544 SUPREME COURT REPORTS ANNOTATED

Citadel Lines, Inc. vs. Court of Appeals

*
G.R. No. 88092. April 25, 1990.

CITADEL ** LINES, INC., petitioner, vs. COURT OF

APPEALS and MANILA WINE MERCHANTS, INC.,
respondents.

Commercial Law; Common Carriers; Presumption of fault or

negligent act of common carrier.—Common carriers, from the
nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them,
according to all the circumstances of each case. If the goods are
lost, destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in Article
1733 of the Civil Code. The duty of the consignee is to prove
merely that the goods were lost. Thereafter, the burden is shifted
to the carrier to prove that it has exercised the extraordinary
diligence required by law. And, its extraordinary re-

_______________

10 Sec. 4, Art. II, Republic Act No. 6425, as amended.

* SECOND DIVISION.

** Impleaded as a respondent and added to complete the title of the case

stated in the petition.

545

VOL. 184, APRIL 25, 1990 545

Citadel Lines, Inc. vs. Court of Appeals

sponsibility 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 the right to receive them.
Same; Failure to prove that the loss of goods was occasioned
by an excepted cause, carrier is liable.—Considering, therefore,
that the subject shipment was lost while it was still in the custody
of herein petitioner CARRIER, and considering further that it
failed to prove that the loss was occasioned by an excepted cause,
the inescapable conclusion is that the CARRIER was negligent
and should be held liable therefor.
Same; Same; Stipulation limiting liability of carrier, binding.
—We, however, find the award of damages in the amount of
P312,800.00 for the value of the goods lost, based on the alleged
market value thereof, to be erroneous. It is clearly and expressly
provided under Clause 6 of the aforementioned bills of lading
issued by the CARRIER that its liability is limited to $2.00 per
kilo. Basic is the rule, long since enshrined as a statutory
provision, that a stipulation limiting the liability of the carrier to
the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding. Further, 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.

PETITION to review the judgment of the Court of Appeals.

Bellosillo, J.

The facts are stated in the opinion of the Court.

     Del Rosario & Del Rosario Law Offices for petitioner.
          Limqueco and Macaraeg Law Office for private
respondent.

REGALADO, J.:

Through this petition, we are asked to review the decision

of the Court of Appeals
1
dated December 20, 1988, in CA-
G.R. No. CV-10070, which affirmed the August 30, 1985
decision of the Regional Trial Court of Manila, Branch 27,
in Civil Case No.

_______________

1 Justice Josue N. Bellosillo, ponente, and Justices Felipe B. Kalalo and

Regina G. Ordoñez-Benitez concurring.

546
546 SUPREME COURT REPORTS ANNOTATED
Citadel Lines, Inc. vs. Court of Appeals

126415, entitled “Manila Wine Merchants, Inc. vs. Citadel

Lines, Inc. and E. Razon, Inc.,” with a modification by
deleting the award of attorney’s fees and costs of suit.
The following recital of the factual background of this
case is culled from the findings in the decision of the court
a quo and adopted by respondent court based on the
evidence of record.
Petitioner Citadel Lines, Inc. (hereafter referred to as
the CARRIER) is the general agent of the vessel “Cardigan
Bay/ Strait Enterprise,” while respondent Manila Wine
Merchants, Inc. (hereafter, the CONSIGNEE) is the
importer of the subject shipment of Dunhill cigarettes from
England.
On or about March 17, 1979, the vessel “Cardigan
Bay/Strait Enterprise” loaded on board at Southampton,
England, for carriage to Manila, 180 Filbrite cartons of
mixed British manufactured cigarettes called “Dunhill
International Filter” and “Dunhill International2
Menthol,”
as evidenced by Bill 3of Lading No. 70621374 and Bill of
Lading No. 70608680 of the Ben Line Containers Ltd. The
shipment arrived at the Port of Manila, Pier 13, on April
18, 1979 in container van No. BENU 204850-9. The said
container was received by E. Razon, Inc. (later known as
Metro Port Service, Inc. and referred to herein as the
ARRASTRE) 4
under Cargo Receipt No. 71923 dated April
18, 1979.
On April 30, 1979, the container van, which contained
two shipments was stripped. One shipment was delivered
and the other shipment consisting of the imported British
manufactured cigarettes was palletized. Due to lack of
space at the Special Cargo Coral, the aforesaid cigarettes
were placed in two containers with two pallets in container
No. BENU 204850-9, the original container, and four
pallets in container No. BENU 201009-9, with both
containers duly padlocked and sealed by the representative
of the CARRIER.
In the morning of May 1, 1979, the CARRIER’S
headchecker discovered that container van No. BENU
201009-9 had a different padlock and the seal was
tampered with. The matter was reported to Jose G.
Sibucao, Pier Superintendent, Pier 13, and upon
verification, it was found that 90 cases of imported British
_______________

