ESLI v. BPI/MS (Case digest. G.R. No. 182864)


FACTS: On 29 December 2004, BPI/MS Insurance Corporation (BPI/MS) and Mitsui Sumitomo Insurance Company Limited (Mitsui) filed a Complaint[3] before the RTC of Makati City against ESLI and Asian Terminals, Inc. (ATI) to recover actual damages amounting to US$17,560.48 with legal interest, attorney’s fees and costs of suit.

In their complaint, BPI/MS and Mitsui alleged that on 2 February 2004 at Yokohama, Japan, Sumitomo Corporation shipped on board ESLI’s vessel M/V “Eastern Venus 22” 22 coils of various Steel Sheet weighing 159,534 kilograms in good order and condition for transportation to and delivery at the port of Manila, Philippines in favor of consignee Calamba Steel Center, Inc. (Calamba Steel) located in Saimsim, Calamba, Laguna as evidenced by a Bill of Lading with Nos. ESLIYMA001. Valued at US$83,857.59 per Invoice with Nos. KJGE-03-1228-NT/KE3. Insured with BPI/MS and Mitsui against all risks.

On 11 February 2004, arrived at the port of Manila in an unknown condition and was turned over to ATI for safekeeping. Part of the shipment was damaged so there was Request for Bad Order Survey. Damage estimated at US$4,598.85 so Calamba Steel rejected damaged shipment for being unfit for the intended purpose.

On 12 May 2004 at Kashima, Japan, Sumitomo Corporation again shipped on board ESLI’s vessel M/V “Eastern Venus 25” 50 coils in various Steel Sheet weighing 383,532 kilograms in good order and condition for transportation to and delivery at the port of Manila, Philippines in favor of the same consignee Calamba Steel as evidenced by a Bill of Lading with Nos. ESLIKSMA002. Declared value at US$221,455.58 per Invoice Nos. KJGE-04-1327-NT/KE2. Insured with BPI/MS and Mitsui against all risks.

On 21 May 2004, ESLI’s vessel with the second shipment arrived at the port of Manila partly damaged and in bad order. The coils sustained further damage during the discharge from vessel to shore until its turnover to ATI’s custody for safekeeping.Upon withdrawal from ATI and delivery to Calamba Steel, damaged estimated at US$12,961.63. Again, Calamba Steel rejected the damaged shipment for being unfit for the intended purpose.

Calamba Steel attributed the damages on both shipments to ESLI as the carrier and ATI as the arrastre operator in charge of the handling and discharge of the coils and filed a claim against them. When ESLI and ATI refused to pay, Calamba Steel filed an insurance claim for the total amount of the cargo against BPI/MS and Mitsui as cargo insurers. After paying, BPI/MS and Mitsui became subrogated.

ATI said shipments were already damaged upon receipt from ESLI’s vessels. Alleged due diligence. Alleged limited liability at 5K per Section 7.01, Article VII[4] of the Contract for Cargo Handling Services between Philippine Ports Authority (PPA) and ATI.[5] Cross claim against ESLI.

ESLI faulted ATI and/or Calamba Steel. Cross claim against ATI.[6]

Mediation failed.

Per pre-trial order, the parties agreed that the procedural issue was whether there was a valid subrogation in favor of BPI/MS and Mitsui; and that the substantive issues were, whether the shipments suffered damages, the cause of damage, and the entity liable for reparation of the damages caused.[9]

RTC Makati City found both ESLI and ATI jointly and severally liable for the damages sustained by the two shipments. Both appealed to CA.

In the CA, ESLI and ATI raised limited liability of US$500.00 per package as provided in Commonwealth Act No. 65 or the Carriage of Goods by Sea Act (COGSA).[38] Questioned BPI/MS's capacity to sue.

CA absolved ATI. ESLI wento to the SC.

