliver to the consignee, without any delay or obstruction, the goods which he may
have received, by the mere fact of being named in the bill of lading to receive them; and if he does not do so, he shall
be liable for the damages which may be caused thereby.

Article 369 – If the consignee cannot be found at the residence indicated in the bill of lading, or if he refuses to pay
the transportation charges and expenses, or if he refuses to receive the goods, the municipal judge, where there is
none of the first instance, shall provide for their deposit at the disposal of the shipper, this deposit producing all the
effects of delivery without prejudice to third parties with a better right.

Article 370 – If a period has been fixed for the delivery of the goods, it must be made within such time, and, for failure
to do so, the carrier shall pay the indemnity stipulated in the bill of lading, neither the shipper nor the consignee being
entitled to anything else.

If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of lading, the carrier shall be liable
for the damages which the delay may have caused.

Article 371 – In case of delay through the fault of the carrier, referred to in the preceding articles, the consignee may
leave the goods transported in the hands of the former, advising him thereof in writing before their arrival at the point
of destination.

When this abandonment takes place, the carrier shall pay the full value of the goods as if they had been lost or
mislaid.

If the abandonment is not made, the indemnification for losses and damages by reason of the delay cannot exceed
the current price which the goods transported would have had on the day and at the place in which they should have
been delivered; this same rule is to be observed in all other cases in which this indemnity may be due.

Article 372 – The value of the goods which the carrier must pay in cases if loss or misplacement shall be determined
in accordance with that declared in the bill of lading, the shipper not being allowed to present proof that among the
goods declared therein there were articles of greater value and money.

Horses, vehicles, vessels, equipment and all other principal and accessory means of transportation shall be
especially bound in favor of the shipper, although with respect to railroads said liability shall be subordinated to the
provisions of the laws of concession with respect to the property, and to what this Code established as to the manner
and form of effecting seizures and attachments against said companies.

Article 373 – The carrier who makes the delivery of the merchandise to the consignee by virtue of combined
agreements or services with other carriers shall assume the obligations of those who preceded him in the
conveyance, reserving his right to proceed against the latter if he was not the party directly responsible for the fault
which gave rise to the claim of the shipper or consignee.

The carrier who makes the delivery shall likewise acquire all the actions and rights of those who preceded him in the
conveyance.

The shipper and the consignee shall have an immediate right of action against the carrier who executed the
transportation contract, or against the other carriers who may have received the goods transported without
reservation.
However, the reservation made by the latter shall not relieve them from the responsibilities which they may have
incurred by their own acts.

Article 374 – The consignees to whom the shipment was made may not defer the payment of the expenses and
transportation charges of the goods they receive after the lapse of twenty-four hours following their delivery; and in
case of delay in this payment, the carrier may demand the judicial sale of the goods transported in an amount
necessary to cover the cost of transportation and the expenses incurred.

Article 375 – The goods transported shall be especially bound to answer for the cost of transportation and for the
expenses and fees incurred for them during their conveyance and until the moment of their delivery.

This special right shall prescribe eight days after the delivery has been made, and once prescribed, the carrier shall
have no other action than that corresponding to him as an ordinary creditor.

Article 376 – The preference of the carrier to the payment of what is owed him for the transportation and expenses of
the goods delivered to the consignee shall not be cut off by the bankruptcy of the latter, provided it is claimed within
the eight days mentioned in the preceding article.

Article 377 – The carrier shall be liable for all the consequences which may arise from his failure to comply with the
formalities prescribed by the laws and regulations of the public administration, during the whole course of the trip and
upon arrival at the point of destination, except when his failure arises from having been led into error by falsehood on
the part of the shipper in the declaration of the merchandise. If the carrier has acted by virtue of a formal order of the
shipper or consignee of the merchandise, both shall become responsible.

Article 378 – Agents for transportation shall be obliged to keep a special registry, with the formalities required by
Article 36, in which all the goods the transportation of which is undertaken shall be entered in consecutive order of
number and dates, with a statement of the circumstances required in Article 350 and others following for the
respective bills of lading.

Article 379 – The provisions contained in Articles 349 and following shall be understood as equally applicable to
those who, although they do not personally effect the transportation of the merchandise, contract to do so through
others, either as contractors for a particular and definite operation, or as agents for transportations and conveyances.

BILL OF LADING AND OTHER Formalities

A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and
to deliver them at a specified place to a person named or on his or her order. It operates both as a
receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the
same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as
to quantity, weight, dimensions, identification marks, condition, quality, and value. As a contract, it
names the contracting parties, which include the consignee; fixes the route, destination, and freight rate
or charges; and stipulates the rights and obligations assumed by the parties.

1. 3-fold character

Purposes: 1. Contract 2. Receipt for the goods – the shipping company recognizes it as
receipt for the goods. 3. Symbol of the goods covered by it – that is why the goods can be sold and
ownership can be transferred by merely delivering the bill of lading

2. Delivery of goods
a. Period of delivery

Stipulated in Contract/Bill of Lading 1. Carrier is bound to fulfill the

contract and is liable for any delay; no matter from what cause it may have
arisen.

No stipulation. 1. Within a reasonable time. 2. Carrier is bound to

forward them in the 1st shipment of the same or similar goods which he may
make to the point of delivery. (ART. 358 Code of Commerce)

b. Delivery without surrender of bill of lading

The Court has said that the delivery of cargoes to consignee is valid even
if the original bill of lading was not surrendered where the bill of lading was not
received by the consignee or anyway the goods were delivered to the actual
consignee.

Consolidated Mines Case. Consolidated Mines imported mining

equipment and opened a letter of credit. The bill of lading was sent to the
bank which opened the letter of credit because the bank has not been paid.
The carrier delivered the equipment to Consolidated Mines even if the bill of
lading was not surrendered by the latter because the bill was in the possession
of the bank. Consolidated Mines did not pay the bank. Now, the bank
questioning the carrier, “why did you deliver the equipment to Consolidated
Mines without requiring the surrender of the bill of lading and the bill is in our
possession?” The Court said that the bank could not sue the carrier if the
consignee, Consolidated Mines, did not pay it because the consignee was
Consolidate Mines. So they delivered the equipment to the correct person. If
the bank was not paid, that’s between the bank and the consignee.

 Macaber (?) Case. This fellow exported goods to Hong Kong.

Following long practice, they instructed the shipping company to deliver the
goods to the buyer in Hong Kong, without requiring the presentation of bill of
lading. Shipper complied with that. The buyer did not pay. The seller wanted to
run after the shipping company—“why did you release the cargo without
requiring the presentation of the bill of lading?” The Court said, “Well that was
your instruction. They complied with your instruction. So you cannot hold the
shipping company liable.”

c. Refusal of consignee to take delivery

The consignee may refuse to take delivery of the goods and may
abandon the goods in certain cases, viz.:

1. If there was partial non-delivery and you cannot make use of the
parts delivered. Like they are components of an equipment and without the
missing parts you cannot use the equipment.
 2. If the goods were rendered useless for the purpose for which they
were intended. E.g. you imported a thoroughbred and the legs of the horse
were broken during the shipment.

