DELSAN TRANSPORT vs.

CA FACTS Caltex engaged into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc.(Delsan), for a period of one year whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with private respondent, American Home Assurance Corporation (American Home) The vessel sank in the early morning of August 15, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. Subsequently, American Home paid Caltex the sum of Php 5,096,635.57 representing the insured value of the cargo. Exercising its right to subrogation under Article 2207 of the New Civil Code, the American Home demanded the Delsan the same amount it paid to Caltex. Due to its failure to collect from Delsan despite prior demand, American Home filed a complaint with the RTC of Makati for collection of a sum of money. The trial court dismissed the complaint against Delsan. It ruled that the vessel, MT Maysun, was seaworthy and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier from liability for the loss of its cargo. The CA reversed. It gave credence to the weather report issued by PAGASA which stated that the waves were only .7 to 2 meters in height in the vicinity of the Panay Gulf at the day the ship sank, in contrast to the claim of the crew of the ship that the waves were 20 feet high. Delsan contends the following 1. Delsan theorized that when the American Home paid Caltex the value of its lost cargo, the act of American Home is equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, American Home was not legally liable to Caltex due to the latters breach of implied warranty under the marine insurance policy that the vessel was seaworthy. nd 2. Delsan avers that although chief officer had merely a 2 officers license, he was qualified to act as the vessels chief officer. In fact, all the crew and officers of MTT Maysun were exonerated in the administrative investigation. ISSUES 1. W/N the payment made by American Home to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. NO W/N the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action. NO

2.

RULING First Issue: The payment made by American Home for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an au tomatic admission of the vessels seaworthiness by American Home as to foreclose recourse against Delsan for any liability under its contractual obligation as a common carrier. The fact of payment grants American Home subrogatory

right which enables it to exercise legal remedies that would otherwise be available to Caltex as owner of the lost cargo against Delsan, the common carrier. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases, 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 they observed extraordinary diligence. In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, Delsan attributes the sinking of MT Maysun to fortuitous event or force majeure. Although the testimony of the captain and chief mate that there were strong winds and waves 20 feet high was effectively rebutted and belied by the weather report of PAGASA. Thus, as the CA correctly ruled, Delsans vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity where the said vessel sank. Additionally, the exoneration of MT Maysuns officers and crew merely concern their respective administrative liabilities. It does not in any way operate to absolve Delsan the common carrier from its civil liability arising from its failure to observe extraordinary diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the determination of which properly belongs to the courts. In the case at bar, Delsan is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or negligence as common carrier occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit. Second Issue: It is the view of the SC that the presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of American Home as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. PHILIPPINE CHARTER vs CHEMOIL

Saludo, Jr. v. Court of Appeals Facts: Plaintiff herein together with Pomierski and Son Funeral Home of Chicago brought the remains of plaintiffs mother to Continental Mortuary Air Services which booked the shipment of the remains from Chicago to San Francisco by Trans World Airways (TWA) and from San Francisco to Mania with Philippine Airlines (PAL). The remains were taken to the Chicago Airport, but it turned out that there were 2 bodies in the said airport. Somehow the 2 bodies were switched, and the remains of plaintiffs mother was shipped to Mexico instead. The shipment was immediately loaded on another PAL flight and it arrived the day after the expected arrival. Plaintiff filed a claim for damages in court. The lower court absolved both airlines and upon appeal it was affirmed by the court. Issue: Whether or not the 2 airlines should be held liable for damages.

Held: Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti. Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked. As already demonstrated, the facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on October 28, 1976 and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby, private respondents cannot be held liable
LORENZO SHIPPING vs. BJ MATHEL FACTS Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. Respondent BJ Marthel International, Inc. is an importer and distributor of different brands of engines and spare parts. Respondent supplied petitioner with spare parts for the latter's marine engines. According to the quotation it sent, deliveries of such items are within 2 months after receipt of firm order. Petitioner thereafter issued to respondent Purchase Order No. 13839 for the procurement of one set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express. The purchase order was co-signed by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo, respondents sales manager. Instead of paying the 25% down payment (indicated in the purchase order) for the first cylinder liner, petitioner issued in favor of respondent ten postdated checks. The checks were supposed to represent the full payment of the aforementioned cylinder liner. Subsequently, petitioner issued Purchase Order No. 14011, for another unit of cylinder liner. This purchase order stated the term of payment to be "25% upon delivery, balance payable in 5 bimonthly equal installments." Like the first purchase order, the second purchase order did not state the date of the cylinder liner's delivery. On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January 1990, however, the same was dishonored by the drawee bank due to insufficiency of funds. The remaining nine postdated checks were eventually returned by respondent to petitioner.