  1. ESLI wants the Supreme Court to reverse the absolution of ATI but failed to implead the latter in the petition. Who is the conseqential loser?
  2. What does the law say re common carrier's liability vis-a-vis bill of lading?
  3. Does the bill of lading prove liability on ESLI's part?
  4. When does the limited liability rule under the COGSA apply?
  5. Should ESLI enjoy the limited liability rule under the COGSA?
  6. What is the effect of payment of freightage fees vis-a-vis limited liability rule under COGSA?

HELD: WHEREFORE, we DENY the Petition for Review on Certiorari. The Decision dated 31 January 2008 and Resolution dated 5 May 2008 of the Second Division of the Court of Appeals in CA-G.R. CV. No. 88744 are hereby AFFIRMED.

ISSUE [1]: ATI's absolution is now beyond review. Clearly, [ESLI] is the consequential loser. It alone must bear the proven liability for the loss of the shipment. It cannot shift the blame to ATI, the arrastre operator, which has been cleared by the CA. Neither can it argue that the consignee should bear the loss.

ISSUE [2]: Common carriers, from the nature of their business and on public policy considerations, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 1734[51] of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier 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.[52]

In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt and symbol of the goods covered by it. If it has no notation of any defect or damage in the goods, it is considered as a “clean bill of lading.” A clean bill of lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein described.[53]

ISSUE [3]: Yes, the bill of lading shows liability on ESLI's part.

Based on the bills of lading issued, it is undisputed that ESLI received the two shipments of coils from shipper Sumitomo Corporation in good condition at the ports of Yokohama and Kashima, Japan. However, upon arrival at the port of Manila, some coils from the two shipments were partly dented and crumpled as evidenced by the Turn Over Survey of Bad Order Cargoes[56] signed by ESLI’s representatives, together with ATI’s representative Garcia.

After re-examination, based on the Requests for Bad Order Survey Nos. 58267[57] and 58254[58] covering the first shipment, four coils were damaged prior to turnover. The second Request for Bad Order Survey No. 58658[59] also affirmed the earlier findings that eleven coils on the second shipment were damaged prior to turnover.

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, loss, or destruction of the goods happened, the transporter shall be held responsible.[61] From the foregoing, the fault is attributable to ESLI.

ISSUE [4]: ESLI invokes the limitation under the COGSA[62]. Noticeably, the invoices specified among others the weight, quantity, description and value of the cargoes, and bore the notation “Freight Prepaid” and “As Arranged.”[63] ESLI argues that the value of the cargoes was not incorporated in the bills of lading[64] and that there was no evidence that the shipper had presented to the carrier in writing prior to the loading of the actual value of the cargo, and, that there was a no payment of corresponding freight.[65] Finally, despite the fact that ESLI admits the existence of the invoices, it denies any knowledge either of the value declared or of any information contained therein.[66]

According to the New Civil Code, the law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.[67] The Code takes precedence as the primary law over the rights and obligations of common carriers with the Code of Commerce and COGSA applying suppletorily.[68]

The New Civil Code provides that a stipulation limiting a common carrier’s liability to the value of the goods appearing in the bill of lading is binding, unless the shipper or owner declares a greater value.[69] In addition, a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.[70]

COGSA, on the other hand, provides under Section 4, Subsection 5 that an amount recoverable in case of loss or damage shall not exceed US$500.00 per package or per customary freight unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

ISSUE [5]: The issue whether or not ESLI has limited liability as a carrier is determined by either absence or presence of proof that the nature and value of the goods have been declared by Sumitomo Corporation and inserted in the bills of lading.

ESLI contends that the invoices specifying the weight, quantity, description and value of the cargo in reference to the bills of lading do not prove the fact that the shipper complied with the requirements mandated by the COGSA. It contends that there must be an insertion of this declaration in the bill of lading itself to fall outside the statutory limitation of liability.

ESLI asserts that the appellate court erred when it ruled that there was compliance with the declaration requirement even if the value of the shipment and fact of payment were indicated on the invoice and not on the bill of lading itself.

There is no question about the declaration of the nature, weight and description of the goods on the first bill of lading.