3. If there is delay thru the fault of the carrier

3. Period for filing claims

Now, if upon delivery of the goods, it is obvious from the external appearance of
the packages that there were damages, the consignee must immediately file a
claim. If that is not apparent from the external condition of the packages, then
he has 24 hours from delivery within which to file a claim. If the claim is not filed
within this period as mentioned in the law, then that will be barred because
compliance with that is a condition precedent for a filing a case in court

4. Period for Filing Actions

Prescriptive Period

 Not provided by Article 366. Thus, in such absence, Civil Code rules on
prescription apply.

 If despite the notice of claim, the carrier refuses to pay, action must be filed
in court.

1. No bill of lading was issued: within 6 years 1145 actions based on an

oral contract.

2. Bill of lading was issued: within 10 years 1144 actions based on a

written contract.

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO G.
SALUDO, Petitioners –versus- HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE
AIRLINES, INC., Respondents. G.R. No. 95536, March 23, 1992, Second Division, REGALADO, J.

The carrier has the right to accept shipper's marks as to the contents of the package offered for
transportation and is not bound to inquire particularly about them in order to take advantage of a false
classification and where a shipper expressly represents the contents of a package to be of a designated
character, it is not the duty of the carrier to ask for a repetition of the statement nor disbelieve it and
open the box and see for itself.

FACTS:
Petitioners herein together with Pomierski and Son Funeral Home of Chicago brought the remains of
petitioners’ mother to Continental Mortuary Air Services (CMAS) which booked the shipment of the
remains from Chicago to San Francisco by Trans World Airways (TWA) and from San Francisco to Manila
with Philippine Airlines (PAL). The remains were taken to the Chicago Airport, but it turned out that
there were two (2) bodies in the said airport. Somehow the two (2) bodies were switched, and the
remains of petitioners’ mother was shipped to Mexico instead. The shipment was immediately loaded
on another PAL flight and it arrived the day after the expected arrival. Petitioners filed a claim for
damages in court. Petitioners consider TWA's statement that "it had to rely on the information furnished
by the shipper" a lame excuse and that its failure to prove that its personnel verified and identified the
contents of the casket before loading the same constituted negligence on the part of TWA. The lower
court absolved both airlines and upon appeal it was affirmed by the court.

ISSUE: Whether or not private respondents is liable for damages for the switching of the two caskets.
(NO)

RULING: No. The Supreme Court concluded that the switching occurred or, more accurately, was
discovered on October 27, 1976; and based on the above findings of the Court of appeals, it happened
while the cargo was still with CMAS, well before the same was place in the custody of private
respondents. Verily, no amount of inspection by respondent airline companies could have guarded
against the switching that had already taken place. Or, granting that they could have opened the casket
to inspect its contents, private respondents had no means of ascertaining whether the body therein
contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male person and
such fact was visually apparent upon opening the casket. However, to repeat, private respondents had
no authority to unseal and open the same nor did they have any reason or justification to resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver goods
to be carried, or enter into contracts with it, and inasmuch as the freight may depend on the value of
the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too, it is
the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value
before it consents to carry them; and its failure to do so cannot defeat the shipper's right to recovery of
the full value of the package if lost, in the absence of showing of fraud or deceit on the part of the
shipper. In the absence of more definite information, the carrier has the right to accept shipper's marks
as to the contents of the package offered for transportation and is not bound to inquire particularly
about them in order to take advantage of a false classification and where a shipper expressly represents
the contents of a package to be of a designated character, it is not the duty of the carrier to ask for a
repetition of the statement nor disbelieve it and open the box and see for itself. However, where a
common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal
character, the carrier has the right to know the character of such goods and to insist on an inspection, if
reasonable and practical under the circumstances, as a condition of receiving and transporting such
goods.

It can safely be said then that a common carrier is entitled to fair representation of the nature
and value of the goods to be carried, with the concomitant right to rely thereon, and further noting at
this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of such
information. The consequent duty to conduct an inspection thereof arises in the event that there should
be reason to doubt the veracity of such representations. Therefore, to be subjected to unusual search,
other than the routinary inspection procedure customarily undertaken, there must exist proof that
would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection,
or even refusal to accept carriage of the same; and it is the failure of the carrier to act accordingly in the
face of such proof that constitutes the basis of the common carrier's liability.

In the case at bar, private respondents had no reason whatsoever to doubt the truth of the
shipper's representations. The airway bill expressly providing that "carrier certifies goods received below
were received for carriage," and that the cargo contained "casketed human remains of Crispina Saludo,"
was issued on the basis of such representations. The reliance thereon by private respondents was
reasonable and, for so doing, they cannot be said to have acted negligently. Likewise, no evidence was
adduced to suggest even an iota of suspicion that the cargo presented for transportation was anything
other than what it was declared to be, as would require more than routine inspection or call for the
carrier to insist that the same be opened for scrutiny of its contents per declaration.

Nonetheless, the facts show that petitioners' right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by every common carrier was
violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and
2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss
suffered but for the vindication or recognition of a right violated of invaded.

WHEREFORE, with the modification that an award of P40,000.00 as and by way of nominal
damages is hereby granted in favor of petitioners to be paid by respondent Trans World Airlines, the
appealed decision is AFFIRMED in all other respects.

Mendoza v. PAL, G.R. No. L-3678. February 29, 1952

JOSE MENDOZA vs. PHILIPPINE AIRLINES, INC.,

Mendoza contracted with LVN Pictures for him to exhibit “Himala ng Birhen” in his
theater during the town fiesta. The can of film was loaded on a PAL plane. However, the same
was not unloaded upon arrival at the airport. Mendoza was not able to exhibit the film on time,
causing him unrealized profits. He filed a case against PAL but the trial court dismissed his
complaint. The SC held that common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right of prompt delivery, unless such common
carriers previously assume the obligation. In this case, Mendoza did not inform PAL of the
special circumstances surrounding the film delivery.

Facts: 1. Mendoza was the owner of the Cita Theater in Naga City, Camarines Sur,
where he used to exhibit movie pictures booked from movie producers or film owners in Manila.
2. The Naga fiesta was usually attended by many people, mostly from the Bicol region,
especially since the Patron Saint Virgin of Peña Francia was believed by many to be
miraculous. 3. Mendoza, taking advantage of these circumstances, decided to exhibit a film
which would fit the occasion and have a special attraction and significance to the people
attending said fiesta. 4. A month before the holiday, he contracted with the LVN pictures, Inc., a
movie producer in Manila for him to show during the town fiesta the Tagalog film entitled
"Himala ng Birhen" 5. He made extensive preparations; he had two thousand posters printed
and later distributed not only in the City of Naga but also in the neighboring towns. He also
advertised in a weekly of general circulation in the province. 6. The advertisements state that
the film would be shown in the Cita theater on the eve and day of the fiesta itself. 7. LVN
Pictures Inc. delivered to Philippine Airlines (PAL) a can containing the film "Himala ng Birhen"
consigned to the Cita Theater. 8. PAL issued its Air Way Bill No. 317133. This can of films was
loaded on flight 113 of the defendant, the plane arriving at the Air Port at Pili a little after four
o'clock in the afternoon of the same day. 9. However, the can of film was not unloaded at Pili Air
Port and it was brought back to Manila. 10. Mendoza inquired about the can of film but it could
not be found. When they finally located it, and delivered the same to Mendoza, it was too late.
He had missed his opportunity to realize a large profit since the fiesta-goers had already gone
home. 11. Mendoza brought an action against the PAL. The court dismissed the complaint. 12.
To avoid liability, PAL, showed the terms and conditions of paragraph 6 of the Way Bill printed
on the back thereof which paragraph reads as follows: a. 6. The Carrier does not obligate itself
to carry the Goods by any specified aircraft or on a specified time. Said Carrier being hereby
authorized to deviate from the route of the shipment without any liability therefor. 13. The trial
court found and held that although the defendant was not obligated to load the film on any
specified plane or on any particular day, once said can film was loaded and shipped on one of
its planes making trip to Camarines, then it assumed the obligation to unload it at its point of
destination and deliver it to the consignee, and its unexplained failure to comply with this duty
constituted negligence.