Petitioner claimed that it replaced said check with a good one, the proceeds of which were applied to its other obligation to respondent. For its part, respondent insisted that it returned said postdated check to petitioner. On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in Manila. The sales invoices evidencing the delivery of the cylinder liners both contain the notation "subject to verification" under which the signature of petitioner's warehouseman, appeared. Respondent sent a Statement of Account and respondent's vice-president sent a demand letter dated to petitioner requiring the latter to pay. Petitioner sent the former a letter offering to pay only P150,000 for the cylinder liners. In said letter, petitioner claimed that as the cylinder liners were delivered late and due to the scrapping of the M/V Dadiangas Express, it (petitioner) would have to sell the cylinder liners in Singapore and pay the balance from the proceeds of said sale. Respondent filed an action for sum of money and damages before the RTC. Prior to the filing of a responsive pleading, respondent filed an amended complaint with preliminary attachment. The amendments also pertained to the issuance by petitioner of the postdated checks and the amounts of damages claimed. The RTC granted respondent's prayer for the issuance of a preliminary attachment. Petitioner filed an Urgent Ex-Parte Motion to Discharge Writ of Attachment attaching thereto a counter-bond which the RTC allowed. Petitioner afterwards filed its Answer alleging therein that time was of the essence in the delivery of the cylinder liners and that the delivery on 20 April 1990 of said items was late as respondent committed to deliver said items "within two (2) months after receipt of firm order." Respondent filed a Second Amended Complaint with Preliminary Attachment which dealt solely with the number of postdated checks issued by petitioner as full payment for the first cylinder liner it ordered from respondent. (In the first amended complaint, only nine postdated checks were involved, in its second amended complaint, there were ten postdated checks). Petitioner filed a Motion alleging therein that the cylinder liners run the risk of obsolescence and deterioration to the prejudice of the parties to this case. Thus, petitioner prayed that it be allowed to sell the cylinder liners at the best possible price and to place the proceeds of said sale in escrow. This motion was granted. The RTC dismissed the complaint which ordered the plaintiff to pay P50,000.00 to the defendant. It held respondent bound to the quotation it submitted to petitioner particularly with respect to the terms of payment and delivery of the cylinder liners. It also declared that respondent had agreed to the cancellation of the contract of sale when it returned the postdated checks issued by petitioner. The CA reversed the decision of the RTC. ISSUES 1. 2. RULING Petitioner maintains that its obligation to pay fully the purchase price was extinguished because the adverted contract was validly terminated due to respondent's failure to deliver within the two-month period. The threshold question, then, is: Was there late delivery of the subjects of the contract of sale to justify petitioner to disregard the terms of the contract considering that time was of the essence thereof? Whether or not respondent incurred delay in performing its obligation under the contract of sale - NO Whether or not said contract was validly rescinded by petitioner. -NO

In determining whether time is of the essence in a contract, the ultimate criterion is the actual or apparent intention of the parties and before time may be so regarded by a court, there must be a sufficient manifestation, either in the contract itself or the surrounding circumstances of that intention. Petitioner insists that although its purchase orders did not specify the dates when the cylinder liners were supposed to be delivered, nevertheless, respondent should abide by the term of delivery appearing on the quotation it submitted to petitioner. Petitioner theorizes that the quotation embodied the offer from respondent while the purchase order represented its (petitioner's) acceptance of the proposed terms of the contract of sale. Thus, petitioner is of the view that these two documents "cannot be taken separately as if there were two distinct contracts." We do not agree. While this Court recognizes the principle that contracts are respected as the law between the contracting parties, this principle is tempered by the rule that the intention of the parties is primordial and "once the intention of the parties has been ascertained, that element is deemed as an integral part of the contract as though it has been originally expressed in unequivocal terms." In the present case, we cannot subscribe to the position of petitioner that the documents, by themselves, embody the terms of the sale of the cylinder liners. One can easily glean the significant differences in the terms as stated in the formal quotation and Purchase Order No. 13839 with regard to the due date of the down payment for the first cylinder liner and the date of its delivery as well as Purchase Order No. 14011 with respect to the date of delivery of the second cylinder liner. While the quotation provided by respondent evidently stated that the cylinder liners were supposed to be delivered within two months from receipt of the firm order of petitioner and that the 25% down payment was due upon the cylinder liners' delivery, the purchase orders prepared by petitioner clearly omitted these significant items. The petitioner's Purchase Order No. 13839 made no mention at all of the due dates of delivery of the first cylinder liner and of the payment of 25% down payment. Its Purchase Order No. 14011 likewise did not indicate the due date of delivery of the second cylinder liner. In the instant case, the formal quotation provided by respondent represented the negotiation phase of the subject contract of sale between the parties. As of that time, the parties had not yet reached an agreement as regards the terms and conditions of the contract of sale of the cylinder liners. Petitioner could very well have ignored the offer or tendered a counter-offer to respondent while the latter could have, withdrawn or modified the same. The parties were at liberty to discuss the provisions of the contract of sale prior to its perfection. In this connection, we turn to the testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer were, indeed, renegotiated prior to the issuance of Purchase Order No. 13839. The law implies, however, that if no time is fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an immediate delivery intended. We also find significant the fact that while petitioner alleges that the cylinder liners were to be used for dry dock repair and maintenance of its M/V Dadiangas Express between the later part of December 1989 to early January 1990, the record is bereft of any indication that respondent was aware of such fact. The failure of petitioner to notify respondent of said date is fatal to its claim that time was of the essence in the subject contracts of sale. Finally, the ten postdated checks issued in November 1989 by petitioner and received by the respondent as full payment of the purchase price of the first cylinder liner supposed to be delivered on 02 January 1990 fail to impress. It is not an indication of failure to honor a commitment on the part of the respondent. The earliest maturity date of the checks was 18 January 1990. As delivery of said checks could produce the effect of payment only when they have been cashed, respondent's obligation to deliver the first cylinder liner could not have arisen as early as 02 January 1990 as claimed by petitioner since by that time, petitioner had yet to fulfill its undertaking to fully pay for the value of the first cylinder liner. As explained by respondent, it proceeded with the placement of the order for the cylinder liners with its principal in Japan solely on the basis of its previously harmonious business relationship with petitioner.