The bills of lading represent the formal expression of the parties’ rights, duties and obligations. It is the best evidence of the intention of the parties which is to be deciphered from the language used in the contract, not from the unilateral post facto assertions of one of the parties, or of third parties who are strangers to the contract.[72] Thus, when the terms of an agreement have been reduced to writing, it is deemed to contain all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.[73]

As to the non-declaration of the value of the goods on the second bill of lading, we see no error on the part of the appellate court when it ruled that there was a compliance of the requirement provided by COGSA. The declaration requirement does not require that all the details must be written down on the very bill of lading itself. It must be emphasized that all the needed details are in the invoice, which “contains the itemized list of goods shipped to a buyer, stating quantities, prices, shipping charges,” and other details which may contain numerous sheets.[74] Compliance can be attained by incorporating the invoice, by way of reference, to the bill of lading provided that the former containing the description of the nature, value and/or payment of freight charges is as in this case duly admitted as evidence.

Also, ESLI admitted the existence and due execution of the Bills of Lading and the Invoice containing the nature and value of the goods on the second shipment per the pretrial order. The effect of admission of the genuineness and due execution of a document means that the party whose signature it bears admits that he voluntarily signed the document or it was signed by another for him and with his authority.[81]

Pre-trial admission in civil cases is one of the instances of judicial admissions explicitly provided for under Section 7, Rule 18 of the Rules of Court, which mandates that the contents of the pre-trial order shall control the subsequent course of the action, thereby, defining and limiting the issues to be tried. (Bayas v. Sandiganbayan) [83]

ISSUE [6]: In Unsworth Transport International (Phils.), Inc. v. Court of Appeals,[75] the Court held that the insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner had knowledge of the value of the cargo. However, the same interpretation does not squarely apply if the carrier had been advised of the value of the goods as evidenced by the invoice and payment of corresponding freight charges. It would be unfair for ESLI to invoke the limitation under COGSA when the shipper in fact paid the freight charges based on the value of the goods.

In Adams Express Company v. Croninger,[76] it was said: “Neither is it conformable to plain principles of justice that a shipper may understate the value of his property for the purpose of reducing the rate, and then recover a larger value in case of loss. Nor does a limitation based upon an agreed value for the purpose of adjusting the rate conflict with any sound principle of public policy.” Conversely, but for the same reason, it is unjust for ESLI to invoke the limitation when it is informed that the shipper paid the freight charges corresponding to the value of the goods.


[1] Rule on Civil Procedure, Rule 45.

[2] Penned by Associate Justice Estela M. Perlas-Bernabe (now a member of this Court) with Associate Justices Portia AliƱo-Homachuelos and Lucas P. Bersamin (also a member of this Court) concurring. Rollo, pp. 43-50.

[3] Complaint. Records, pp. 1-5.

[4] Rollo, pp. 170-171.

[5] Answer of ATI. Records, pp. 23-27.

[6] Answer of ESLI. Id. at 38-47.

[7] Mediator’s Report. Id. at 91.

[8] As embodied in the Pre-Trial Order. Id. at 98-99.

[9] Id. at 99.

[10] Id.

[11] Id. at 145-147.

[12] Id. at 102-104.

[13] Id. at 129-131.

[14] Id. at 105 and 116.

[15] Id. at 106-110 and 117-123.

[16] Id. at 124-127.

[17] Id. at 128.

[18] Id. at 133-136 and 140-143.

[19] Id. at 149-154.

[20] Id. at 157-159.

[21] Id. at 148.

[22] Compliance/Manifestation. Id. at 169-171.

[23] Id. at 173-176.

[24] Id. at 178-179.

[25] Id. at 180-205.

[26] Id. at 207 and 210-210-A.

[27] Id. at 208 and 210-212.

[28] Id. at 149-154.

[29] Id. at 215-217.

[30] Id. at 224-227.

[31] Id. at 218 and 221.

[32] Id. at 219-220 and 223.

[33] Id. at 228-232.

[34] Id. at 233 and 273.

[35] Id. at 235-261.

[36] Rollo, pp. 131-137.

[37] Records, pp. 284-285 and 287.