a. It however found that fraud was not involved and that the defendant was a debtor in good
faith. b. The trial court held that inasmuch as these damages suffered by Mendoza were not
foreseen or could not have been foreseen at the time that the defendant accepted the can of
film for shipment, for the reason that neither the shipper LVN Pictures Inc. nor the consignee
Mendoza had called its attention to the special circumstances attending the shipment and the
showing of the film during the town fiesta of Naga, plaintiff may not recover the damages
sought. 14. Counsel for Mendoza insists that the articles of the Code of Commerce rather than
those of the Civil Code should have been applied in deciding this case for the reason that the
shipment of the can of film is an act of commerce; a. that the contract of transportation in this
case should be considered commercial under Art. 349 of the Code of Commerce because it
only involves merchandise or an object of commerce but also the transportation company, PAL,
was a common carrier, that is to say, customarily engaged in transportation for the public, b.
and that although the contract of transportation was not by land or waterways as defined in said
Art. 349, nevertheless, air transportation being analogous to land and water transportation,
should be considered as included, especially in view of the second paragraph of Art. 2 of the
same Code which says that transactions covered by the Code of Commerce and all others of
analogous character shall be deemed acts of commerce.
Issue: Whether or not the trial court made an error in dismissing the complaint. NO.

Held/Ratio:
  A contract of transportation by air may be regarded as commercial.  The reason is
that the transportation company (PAL) is a common carrier; besides, air transportation is clearly
similar or analogous to land and water transportation. The obvious reason for its non-inclusion
in the Code of Commerce was that at the time of its promulgation, transportation by air on a
commercial basis was not yet known.  The test of whether one is a common carrier by air is
whether he holds out that he will carry for hire, so long as he has room, goods for everyone
bringing goods to him for carriage, not whether he is carrying as a public employment or
whether he carries to a fixed place.  Under Art. 1107 of the Civil Code, a debtor in good faith
like PAL, may be held liable only for damages that were foreseen or might have been foreseen
at the time the contract of the transportation was entered into. o The trial court correctly found
that PAL could not have foreseen the damages that would be suffered by Mendoza upon failure
to deliver the can of film on the 17th of September, 1948 for the reason that the plans of
Mendoza to exhibit that film during the town fiesta and his preparations, specially the
announcement of said exhibition by posters and advertisement in the newspaper, were not
called to the PAL's attention.  In order to impose on the defaulting party further liability than for
damages naturally and directly arising from a breach of contract, such unusual or extraordinary
damages must have been brought within the contemplation of the parties as the probable result
of a breach at the time of or prior to contracting. Generally, notice then of any special
circumstances which will show that the damages to be anticipated from a breach would be
enhanced has been held sufficient for this effect. Common carriers are not obligated by law to
carry and to deliver merchandise, and persons are not vested with the right of prompt delivery,
unless such common carriers previously assume the obligation. Said rights and obligations are
created by a specific contract entered into by the parties. In situations like the present where
failure to exhibit films on a certain day would spell substantial damages or considerable loss of
profits, including waste of efforts on preparations and expenses incurred in advertisements,
exhibitors, for their security, may either get hold of the films well ahead of the time of exhibition
in order to make allowance for any hitch in the delivery, or else enter into a special contract or
make a suitable arrangement with the common carrier for the prompt delivery of the films,
calling the attention of the carrier to the circumstances surrounding the case and the
approximate amount of damages to be suffered in case of delay.

Related to:
Bill of Lading as a Receipt

HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, INC. and

LUZON STEVEDORING CORPORATION
G.R. No. L-25599
April 4, 1968
FACTS: “Consorcio Pesquero del Peru of South America” shipped freight pre-paid at Peru,
jute bags of Peruvian fish meal through SS Crowborough, covered by clean bills of lading.
The cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and
insured by Home Insurance Company arrived in Manila and was discharged into the
lighters of Luzon Stevedoring Company. When the cargo was delivered to consignee San
Miguel Brewery Inc., there were shortages causing the latter to lay claims against Luzon
Stevedoring Corporation, Home Insurance Company and the American Steamship Agencies
(shipowner), owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid SMBI the insurance
value of the loss, as full settlement of the claim. Having been refused reimbursement by
both the Luzon Stevedoring Corporation and American Steamship Agencies, Home
Insurance Company, as subrogee to the consignee, filed against them before the CFI of
Manila a complaint for recovery of the payment paid with legal interest, plus attorney’s fees.

In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the
goods in the same quantity and quality that it had received the same from the carrier.

The CFI, after trial, absolved Luzon Stevedoring Corporation, having found the latter to
have merely delivered what it received from the carrier in the same condition and quality,
and ordered American Steamship Agencies to pay Home Insurance Company the amount
demanded with legal interest plus attorney’s fees.

Disagreeing with such judgment, American Steamship Agencies appealed directly to Us.

ISSUE: Is the stipulation in the charter party of the owner’s non-liability valid so as to
absolve the American Steamship Agencies from liability for loss?
HELD: The judgment appealed from is hereby reversed and appellant is absolved from
liability to plaintiff.
YES

The bills of lading, covering the shipment of Peruvian fish meal provide at the back thereof
that the bills of lading shall be governed by and subject to the terms and conditions of the
charter party, if any, otherwise, the bills of lading prevail over all the agreements. On the
bills are stamped “Freight prepaid as per charter party. Subject to all terms, conditions and
exceptions of charter party dated London, Dec. 13, 1962.”

Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or
damage to the goods caused by personal want of due diligence on its part or its manager to
make the vessel in all respects seaworthy and to secure that she be properly manned,
equipped and supplied or by the personal act or default of the owner or its manager. Said
paragraph, however, exempts the owner of the vessel from any loss or damage or delay
arising from any other source, even from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for whose acts the owner would ordinarily be
liable except for said paragraph..
The provisions of our Civil Code on common carriers were taken from Anglo-American law.
Under American jurisprudence, a common carrier undertaking to carry a special cargo
or chartered to a special person only, becomes a private carrier. As a private carrier, a
stipulation exempting the owner from liability for the negligence of its agent is not against
public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should
not be applied where the carrier is not acting as such but as a private carrier. The stipulation
in the charter party absolving the owner from liability for loss due to the negligence of its
agent would be void only if the strict public policy governing common carriers is applied.
Such policy has no force where the public at large is not involved, as in the case of a ship
totally chartered for the use of a single party.