2 Exh. A; Exh. 7-Citadel.

3 Exh. B; Exh. 8-Citadel.
4 Exh. 1-Citadel.

547

VOL. 184, APRIL 25, 1990 547

Citadel Lines, Inc. vs. Court of Appeals

manufactured cigarettes were missing. This was confirmed

in the report of said Superintendent Sibucao to Ricardo5
Cosme, Assistant Operations Manager, dated May 1, 1979
and the Official Report/Notice of Claim6 of Citadel Lines,
Inc. to E. Razon, Inc. dated May 8, 1979. Per investigation
conducted by the ARRASTRE, it was revealed that the
cargo in question was not formally turned over to it by the
CARRIER but was kept inside container van No. BENU
201009-9 which was padlocked and sealed by the
representatives of the CARRIER without any participation
of the ARRASTRE.
When the CONSIGNEE learned that 90 cases 7 were
missing, it filed a formal claim dated May 21, 1979 with
the CARRIER, demanding the payment of P315,000.00
representing the market value of the missing cargoes.
8
The
CARRIER, in its reply letter dated May 23, 1979, admitted
the loss but alleged that the same occurred at Pier 13, an
area absolutely under the control of the ARRASTRE. In
view thereof, 9the CONSIGNEE filed a formal claim, dated
June 4, 1979, with the ARRASTRE, demanding payment
of the value of the goods but said claim was denied.
After trial, the lower court rendered a decision on
August 30, 1985, exonerating the ARRASTRE of any
liability on the ground that the subject container van was
not formally turned over to its custody, and adjudging the
CARRIER liable for the principal amount of P312,480.00
representing the market value of the lost shipment, and
the sum of P30,000.00 as and for attorney’s fees and the
costs of suit.
As earlier stated, the Court of Appeals affirmed the
decision of the court a quo but deleted the award of
attorney’s fees and costs of suit.
The two main issues for resolution are:
1. Whether the loss occurred while the cargo in question
was in the custody of E. Razon, Inc. or of Citadel Lines, Inc;
and
 2. Whether the stipulation limiting the liability of the
car-

________________

5 Exh. 10-D-Razon.
6 Exh. 4-Citadel.
7 Exh. C.
8 Exh. D.
9 Exh. E.

548

548 SUPREME COURT REPORTS ANNOTATED

Citadel Lines, Inc. vs. Court of Appeals

rier contained in the bill of lading is binding on the

consignee.
The first issue is factual in nature. The Court of Appeals
declared in no uncertain terms that, on the basis of the
evidence presented, the subject cargo which was placed in a
container van, padlocked and sealed by the representative
of the CARRIER was still in its possession and control
when the loss occurred, there having been no formal
turnover of the cargo to the ARRASTRE. Besides, there is
the categorical admission made by two witnesses, namely,
Atty. Lope M. Velasco and Ruben Ignacio, Claims 10Manager
and Head Checker, respectively, of the CARRIER, that for
lack of space the containers were not turned over to and as
the responsibility of E. Razon Inc. The CARRIER is now
estopped from claiming otherwise.
Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by 11
them,
according to all the circumstances of each case. If the
goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary
12
diligence as required in Article 1733 of the
Civil Code. The duty of the consignee is to prove merely
that the goods were lost. Thereafter, the burden is shifted
to the carrier to prove that it has exercised the
extraordinary diligence required by law. And, its
extraordinary responsibility 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
13
or to the person who has the right to receive
them.
Considering, therefore, that the subject shipment was
lost while it was still in the custody of herein petitioner
CARRIER, and considering further that it failed to prove
that the loss was occasioned by an excepted cause, the
inescapable conclusion is that the CARRIER was negligent
and should be held liable therefor.