[38] Appellant’s Brief of ESLI. Rollo, pp. 71-106.

[39] Appellant’s Brief of ATI. Id. at 107-130.

[40] Id. at 43-50.

[41] Id. at 49-50.

[42] Id. at 302.

[43] Id. at 300-307.

[44] Id. at 401-414.

[45] Id. at 302.

[46] Id. at 308-326.

[47] Id. at 312.

[48] Petition for Review on Certiorari. Id. at 15.

[49] Records, pp. 145-146.

[50] Id. at 173-176.

[51] Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.
[52] Asian Terminals, Inc. v. Philam Insurance Co., Inc. (Now Chartis Philippines Insurance, Inc.), G.R. No. 181163, 181262 and 181319, 24 July 2013 citing Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc., G.R. No. 165647, 26 March 2009, 582 SCRA 457, 466-467.

[53] Lorenzo Shipping Corp. v. Chubb and Sons, Inc., G.R. No. 147724, 8 June 2004, 431 SCRA 266, 279-280 citing Aguedo F. Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. IV, 1987 ed., p. 119 citing further Government of the Philippine Island v. Ynchausti & Co., 40 Phil. 219, 213 (1919); 28 Am Jur 2d 264 and Westway Coffee Corp. v. M/V Netuno, 675 F.2d 30, 32 (1982).

[54] Records, pp. 218.

[55] Id. at 221.

[56] Id. at 222.

[57] Id. at 219.

[58] Id. at 220.

[59] Id. at 223.

[60] Supra note 52.

[61] Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance Co., Inc., 432 Phil. 567, 579 (2002); Tabacalera Insurance Co. v. North Front Shipping Services, Inc., 338 Phil. 1024, 1029-1030 (1997).

[62] On 16 April 1936, the Philippine Government adopted the U.S. COGSA by virtue of Commonwealth Act No. 65 and was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade provided that it would but be construed as a repealing law of the Code of Commerce.

[63] Petition for Review on Certiorari. Rollo, pp. 30-31.

[64] Id. at 31.

[65] Id. at 33.

[66] Id. at 34.

[67] New Civil Code, Article 1753.

[68] Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws.

[69] New Civil Code, Article 1749.

[70] New Civil Code, Art. 1750.

[71] Bill of Lading. Records, p. 105.

[72] Chua Gaw v. Chua, 574 Phil. 640, 657 (2008) citing Arwood Induestries, Inc. v. D.M. Consunji, Inc., 442 Phil. 203, 212 (2002); Herbon v. Palad, 528 Phil. 130, 142 (2006).

[73] Rules of Court, Rule 130, Sec. 9.

[74] Glossary of Shipping Terms, United States of America, Department of Transportation, Maritime Administration, (visited 3 April 2014)

[75] G.R. No. 166250, 26 July 2010, 625 SCRA 357, 368.

[76] 226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314 (1913); as reiterated in H. E. Heacock Company v. Macondray & Co. Inc., 42 Phil. 205, 210 (1921) which ruled that, “A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of public policy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rate and then recover a larger value in case of loss.” [Adams Express Co. v. Croninger 226 U.S. 491, 492; Reid v. Fargo (130 C.C.A., 285); Jennings v. Smith (45 C.C.A., 249); George N. Pierce Co. v. Wells, Fargo and Co. (236 U.S., 278); Wells, Fargo & Co. v. Neiman-Marcus Co. 227 U.S., 469]

[77] Records, pp. 98-99.

[78] Id. at 9 and 13.

[79] Id. at 14.

[80] Id. at 10.

[81] Permanent Savings and Loan Bank v. Velarde, 482 Phil. 193, 202 (2004).

[82] Rollo, p. 34.

[83] 440 Phil. 54 (2002).

[84] Id. at 69.

[85] 520 Phil. 982 (2006).

[86] Id. at 991; Constantino v. Heirs of Constantino, Jr., G.R. No. 181508, 2 October 2013.

[87] SCC Chemicals Corporation v. Court of Appeals, 405 Phil. 514, 522-523 (2001).