And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to
the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document
of title not a contract, for the contract is the charter party. The consignee may not claim
ignorance of said charter party because the bills of lading expressly referred to the same.
Accordingly, the consignees under the bills of lading must likewise abide by the terms of the
charter party. And as stated, recovery cannot be had thereunder, for loss or damage to the
cargo, against the shipowners, unless the same is due to personal acts or negligence of said
owner or its manager, as distinguished from its other agents or employees. In this case, no
such personal act or negligence has been proved.

1. Three-Fold Character

KENG HUA PAPER PRODUCTS CO. INC., Petitioners, -versus - COURT OF APPEALS; REGIONAL TRIAL
COURT OF MANILA, BR. 21; and SEA-LAND SERVICE, INC., Respondents. G.R. No. 116863, FIRST
DIVISION, February 12, 1998, PANGANIBAN, J.

A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract
by which 3 parties: the shipper, the carrier, and the consignee undertake specific responsibilities and
assume stipulated obligations. The acceptance of a bill of lading by the shipper and the consignee,
with full knowledge of its contents, gives rise to the presumption that the same was a perfected and
binding contract.

FACTS: Sea-Land Service Inc, a shipping company, is a foreign corporation licensed to do business in the
Philippines. On June 29, 1982, plaintiff received at its Hong Kong terminal a sealed container, Container
No. SEAU 67523, containing seventy-six bales of "unsorted waste paper" for shipment to Keng Hua
Paper Products, Co. in Manila. A bill of lading to cover the shipment was issued by the plaintiff. On July
9, 1982, the shipment was discharged at the Manila International Container Port. Notices of arrival were
transmitted to the defendant but the latter failed to discharge the shipment from the container during
the "free time" period or grace period. The said shipment remained inside the plaintiff's container from
the moment the free time period expired on July 29, 1982 until the time when the shipment was
unloaded from the container on November 22, 1983, or a total of four hundred eighty-one (481) days.
During the 481-day period, demurrage charges accrued. Within the same period, letters demanding
payment were sent by the plaintiff to the defendant who, however, refused to settle its obligation which
eventually amounted to P67,340.00. Numerous demands were made on the defendant but the
obligation remained unpaid. Plaintiff thereafter commenced this civil action for collection and damages.
In its answer, defendant, by way of special and affirmative defense, alleged that it purchased fifty (50)
tons of waste paper from the shipper in Hong Kong, Ho Kee Waste Paper, as manifested in Letter of
Credit No. 824858 issued by Equitable Banking Corporation, with partial shipment permitted; that under
the letter of credit, the remaining balance of the shipment was only ten (10) metric tons as shown in
Invoice No. H-15/82; that the shipment plaintiff was asking defendant to accept was twenty (20) metric
tons which is ten (10) metric tons more than the remaining balance; that if defendant were to accept
the shipment, it would be violating Central Bank rules and regulations and custom and tariff laws; that
plaintiff had no cause of action against the defendant because the latter did not hire the former to carry
the merchandise; that the cause of action should be against the shipper which contracted the plaintiff's
services and not against defendant; and that the defendant duly notified the plaintiff about the wrong
shipment through a letter dated January 24, 1983. The RTC found petitioner liable for demurrage. The
petitioner appealed to the Court of Appeals, arguing that the lower court erred in (1) awarding the sum
of P67,340 in favor of the private respondent, (2) rejecting petitioner's contention that there was
overshipment, (3) ruling that petitioner's recourse was against the shipper. Respondent Court of Appeals
denied the appeal and affirmed the lower court's decision in toto.

ISSUE: Whether petitioner is bound by the bill of lading.

RULING: YES. A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is
a contract by which 3 parties: the shipper, the carrier, and the consignee undertake specific
responsibilities and assume stipulated obligations. The acceptance of a bill of lading by the shipper and
the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a
perfected and binding contract. RTC and CA held that the bill of lading was a valid and perfected
contract between the shipper (Ho Kee), the consignee (KengHua), and the carrier (SeaLand). Section 17
of the bill of lading provided that the shipper and the consignee were liable for the payment of
demurrage charges for the failure to discharge the containerized shipment beyond the grace period
allowed by tariff rules. Applying said stipulation, both lower courts found KengHua liable. Having been
afforded an opportunity to examine the said document, KengHua did not immediately object to or
dissent from any term or stipulation therein. It was only 6 months later, that it sent a letter to Sealand
saying that it could not accept the shipment. KengHua’s inaction for such a long period conveys the clear
inference that it accepted the terms and conditions of the bill of lading. The letter merely proved its
refusal to pick up the cargo, not its rejection of the bill of lading. KengHua's attempt to evade its
obligation to receive the shipment on the pretext that this may cause it to violate customs, tariff and
central bank laws must likewise fail. Mere apprehension of violating said laws, without a clear
demonstration that taking delivery of the shipment has become legally impossible cannot defeat the
KengHua's contractual obligation and liability under the bill of lading. It’s prolonged failure to receive
and discharge the cargo from the Sea-Land’s vessel constitutes a violation of the terms of the bill of
lading and is liable for demurrage.

Compania Maritima vs Court of Appeals and Vicente Concepcion

G.R. No. L-31379, August 29, 1988
164 SCRA 685
FACTS:
Vicente Concepcion, a contractor, had his construction equipment shipped from
Manila to Cagayan de Oro. His equipment were loaded aboard MV Cebu, a vessel
owned by Compania Maritima. During unloading, the payloader fell and was
damaged. The carrier had the payloader weighed in Manila and found that it
weighed 7.5 tons not 2.5 tons as declared in the Bill of Lading. Concepcion
demanded a replacement of the payloader but to no avail. The shipper denied the
claim for damages.
ISSUE:
Whether or not the furnishing of an inaccurate weight of 2.5 tons was the
proximate and only cause of the damage on the payloader.
RULING:
NO. The furnishing of an inaccurate weight of 2.5 tons is only a contributory
circumstance to the damaged cause. It mitigates the liability making the
recoverable amount reduced to 80%. The standard diligence required for the
carrier in handling the goods is EXTRAORDINARY. The carrier failed to establish that
it exercised the necessary diligence when they did not check the equipment and
accepted the bill of lading on its face value. Moreover, they did not use the jumbo
lifter (20-25 tons capacity) but the 5-ton capacity lifting apparatus to lift and unload
a visibly heavy cargo like a payloader. The crew were careless in ascertaining the
weight of heavy cargoes. The extraordinary diligence requires common carriers to
render service with the greatest skill and foresight and “to use all reasonable means
to ascertain the nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their
nature requires.

INTERPROVINCIAL AUTOBUS CO., INC., Petitioner, vs. COLLECTOR OF INTERNAL

REVENUE, Respondent.
 
