Presumed negligent

Common carriers are required to observe a high degree of diligence in the carriage of goods. So, as a general rule, they are presumed to have been at fault or negligent if the goods they transported get lost or destroyed. This case illustrates when that presumption arises.

This case involve the shipment of 242 coils of various prime cold rolled steel sheets from Germany to Manila. The shipper is CMC Trading and the consignee in Manila is PSTC. CMC shipped the said steel sheets on board the vessel owned by BOC Shipping thru the latter’s agent, JDT. When BOC received the goods for shipment at Hamburg, Germany, it issued a bill of lading (B/L) indicating that it received the shipment in good order and condition with a value of $500.00 per coil. The B/L however had a notation making reference to a letter of credit showing a higher declared value per metric ton for the said goods. The shipment was insured by PFI Co. Inc.

Upon arrival of the cargo in Manila, an inspection was made by representatives of both BOC, the Shipping Company, and PSTC, the consignee. The report signed by both parties showed that four coils or packages were in bad order with the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. A bad order tally sheet was then issued by the shipping company’s agent JDT stating that the four coils in four packages were in bad order and condition. When the cargo was discharged, PSTC submitted the damaged goods to analysis. The certificate of analysis declared that the steel sheets found in bad order were wet with fresh water. Finding the four coils in four packages in their damaged state to be unfit for their intended purpose, PSTC declared the same as total loss.

Then PSTC made a formal demand upon both BOC and its agent JDT to pay for the damaged goods. While both BOC and JDT admitted in its letter that they were aware of the bad order and condition of the four packages, they refused to pay. So PSTC claimed from its insurer PFI which then paid the sum of P 506,086.50. PFI in turn sued BOC and JDT for the recovery of the amount it paid to PSTC.

BOC and JDT questioned the suit against them. They imputed the loss to pre-shipment damage, the inherent nature, vice or defect of the goods or to the perils, dangers and accidents of the sea, or to the acts or omissions of the shipper CMC Trading in Germany. More-over, BOC and JDT argued that their liability, if any, should not exceed the limitations of liability provided in the bill of lading which is $500.00 per package.

Were they correct?

As far as their liability for the loss or damage is concerned, they are not correct. 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 presumption of fault or negligence on the part of the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the carrier or transporter shall be held responsible, owing to the extraordinary diligence and vigilance required of them with respect to the safety of the goods (and the passengers) they transport. In this case, BOC and JDT failed to rebut this presumption or submit an adequate explanation. First, as stated in the B/L, BOC received the subject shipment in good order and condition in Hamburg, Germany. Second, prior to the unloading of the cargo an inspection report prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled and the contents thereof exposed and rusty. Third, the bad order tally sheet issued by JDT stated that the four coils were in bad order and condition. A bad order survey is made only in case there is an apparent or presumed loss or damage. Fourth, the certificate of analysis stated that the steel sheets found in bad order were wet with fresh water. Fifth, BOC and JDT in a letter addressed to PSTC admitted that they were aware of the conditions of the four coils. All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils while in possession of BOC. They failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow so that the goods entrusted to them for safe carriage and delivery will not be damaged or destroyed.

But BOC and JDT are correct in saying that their liability is limited only to $500.00 per package as provided in the bill of lading. The stipulation in the bill of lading limiting to a certain sum the common carrier’s liability for loss or destruction of a cargo– unless the shipper or owner declares a greater value– is sanctioned by law. The notation and insertion in the B/L referring to the letter of credit (L/C) and its amount cannot be the basis of BOC and JDT’s liability. That notation was made only for convenience of the shipper and the bank processing the L/C. The amount indicated in the L/C will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. Hence BOC and JDT’s liability should be computed based on $500.00 per package and not on the per metric ton price declared in the L/C. (Belgian Overseas Chartering etc. et. al vs. Philippine First Insurance Co. Inc., G.R. 143133 June 5, 2002)

* * *

E-mail us at: [email protected]