______________

10 Rollo, 45.
11 Art. 1733, Civil Code.
12 Art. 1735, id.
13 Art. 1736, id.

549

VOL. 184, APRIL 25, 1990 549

Citadel Lines, Inc. vs. Court of Appeals

The cases cited by petitioner in support of its allegations to

the contrary do not find proper application in the case at
bar simply because those cases involve a situation wherein
the shipment was turned over to the custody and
possession of the arrastre operator.
We, however, find the award of damages in the amount
of P312,800.00 for the value of the goods lost, based on the
alleged market value thereof, to be erroneous. It is clearly
and expressly provided under Clause 6 of the
aforementioned bills of lading issued by the CARRIER that
its liability is limited to $2.00 per kilo. Basic is the rule,
long since enshrined as a statutory provision, that a
stipulation limiting the liability of the carrier to the value
of the goods appearing in the bill of lading, unless the 14
shipper or owner declares a greater value, is binding.
Further, 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,
15
and has been fairly and
freely agreed upon.
The CONSIGNEE itself admits in its memorandum that
the value 16of the goods shipped does not appear in the bills
of lading. Hence, the stipulation on the carrier’s limited
liability applies. There is no question that the stipulation is
just and reasonable under the circumstances and have
been fairly and freely agreed upon. In Sea-land 17
Service,
Inc. vs. Intermediate Appellate Court, et al., we there
explained what is a just and reasonable, and a fair and
free, stipulation, in this wise:

“x x x That said stipulation is just and reasonable is arguable

from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in
the bill of lading. To hold otherwise would amount to questioning
the justice and fairness of that law itself, and this the private
respondent does not pretend to do. But over and above that
consideration, the just and reasonable character of such
stipulation is implicit in it giving the shipper or owner the option
of avoiding accrual of liability limitation by the simple and surely
far from onerous expedient of declaring the

______________

14 Art. 1749, id.

15 Art. 1750, id.
16 Rollo, 120.
17 153 SCRA 552 (1987).

550

550 SUPREME COURT REPORTS ANNOTATED

Citadel Lines, Inc. vs. Court of Appeals

nature and value of the shipment in the bill of lading. And since
the shipper here has not been heard to complain of having been
‘rushed,’ imposed upon or deceived in any significant way into
agreeing to ship the cargo under a bill of lading carrying such a
stipulation—in fact, it does not appear that said party has been
heard from at all insofar as this dispute is concerned—there is
simply no ground for assuming that its agreement thereto was not
as the law would require, freely and fairly sought and given.”

The bill of lading shows that 120 cartons weigh 2,978 kilos
or 24.82 kilos per carton. Since 90 cartons were lost and the
weight of said cartons is 2,233.80 kilos, at $2.00 per kilo
the CARRIER’s liability amounts to only US$4,467.60.
WHEREFORE, the judgment of respondent court is
hereby MODIFIED and petitioner Citadel Lines, Inc. is
ordered to pay private respondent Manila Wine Merchants,
Inc. the sum of US$4,465.60 or its equivalent in Philippine
currency at the exchange rate obtaining at the time of
payment thereof. In all other respects, said judgment of
respondent Court is AFFIRMED.
SO ORDERED.
           Melencio-Herrera (Chairman), Paras, Padilla and
Sarmiento, JJ., concur.

Judgment affirmed with modification.

Note.—Petitioner carrier failed to prove that it has

exercised the extra-ordinary diligence required by law
(Eastern Shipping Lines vs. Intermediate Appellate Court,
150 SCRA 463).

——o0o——

551

© Copyright 2021 Central Book Supply, Inc. All rights reserved.