DECISION
LABRADOR, J.:
This is an appeal by way of certiorari from a decision of the Court of Appeals reversing the judgment of
the Court of First Instance of Misamis Occidental in civil case No. 1161, entitled The Interprovincial
Autobus Co., Inc., Plaintiff versus Bibiano L. Meer as Collector of Internal Revenue, Defendant and
absolving the Defendant- Appellant therein from the complaint.
Plaintiff is a common carrier engaged in transporting passengers and freight by means of TPU buses in
Misamis Occidental and Northern Zamboanga. Sometime in the year 1941 the provincial revenue agent
for Misamis Occidental examined the stubs of the freight receipts that had been issued by the Plaintiff.
He found that the stubs of the receipts issued during the years 1936 to 1938 were not preserved ;  but
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those for the years 1939 to 1940 were available. By referring, however, to the conductors’ daily reports
for 1936 to 1938, he was able to ascertain the number of receipts for those years and these, together
with those for 1939 to 1940, gave a total during the 5-year period from 1936 to 1940, of 194,406 freight
receipts issued. Both the said daily reports of Plaintiff’s conductors and the available stubs did not state
the value of the goods transported thereunder. Pursuant, however, to sections 121 and 127 of the
Revised Documentary Stamp Tax Regulations of the Department of Finance promulgated on September
16, 1924, he assumed that the value of the goods covered by each of the above- mentioned freight
receipts amounted to more than P5, and assessed a documentary stamp tax of P0.04 on each of the
194,406 receipts. The tax thus assessed amounted to P7,776.24, which was collected from the deposit
of the Plaintiff in the Misamis Occidental branch of the Philippine National Bank. Plaintiff demanded the
refund of the amount, and upon refusal of the Defendant, Plaintiff filed the action. The Court of First
Instance of Misamis Occidental having rendered judgment in favor of the Plaintiff,
the Defendant appealed to the Court of Appeals. This court reversed the decision appealed from and
absolved the Defendant from the complaint. Hence, this appeal.
In this Court Petitioner-Appellant presents the following propositions:  (1) that the judgment of the chanroblesvirtuallawlibrary

Court of Appeals is null and void, because it had no jurisdiction of the case, which involves the validity of
an assessment;  (2) that the decision of the Court of Appeals is erroneous because freight receipts are
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not bills of lading within the meaning of Section 1449, sub-paragraph (r), of the Revised Administrative
Code of 1917, and because the provision of section 121 of the Revised Documentary Stamp Tax
Regulations, to the effect that if the bill of lading fails to state the value of the goods shipped, it must be
held that the tax is due, is illegal;  (3) that the documentary stamp tax on freight receipts should be
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paid by the shipper of the merchandise, not by the carrier;  and (4) that the collection of the tax is chan roblesvirtualawlibrary

illegal because it was done beyond the period of limitation fixed by law for its collection.
The first proposition, that the Court of Appeals had no jurisdiction of the appeal from the Court of First
Instance, is well founded. Both the Constitution and the Judiciary Act of 1948 grant to the Supreme
Court exclusive appellate jurisdiction over all cases involving the legality of any tax, assessment, or toll,
or any penalty in relation thereto. The Court of Appeals in turn has no jurisdiction over cases the
exclusive appellate jurisdiction of which is granted the Supreme-Court. As the legality or validity of the
tax is involved in the present appeal the Supreme Court is the one that had jurisdiction thereof and the
Court of Appeals had none. The decision of the Court of Appeals was, therefore, null and void.
But the claim that freight tickets of bus companies are not “bills of lading or receipts” within the
meaning of the Documentary Stamp Tax Law is without merit. Bills of lading, in modern jurisprudence,
are not those issued by masters of vessels alone;  they now comprehend all forms of transportation, chan roblesvirtualawlibrary

whether by sea or land, and includes bus receipts for cargo transported.
“The term ‘bill of lading’ is frequently defined, especially by the order authorities, as a writing signed by
the master of a vessel acknowledging the receipt of goods on board to be transported to a certain part
and there delivered to a designated person or on his order. This definition was formulated at a time
when goods were principally transported by sea and, while adequate in view of the conditions existing
at that early day, is too narrow to suit present conditions. As comprehending all methods of
transportation, a bill of lading may be defined as a written acknowledgment of the receipt of goods and
an agreement to transport and to deliver them at a specified place to a person named or on his order.
Such instruments are sometimes called ‘shipping receipts,’ ‘forwarders’ receipts’ and ‘receipts for
transportation.’ The designation, however, is not material, and neither is the form of the instrument . If it
contains an acknowledgment by the carrier of the receipt of goods for transportation, it is, in legal
effect, a bill of lading.” (9 Am. Jur. 662, Italics supplied.)
Section 227 of the National Internal Revenue Code imposes the tax on receipts for goods or effects
shipped from one port or place to another port or place in the Philippines. The use of the word place
after port and of the word “receipt” shows that the receipts for goods shipped on land are included.
The next claim involves the validity of Department of Finance Regulation No. 26 dated September 16,
1924, which provides: chanroblesvirtuallawlibrary

“SEC. 121.  Basis of the tax and affixture of stamps. — Bills of lading are exempt from the documentary
stamp tax imposed by paragraphs (q) and (r) of section 1449 of the Administrative Code when the value
of the goods shipped is P5 or less. Unless the bill of lading states that the goods are worth P5 or less, it
must be held that the tax is due, and internal revenue officers will see to it that the tax is paid in all cases
where the bill of lading does not state that the shipment is worth P5 or less.”
“SEC. 127.  ‘Chits,’ memorandum slips, and other papers not in the usual commercial form of bills of
lading, when used by common carriers in the transportation of merchandise or goods for the collection
of fees therefor are considered as bills of lading, and the original thereof issued or used should bear the
documentary stamp as provided by paragraphs (q) and (r) of section 1449 of the Administrative Code.”
The above regulations were promulgated under the authority of section 79 (B) of the Administrative
Code (originally section 2 of Act 2803), which expressly provides: chanroblesvirtuallawlibrary

“The Department Head shall have power to promulgate, whenever he may see fit to do so, all rules,
regulations, orders, circulars, memorandums, and other instructions, not contrary to law, necessary to
regulate the proper working and harmonious and efficient administration of each and all of the offices
and dependencies of his Department, and for the strict enforcement and proper execution of the laws
relative to matters under the jurisdiction of said Department;  but none of said rules or orders shall
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prescribe penalties for the violation thereof, except as expressly authorized by law  .”  cralaw

Did the Secretary of Finance infringe or violate any right of the taxpayer when he directed that the tax is
to be collected in all cases where the bill of lading or receipt does not state that the shipment is worth
P5 or less, or, in the language of the Petitioner-Appellant, when he (Secretary) created a presumption of
liability to the tax if the receipt fails to state such value? It cannot be denied that the regulation is
merely a directive to the tax officers;  it does not purport to change or modify the law;  it does not
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create a liability to the stamp tax when the value of the goods does not appear on the face of the
receipt. The practical usefulness of the directive becomes evident when account is taken of the fact that
tax officers are in no position to witness the issuance of receipts and check the value of the goods for
which they are issued. If tax officers were to assess or collect the tax only when they find that the value
of the goods covered by the receipts is more than five pesos, the assessment and collection of the tax
would be well-nigh impossible, as it is impossible for tax collectors to determine from the receipts alone,
if they do not contain the value of the goods, whether the goods receipted for exceed P5, or not. The
regulation impliedly required the statement of the value of the goods in the receipts;  so that the chan roblesvirtualawlibrary

collection of the tax can be enforced. This the Petitioner-Appellant failed to do and he now claims the
unreasonableness of the provision as a basis for his exemption. We find that the regulation is not only
useful, practical and necessary for the enforcement of the law on the tax on bills of lading and receipts,
but also reasonable in its provisions.
The regulation above quoted falls within the scope of the administrative power of the Secretary of
Finance, as authorized in Section 79 (B) of the Revised Administrative Code, because it is essential to the
strict enforcement and proper execution of the law which it seeks to implement. Said regulations have
the force and effect of law.
“In the very nature of things in many cases it becomes impracticable for the legislative department of
the Government to provide general regulations for the various and varying details for the management
of a particular department of the Government. It therefore becomes convenient for the legislative
department of the Government, by Law, in a most general way, to provide for the conduct, control and
management of the work of the particular department of the Government;  to authorize certain chan roblesvirtualawlibrary

