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DESIGNER BASKETS v. AIR SEA TRANSPORT

FACTS:

Designer Baskets, Inc. (DBI), a domestic corporation, entered into a contract with Ambiente, a foreign-based company, to deliver wooden items to Ambiente in the United States. DBI designated Air Sea Transport, Inc. (ASTI) and Asia Cargo Container Lines, Inc. (ACCLI) as the forwarding agent to ship out the goods. ASTI released the shipment to Ambiente without DBI's knowledge and without receiving payment based on an Indemnity Agreement between ASTI and Ambiente. DBI filed a complaint against ASTI, ACCLI, and ACCLI's incorporators-stockholders for the payment of the value of the shipment. DBI also filed an amended complaint impleading Ambiente as a new defendant. ASTI, ACCLI, and ACCLI's incorporators-stockholders argued that they are not the real parties-in-interest and that the case is a simple case of non-payment by the buyer. The trial court directed the parties to submit their respective position papers.

DBI Freight System (DBI) filed a complaint against Ambiente Corporation (Ambiente), ASTY Trading International, Inc. (ASTI), and ACCLI Transport International, Inc. (ACCLI) for non-payment. ASTI released the goods to Ambiente without surrendering the bill of lading. The trial court found Ambiente liable to DBI and awarded damages. The Court of Appeals (CA) affirmed the trial court's finding that Ambiente is liable but absolved ASTI and ACCLI from liability.

DBI filed a complaint against ASTI and ACCLI seeking payment for damages incurred due to mishandling and excessive heat during the shipment of coffee beans. The Regional Trial Court (RTC) held ASTI and ACCLI solidarily liable and awarded damages. The CA affirmed the decision but modified the amount of damages to be paid and imposed liability on Ambiente. ASTI and ACCLI appealed to the Supreme Court.

ISSUES:

  1. Whether ASTI and ACCLI are liable to DBI for the value of the goods sold based on the bill of lading.

  2. Whether the carrier is liable for releasing the goods without the surrender of the bill of lading

  3. Whether Articles 1733, 1734, and 1735 of the Civil Code are applicable in this case

  4. Whether the liability of ASTI and ACCLI is joint and several with Ambiente.

  5. Whether ASTI and ACCLI can be held liable for the payment of the value of the goods sold.

RULING:

  1. ASTI and ACCLI are not liable to DBI for the value of the goods sold based on the bill of lading.

  2. The carrier is not liable for releasing the goods without the surrender of the bill of lading. The execution of an Indemnity Agreement between the shipper and the carrier, wherein the shipper asked the carrier to release the goods even without surrendering the bill of lading, operates as a receipt in substantial compliance with the last paragraph of Article 353 of the Code of Commerce. The surrender of the original bill of lading is not absolute and in case of loss or any other cause, a common carrier may release the goods to the consignee even without it.

  3. Articles 1733, 1734, and 1735 of the Civil Code are not applicable in this case. These articles pertain to the general liability of common carriers for loss, destruction, or deterioration of goods and the presumption of negligence against them. However, in this case, the carrier had already fulfilled its duty to deliver the goods to the proper consignee. The applicable provision is Article 353 of the Code of Commerce, which allows the release of goods to the consignee even without the surrender of the bill of lading.

  4. The liability of ASTI and ACCLI is not joint and several with Ambiente. As carriers of the goods, their obligation is simply to ensure that the goods are delivered on time and in good condition. Once the goods are delivered, their responsibility ceases to exist, and they are freed from all liabilities arising from the transaction. The carrier's liability is separate and distinct from the transaction between the buyer and seller.

  5. ASTI and ACCLI cannot be held liable for the payment of the value of the goods sold. The contract between DBI and ASTI is a contract of carriage of goods, not a contract of sale. They are not parties to the contract of sale between DBI and Ambiente. Their liability should be pursuant to the contract of carriage and the law on transportation of goods. Only Ambiente, as the buyer of the goods, has the obligation to pay for the value of the shipment.

PRINCIPLES:

  • A bill of lading is a written acknowledgment of the receipt of goods and an agreement to transport and deliver them at a specified place to a person named or on his order. It is the legal evidence of the contract of carriage between the shipper and the carrier. The stipulations in the bill of lading are valid and binding unless they are contrary to law, morals, customs, public order or public policy.

  • A carrier is allowed by law to release the goods to the consignee even without the latter's surrender of the bill of lading. The consignee must issue a receipt to the carrier upon the release of the goods, which shall produce the same effect as the surrender of the bill of lading. Exceptions include when the bill of lading is lost or for other cause, as long as the consignee issues a receipt to the carrier.

  • The surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. Extraordinary diligence is exercised by the carrier when it releases the goods to the consignee upon signing the delivery receipts and surrender of certified true copies of the bills of lading.

  • The surrender of the original bill of lading is not absolute and a common carrier may release the goods to the consignee even without it in case of loss or any other cause. (Art. 353, Code of Commerce)

  • Articles 1733, 1734, and 1735 of the Civil Code pertain to the general liability of common carriers for loss, destruction, or deterioration of goods and the presumption of negligence against them. However, these articles are not applicable if the carrier has already fulfilled its duty to deliver the goods to the proper consignee.

  • The provisions of Article 1503 of the Civil Code, regarding the retention of the bill of lading by the seller, do not apply to a contract of carriage between the shipper and the common carrier.

  • Article 1503 and Article 1523 of the Civil Code pertain to a contract of sale and deal with the right of possession or ownership over the goods subject of the sale.

  • A contract of sale is separate and distinct from a contract of carriage.

  • A contract of sale is separate and distinct from a contract of carriage. They involve different parties, different rights, different obligations, and liabilities.

  • The extraordinary responsibility of common carriers lasts until the actual or constructive delivery of the goods to the consignee or the person who has the right to receive them.

  • The carrier's liability ceases to exist once the goods are delivered, and they are freed from all liabilities arising from the transaction.

  • In a contract of carriage of goods, the carrier's liability should be pursuant to the contract and the law on transportation of goods.

  • A carrier cannot be held liable for the payment of the value of the goods sold if they are not a party to the contract of sale between the buyer and the seller.