As an aside, let it be underscored that "[e]ven where time is of the essence, a breach of the contract in that respect by one of the parties may be waived by the other party's subsequently treating the contract as still in force." Petitioner's receipt of the cylinder liners when they were delivered to its warehouse on 20 April 1990 clearly indicates that it considered the contract of sale to be still subsisting up to that time. Indeed, had the contract of sale been cancelled already as claimed by petitioner, it no longer had any business receiving the cylinder liners even if said receipt was "subject to verification." By accepting the cylinder liners when these were delivered to its warehouse, petitioner indisputably waived the claimed delay in the delivery of said items. We, therefore, hold that in the subject contracts, time was not of the essence. The delivery of the cylinder liners on 20 April 1990 was made within a reasonable period of time considering that respondent had to place the order for the cylinder liners with its principal in Japan and that the latter was, at that time, beset by heavy volume of work. There having been no failure on the part of the respondent to perform its obligation, the power to rescind the contract is unavailing to the petitioner. Here, there is no showing that petitioner notified respondent of its intention to rescind the contract of sale between them. Quite the contrary, respondent's act of proceeding with the opening of an irrevocable letter of credit on 23 February 1990 belies petitioner's claim that it notified respondent of the cancellation of the contract of sale. Truly, no prudent businessman would pursue such action knowing that the contract of sale, for which the letter of credit was opened, was already rescinded by the other party.

SEALOADER vs GRAND CEMENT

Doctrine:
Contributory Negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection

Facts: Sealoader executed a Time Charter Party Aggrement with Joyce Launch for the chartering of MT Viper in order to tow its unpropelled barges for a minimum of 15 days.

Sealoder entered into a contract with Grand Cement for the loading of cement clinkers and the delivery thereof to Manila. On March 31, 1994, Sealoders barge arrived at the wharf of Grand Cement tugged by MT Viper. It was not immediately loaded as the employees of Grand Cement were loaded another vessel.

On April 4, typhoon Bising struck Cebu area. The barge was still docked at the wharf of Grand Cement. As it became stronger, MT Viper tried to tow the barge away but it was unsuccessful because the towing line connecting the vessels snapped since the mooring lines were not cast off, which is the ultimate cause. Hence, the barge rammed the wharf

causing significant damage.

Grand Cement filed a complaint for damages (P2.4M) since Sealoader ignored its demands. They allege that Sealoader was negligent when it ignored its employees advice to move the vessels after it had received weather updates. Sealoader filed a motion to dismiss on the ground that Joyce Launch is the one liable since it was the owner of MT Viper, whos employees were manning the vessel. Sealoader filed a crossclaim against Joyce Launch. Joyce maintains that the damages were due to force majeure and faulted Grand Cements employees for abandoning the wharf leaving them helpless and for not warning them early on.

Upon testimonies, the RTC rendered judgment in favor of Grand Cement holding the two companies liable since there was complete disregard of the storm signal, the captain of the vessel was not present and the vessel was not equipped with a radio or any navigational facility, which is mandatory. Joyce launch did not appeal.

On appeal, the CA affirmed the decision but on MR, it partly reversed its decision finding Grand Cement to be guilty of contributory negligence since it was found that it was still loading the other vessel at the last minute just before the storm hit, hence Sealodersvessel did not move. Damages were reduced to 50%. Hence, petition for review to SC.

Issue:
Who should be liable for damage sustained by the wharf of Grand Cement?

Ruling:
Sealoader is liable for its negligence. First because it was not equipped with a radio or a navigational facility and it failed to monitor the prevailing weather conditions. Second, it cannot pass the responsibility of casting off the mooring lines because the people at the wharf could not just cast off the mooring lines without any instructions from the crew of the vessel. It should have taken the initiative to cast off the mooring lines early on.

With regard to Grand Cements contributory negligence, the court found that it was not guilty thereof. It had timely informed the barge of the impending typhoon and directed the vessels to move to a safer place. Sealoader had the responsibility to inform itself of the prevailing weather conditions in the areas where its vessel was to sail. It cannot merely

rely on other vessels for weather updates and warnings on approaching storms. For to do so would be to gamble with the safety of its own vessel, putting the lives of its crew under the mercy of the sea, as well as running the rick of causing damage to property of third parties for which it would necessarily be liable.

MITSUI OSK LINES vs CA