persons, in charge of the management, control, and direction of the particular department, to adopt
certain rules and regulations providing for the detail of the management and control of such
department. Such regulations have uniformly been held to have the force of law, whenever they are
found to be in consonance and in harmony with the general purposes and objects of the law. Many
illustrations might be given. For instance, the Civil Service Board is given authority to examine applicants
for various positions within the Government service. The law generally provides the conditions in a most
general way, authorizing the chief of such Bureau to provide rules and regulations for the management
of the conduct of examinations, etc. The law provides that the Collector of Customs shall examine
persons who become applicants to act as captains of ships for the coastwise trade, providing at the
same time that the Collector of Customs shall establish rules and regulations for such examinations.
Such regulations, once established and found to be in conformity with the general purposes of the law,
are just as binding upon all of the parties, as if the regulations had been written in the original law itself.
(United States vs. Grimaud, 22 U. S., 506;  Williamson vs. United States, 207 U. S., 425;  United States
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vs. United Verde Copper Co., 196 U. S., 207.)” (United States vs. Tupasi Molina, 29 Phil., 119, 125.)
Another reason for sustaining the validity of the regulation may be found in the principle of legislative
approval by re-enactment. The regulations were approved on September 16, 1924. When the National
Internal Revenue Code was approved on February 18, 1939, the same provisions on stamp tax, bills of
lading and receipts were reenacted. There is a presumption that the Legislature reenacted the law on
the tax with full knowledge of the contents of the regulations then in force regarding bills of lading and
receipts, and that it approved or confirmed them because they carry out the legislative purpose.
“  Of course, the rule does not operate to freeze a meaning which is in evident conflict with the clearly
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expressed legislative intent. Helvering vs. Hallock, 309 U. S. 106, 119-121, 60 S. Ct. 444, 84 L. Ed. 604
A.L.R. 1368. But where a statute is susceptible of the meaning placed upon it by Treasury ruling and
Congress thereafter reenacts the provision without substantial change, such action is to some extent
confirmatory that the ruling carries out the congressional purpose.” (Mead Corporation vs.
Commissioner of Internal Revenue, 116 F [2d] 187, p. 194)
“The fact that an identical Treasury Regulation with regard to computation of stamp tax on conveyances
had been in effect during several re-enactments of the statute was pursuasive evidence of congressional
approval thereof  ..” (Railroad Federal Sav. and Loan Ass’n. vs. United States, 135 F [2d], p. 290)
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“The law, I believe, is now settled that substantial re-enactment of legislation which has been construed
by Treasury regulations is at least strong evidence of legislative approval of such construction. It is
presumed that Congress knew of the existing administrative interpretations of the statute  .” (Cargill vs.  cralaw

United States, 46 F. Supp. 712, 716.)

“Regulations promulgated by the Commissioner of Internal Revenue under authority of the Revenue Act
of 1928 acquired the effect of law by substantial re-enactment of provision of the 1928 Act in the 1932
Revenue Act  .” (S. Slater & Sons, Inc., vs. White, etc., 33 F. Supp. 329, 330.)
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It is to be noted that the regulation does not purport to modify or change the law in the sense that when
the value of the merchandise (for which the receipt is issued) does not appear thereon the tax shall
always be imposed. Such a meaning would have the effect of changing the law;  the regulation should
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not be understood in this illegal or authorized sense. The regulation should be considered merely as a
directive to internal revenue officers to assess the tax and collect the same. As already adverted to, it
only creates a presumption of the liability of the taxpayer, which presumption, however, is not
conclusive upon the taxpayer who can adduce evidence that the tax is not collectible because the value
of the merchandise concerned does not exceed the amount of P5. It was in pursuance of this
interpretation of the regulation that the trial court permitted evidence to be introduced to show that
the Petitioner-Appellant is not subject to the tax on the receipts.
Claim is made that the evidence submitted by the Petitioner- Appellant proved that the freight receipts
covered shipment of merchandise worth not more than P5. It is argued in support of this claim that the
said freight receipts were issued to people carrying agricultural produce from one place to another,
perhaps from their farms to the towns or to their residences. The Court of Appeals’ decision, upon
which the claim is made, does not state that said receipts were actually issued for shipments the value
of which was not more than P5 each. The decision of the Court of Appeals in fact is that the Petitioner-
Appellant “merely tried to establish through his witnesses” the facts above mentioned, which is not a
finding that the receipts covered merchandise more than P5 in value. Upon consideration of the claim
and the testimonies with which it is supported, we are unable to agree with said contention. It is a
common knowledge that when barrio residents or those living in farms go to town and bring along with
them their daily needs on their daily produce, they ordinarily do not secure receipts for these baggages
or cargoes but keep these under their seats. The common practice is for a passenger carrying cargoes of
small value not to secure receipts therefor;  for convenience and economy he keeps them under his
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seat in the bus so as to make them easily accessible when he goes down, and at the same time save the
few centavos that the issuance of the receipt entails. On the other hand, receipts for valuable cargo are
demanded, to insure against their loss. Our conclusion is that the receipts must have been issued for
shipments or merchandise in excess of P5 in value. The evidence submitted notwithstanding, the fact
that it has not been contradicted fails to prove to our satisfaction that the merchandise for which
receipts were issued were actually worth P5 or less. Furthermore, the rule is that in actions for the
recovery of taxes assessed and collected, the taxpayer has the burden of proving that the assessment is
illegal.
“All presumptions are in favor of the correctness of tax assessments. The good faith of tax assessors and
the validity of their actions are presumed. They will be presumed to have taken into consideration all
the facts to which their attention was called. No presumption can be indulged that all of the public
officials of the state in the various counties who have to do with the assessment of property for taxation
will knowingly violate the duties imposed upon them by law.”
“As a logical outgrowth of the presumption in favor of the validity of assessments, when such
assessments are assailed, the burden of proof is upon the complaining party. It is incumbent upon the
property owner clearly to show that the assessment was erroneous, in order to relieve himself from it.”
(51 Am. Jur. pp. 620-621.)
“The burden is on him who seeks the recovery of a tax already paid to establish those facts which show
its invalidity. United States vs. Anderson, 269 U. S. 422, 428, 70 L. ed. 347, 46 Sup. Ct. Rep. 131;  chan

Fidelity Title & T. Co. vs. United States, 259 U. S. 304, 306, 66 L. ed., 953, 954, 42 Sup. Ct. Rep. 514  .”
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(Compañia General de Tabacos vs. Collector of Int. Rev., 73 L. ed., 704, 706.)
“ . But the presumption is that taxes paid are rightly collected upon assessments correctly made by the
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commissioner, and in a suit to recover them the burden rests upon the taxpayer to prove all the facts
necessary to establish the illegality of the collection. United States vs. Anderson, supra. See United
States vs. Rindskopt, 106 U. S. 419, 26 L. ed.,  ” (Niles Bement Pond Co. vs. United States, 74 L. ed., 901,
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904.)
The rule above-mentioned has not been complied with and the action for recovery must be denied.
It is also contended that the tax should be collected from the holder of the receipt, and not from the one
who collected it, which is the transportation company. There is no merit in this contention because the
law expressly provides that the tax should be paid by the one “making, signing, issuing, accepting, or
transferring the same.” (Section 1449, Revised Administrative Code of 1917) . The receipts were made
and issued by the transportation company;  it is therefore liable for the payment of the tax thereon.
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The last contention of the Petitioner-Appellant is that the tax could no longer be collectible because the
same was assessed and collected after seven years, the tax having been due in 1936-1938 and the
assessment having been made in the year 1947. The period within which a tax may be assessed is ten
years after the discovery of the falsity, fraud or omission (section 332, paragraph (a), National Internal
Revenue Code). Petitioner-Appellant cites, in support of his contention, paragraph (c) of the same
action. This paragraph refers to the collection of the tax by distraint or by levy or by a proceeding in
court, and the period prescribed is within five years after the assessment of the tax.
Was the levy justified? The discovery, according to the pleadings, took place in the year 1941 and the
warrant of distraint or levy was issued on September 30, 1946 (paragraphs 3 and 4 of the complaint).
The pleadings do not show, neither does the evidence, the specific date of the assessment. It is only
alleged in the complaint that the examination of the books took place in the year 1941. In order to
sustain the claim of the invalidity of the levy, it is necessary for the  Plaintiff to allege and prove that the
levy took place after five years from the date of the assessments. But the date of the assessment has not
been proved. This is a material matter that the Petitioner-Appellant should have proved to assail the
levy. Because of his failure to do so the exemption from levy may not be invoked by him. Besides, the
question was not raised in the pleadings as a ground to void the collection of the amount. The court
cannot assume that the levy and distraint took place beyond the period prescribed by law. This
conclusion is supported by the presumption of the regularity of the acts of public officers. In any event
the collection was made in 1947, within ten years after the discovery in 1941, and the liability
of Petitioner-Appellant is not thereby affected.
For the foregoing considerations, the judgment of the Court of Appeals is declared void and that of the
Court of First Instance, reversed and the Respondent-Appellee absolved from the complaint. With costs
against the Petitioner-Appellant.

SOUTHERN LINES, INC., vs. COURT OF APPEALS and CITY OF ILOILO

FACTS:
The City of Iloilo requisitioned for rice from the National Rice and Corn Corporation (NARIC) in
Manila. NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of Iloilo
on board the SS "General Wright" belonging to the Southern Lines, Inc. Each sack of rice
weighed 75 kilos and the entire shipment as indicated in the bill of lading had a total weight of
129,450 kilos. The City, received and paid the amount of P63,115.50 as the cost of the
shipment. However, it actually received 1685 sacks with a gross weight of 116,131 kilos upon
actual weighing. Total shortage ascertained 13,319 kilos. The shortage was equivalent to 41
sacks of rice with a net weight of 13,319 kilos, the proportionate value of which was
P6,486.35.Hence, the City of Iloilo filed a complaint against NARIC and the Southern Lines, Inc.
for the recovery of the amount of P6,486.35 representing the value of the shortage of the
shipment of rice. the lower court absolved NARIC from the complaint, but sentenced the
Southern Lines, Inc. to pay the amount of P4,931.41 which is the difference between the sum of
P6,486.35 and P1,554.94 representing the latter's counterclaim for handling and freight.
Petitioner claims exemption from liability by contending that the shortage in the shipment of rice
was due to such factors as the shrinkage, leakage or spillage of the rice on account of the bad
condition of the sacks at the time it received the same and the negligence of the agents of
respondent City of Iloilo in receiving the shipment. The Southern Lines, Inc. appealed to CA
which affirmed the judgment of the trial court. Hence, this petition for review.
ISSUE: Whether or not, the herein petitioner carrier, is liable for the loss or shortage of the rice
shipped.
HELD: Under the provisions of Article 361, the defendant-carrier in order to free itself from
liability was only obliged to prove that the damages suffered by the goods were "by virtue of the
nature or defect of the articles." Under the provisions of Article 362, the plaintiff, in order to hold
the defendant liable, was obliged to prove that the damages to the goods by virtue of their
nature occurred on account of its negligence or because the defendant did not take the
precaution adopted by careful persons. The contention of the petitioner is untenable, for, if the
fact of improper packing is known to the carrier or his servants, or apparent upon ordinary
observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability
for loss or injury resulting therefrom. Furthermore, petitioner itself frankly admitted that the
strings that tied the bags of rice were broken; some bags were with holes and plenty of rice
were spilled inside the hull of the boat, and that the personnel of the boat collected no less than
26 sacks of rice which they had distributed among themselves. This finding, shows that the
shortage resulted from the negligence of petitioner. It should be recalled that the present action
is one for the refund of the amount paid in excess, and not for damages or the recovery of the
shortage; for admittedly the respondent had paid the entire value of the 1726 sacks of rice,
subject to subsequent adjustment, as to shortages or losses. The bill of lading does not at all
limit the time for filing an action for the refund of money paid in excess.

Monico G. Roldan vs.Lim Ponzo & Co. G.R. No. L-11325 December 7, 1917
FACTS: Plaintiff Roldan executed a case against the Defendant Lim Ponzo &Co., to recover
damages in the sum of P3,780 for the alleged failure of the defendant company to live up to its
contract for the transportation of 2,244 packages of sugar to Roldan’s hacienda in Iloilo. The
defendant admits the existence of the contract but denies liability averring that the sugar was
lost in a wreck without the fault on the part of the owner, the patron, or the crew of the vessel.
Accordingly, among the 2,244 packages, only 1,022 were saved in a more or less damaged
condition from the wreckage. Nevertheless, at the trial, after the plaintiff offered his pieces of
evidence, the trial court dismissed the case ruling that the plaintiff failed to comply with the
provisions of section 366 of the Commercial Code which provides that a “claim” must be
submitted to the carrier within 24 hours upon the receipt of the goods for bringing an action on
account of damages on the goods delivered and failure to do so prescribes the right of the
consignee to claim damages against the carrier. Plaintiff then sought for the appeal of the RTCs
decision.
ISSUE: WON Article 366 of Commercial Code is applicable in case of failure of delivery of
goods to a consignee
RULING: No. Article 366 of Commercial Code is limited to cases of claims for damage to goods
“actually turned over by the carrier and received by the consignee.” Clearly it has no application
in cases wherein the goods entrusted to the carrier are not delivered by the carrier to the
consignee. The claim for damages then arises exclusively out of the failure to make delivery.
Article 366 of the Commercial Code is limited to cases of claims for damaged goods actually
turned over by the carrier and received by the consignee, whether those damages be apparent
from the examination of the packages in which the goods are delivered, or of such a character
that the nature and extent of the damage is not apparent until the packages are opened and the
contents examined. It does not apply to cases where the goods entrusted to the carrier are not
delivered by the carrier to the consignee. The purpose of requiring the submission of claims in
pursuance of this article is to compel the consignee of goods entrusted to a carrier to make
prompt demand for settlement of alleged damages suffered by the goods while in transport, so
that the carrier will be enabled to verify all such claims at the time of delivery or within
twentyfour hours. Also, the necessity for making the claim in accordance with Article 366 did not
arise if, as it is alleged, these 1,022 packages of sugar were recovered from the wreck by the
plaintiff himself, in an effort, by his own activities, to save his property from total loss. The
measures to be taken under the terms of article 367 of the Code indicate that the necessity for
the presentation of claims under this article arises only in those cases wherein the carrier makes
delivery and the consignee receives the goods in pursuance of the terms of the contract.

New Zealand Ins. Co. v. Adriana Choa Toy 97 Phil 646; 51 OG 5179
FACTS: A cargo of oats was consigned to Muller and Phipps (Manila) Ltd. The cargo was
insured against all risks by The New Zealand Insurance Co., Ltd. When the cargo was
discharged several cartons which contained the oats were in bad order. The consignee filed a
claim against the insurer for the value of the damaged goods which the latter paid in the amount
of P18,148.69. The insurer as subrogee of the consignee sued E. Razon, Inc. who was the
arrastre operator. The insurer demanded reimbursement in the amount of P17,025.87. The
lower figure is due to the fact that the carrier responded for its share of the loss in the sum of
P1,121.02. E. Razon was ordered to pay. He appealed and the CA revewrsed the decision on
the ground of prescription.
ISSUE: W/N E. Razon is not liable due to prescription based on Art. 366 of the Code of
Commerce? - NO
HELD: There are two requisites before claim for damages under Art. 366 may be demanded: 1.
Consignment of goods through a common carrier, by a consignor in one place to a consignee in
another place; and 2. The delivery of the merchandise by the carrier to the consignee at the
place of destination In the instant case, the consignor is the branch office of Lee Teh & Co., Inc.,
at Catarman, Samar, which placed the cargo on board the ship Jupiter, and the consignee, its
main office at Manila. The lower court found that the cargo never reached Manila, its
destination, nor was it ever delivered to the consignee, the office of the shipper in Manila,
because the ship ran aground upon entering Laoang Bay, Samar on the same day of the
shipment. Such being the case, it follows that the aforesaid article 366 does not have
application because the cargo was never received by the consignee. Moreover, under the bill of
lading issued by the carrier, it was the letter's undertaking to bring the cargo to its destination—
Manila,—and deliver it to consignee, which undertaking was never complied with. The carrier,
therefore, breached its contract, and, as such, it forfeited its right to invoke in its favor the
conditions required by article 366. Article 366 of the Commercial Code is limited to cases of
claims for damages to goods actually turned over by the carrier and received by the consignee,
whether those damages be apparent from an examination of the packages in which the goods
are delivered, or of such character that the nature and extend of the damage is not apparent
until the packages are opened and the contents examined. Clearly it has no application in cases
wherein the goods entrusted to the carrier are not delivered by the carrier to the consignee. In
such cases there can be no question of a claim for damages suffered by the goods while in
transport, since the claim for damages arises exclusively out of the failure to make delivery.
BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, Petitioner, -versus –
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC,
Respondents. G.R. No. 125524, SECOND DIVISION, August 25, 1999, BELLOSILLO, J.

Extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive them . PAKISTAN BANK was
indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export
invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his
demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us
to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art.
1736 had, other than the consignee, the right to receive them was proper.

FACTS Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board
the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent
respondent Wallem Philippines Shipping, Inc. 3,500 boxes of watermelons and 1,611 boxes of fresh
mangoes. The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect
Company of Kowloon, Hongkong as notify party. Upon arrival in Hongkong, the shipment was delivered
by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and without the required bill of lading
having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in
possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK
already pre-paid petitioner the value of the shipment, it demanded payment from respondent WALLEM
through five (5) letters but was refused. Petitioner was thus allegedly constrained to return the amount
involved to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.
Petitioner sought collection of the value of the shipment from respondents before the Regional Trial
Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and
bank guarantee. Respondents contended that t the shipment was delivered to GPC without presentation
of the bills of lading and bank guarantee per request of petitioner himself because the shipment
consisted of perishable goods. Respondents explained that it is a standard maritime practice, when
immediate delivery is of the essence, for the shipper to request or instruct the carrier to deliver the
goods to the buyer upon arrival at the port of destination without requiring presentation of the bill of
lading as that usually takes time. As proof thereof, respondents apprised the trial court that for the
duration of their twoyear business relationship with petitioner concerning similar shipments to GPC
deliveries were effected without presentation of the bills of lading. Respondents advanced next that the
refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to
submit a Certificate of Quantity and Quality. The trial court ordered respondents to pay, jointly and
severally. Respondent Court of Appeals appreciated the evidence in a different manner. According to it,
as established by previous similar transactions between the parties, shipped cargoes were sometimes
actually delivered not to the consignee but to notify party GPC without need of the bills of lading or
bank guarantee. Respondent court set aside the decision of the trial court and dismissed the complaint
together with the counterclaims.

ISSUE Whether private respondents are liable to petitioner for releasing the goods to GPC without the
bills of lading or bank guarantee.(NO)

RULING Article 1736 of the Civil Code provides — Art. 1736. The extraordinary responsibility of the
common carriers lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them, without prejudice to the
provisions of article 1738.12 The Court emphasized that the extraordinary responsibility of the common
carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who
has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas
GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer.
Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint
before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as
buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive
them was proper. Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering
the cargoes to GPC without the bills of lading and bank guarantee. The telex instructed delivery of
various shipments to the respective consignees without need of presenting the bill of lading and bank
guarantee per the respective shipper's request since "for prepaid shipt ofrt charges already fully paid."
Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading Nos. HKG
99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims that this
evidence is self-serving.

From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer
for around two (2) or three (3) years already. It has been the practice of petitioner to request the
shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes
through telephone calls by himself or his "people." In transactions covered by a letter of credit, bank
guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using
telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully
paid. In his several years of business relationship with GPC and respondents, there was not a single
instance when the bill of lading was first presented before the release of the cargoes. He admitted the
existence of the telex of 3 July 1989 containing his request to deliver the shipment to the consignee
without presentation of the bill of lading but not the telex of 5 April 1989 because he could not
remember having made such request. Conformably, to implement the said telex instruction, the delivery
of the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the
Pakistani Bank since the latter can very well present the original Bills of Lading in its possession.
Likewise, if it were the Pakistani Bank to whom the cargoes were to be strictly delivered, it will no longer
be proper to require a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will
render meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and
immediate delivery thereof to the buyer/importer is essentially a factor to reckon with. Besides, GPC is
listed as one among the several consignees in the telex (Exhibit 5-B) and the instruction in the telex was
to arrange delivery of A/M shipment (not any party) to respective consignees without presentation of
OB/L and bank guarantee . . . . Apart from the foregoing obstacles to the success of petitioner's cause,
petitioner failed to substantiate his claim that he returned to SOLIDBANK the full amount of the value of
the cargoes. It is not far-fetched to entertain the notion, as did respondent court, that he merely
accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from respondents. We
note that it was SOLIDBANK which initially demanded payment from respondents through five (5)
letters. SOLIDBANK must have realized the absence of privity of contract between itself and
respondents. That is why petitioner conveniently took the cudgels for the bank. In view of petitioner's
utter failure to establish the liability of respondents over the cargoes, no reversible error was committed
by respondent court in ruling against him.