National Trucking and Forwarding Corporation vs. Lorenzo Shipping Corporation

A common carrier discharges its obligation by delivering goods to the consignee or his authorized representative and obtaining a signed receipt, even without surrender of the original bill of lading, in accordance with Article 353 of the Code of Commerce. Such practice, combined with requiring certified true copies of the bills of lading, suffices to prove extraordinary diligence and overcome the legal presumption of fault or negligence.

In 1987, the Philippine government, through the Department of Health, contracted with the Cooperative for American Relief Everywhere, Inc. (CARE) for the donation and distribution of non-fat dried milk and other food products from the United States. The government then engaged petitioner National Trucking and Forwarding Corporation (NTFC) to transport the goods. NTFC, in turn, contracted respondent Lorenzo Shipping Corporation (LSC) to ship 4,868 bags of non-fat dried milk from September to December 1988. The named consignee was Abdurahman Jama, petitioner’s branch supervisor in Zamboanga City.

• The Shipment and the Consignee: Under a contract of carriage with the government, petitioner NTFC engaged respondent LSC to ship 4,868 bags of non-fat dried milk from September to December 1988. The bills of lading issued by LSC named Abdurahman Jama, petitioner’s branch supervisor in Zamboanga City, as consignee.

• Delivery to the Warehouse: Upon arrival at the port of Zamboanga City, respondent’s agent, Efren Ruste Shipping Agency, unloaded the goods and delivered them to petitioner’s warehouse. Before each delivery, delivery checkers Rogelio Rizada and Ismael Zamora asked Abdurahman Jama to surrender the original bills of lading, but Jama presented only certified true copies.

• Receipt of the Goods: After each delivery, the checkers asked Jama to sign the delivery receipts. On occasions when Jama could not remain to witness the complete delivery, he instructed his subordinates to sign the delivery receipts for him.

• Claim of Non-Delivery and Investigation: Petitioner alleged that the goods were not received and filed a formal claim for non-delivery in a letter dated March 11, 1989. Respondent answered that the cargo had been delivered to Jama. Petitioner commenced an investigation, but before it concluded, Jama resigned as branch supervisor. Petitioner did not disapprove Jama’s resignation or hold him responsible for the loss.

• Filing of Suit: The government, through the DOH, CARE, and NTFC, filed an action for breach of contract of carriage against LSC before the RTC of Manila.

• Presumption of Negligence and Want of Extraordinary Diligence: Petitioner contended that respondent, as a common carrier, was presumed negligent and liable for the loss of the goods because it failed to abide by the terms and conditions of the bills of lading. Petitioner argued that the non-appearance of consignee Abdurahman Jama to testify should not be taken against it, and that the testimonies of respondent’s delivery checkers, being employees of respondent’s agent, were biased and insufficient to overturn the legal presumption of fault.

• Improper Award of Damages and Attorney’s Fees: Petitioner maintained that its complaint was filed in good faith, without malice, and with the best intention of protecting the government’s interest, integrity, and its credibility with international relief agencies and donor states. Thus, the award of actual damages and attorney’s fees to respondent was baseless.

• Observance of Extraordinary Diligence: Respondent argued that it exercised extraordinary diligence by requiring the surrender of the original bills of lading before release of the goods. In their absence, it demanded and obtained certified true copies of the bills of lading and required Abdurahman Jama, or his designated subordinates, to sign the delivery receipts upon completion of each delivery.

• Baseless and Malicious Suit: Respondent contended that petitioner’s suit was baseless and malicious because petitioner, instead of pursuing its absconding employee, sought to recoup its losses from respondent. This, respondent claimed, justified the award of actual damages and attorney’s fees.

• Presumption of Negligence of Common Carrier: Whether respondent Lorenzo Shipping Corporation was presumed at fault or negligent for the loss of the goods, and whether it overcame that presumption by proving exercise of extraordinary diligence.

• Award of Damages and Attorney’s Fees: Whether the award of actual damages and attorney’s fees in favor of respondent was justified.

• Presumption of Negligence of Common Carrier: Respondent adequately proved that it exercised extraordinary diligence over the goods. The surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. Under Article 353 of the Code of Commerce, if the original bill of lading cannot be returned, the consignee’s signed receipt produces the same effect. Respondent’s agents demanded certified true copies of the bills of lading and obtained signed delivery receipts from the consignee or his authorized subordinates—a standard operating procedure that substantially complied with the law. Furthermore, petitioner failed to hold its own employee Abdurahman Jama accountable for the loss and could not shift the burden to respondent.

• Award of Damages and Attorney’s Fees: The award of actual damages and attorney’s fees was deleted. An adverse decision does not automatically justify an award of attorney’s fees. The suit was filed to protect the government’s credibility with international organizations and was not in bad faith; no ill motive was shown, only an erroneous belief in the righteousness of the claim. Moreover, respondent presented no proof of actual pecuniary loss to support the award of actual damages.

• Extraordinary Diligence of Common Carriers — Under Article 1733 of the Civil Code, a common carrier is bound to observe extraordinary diligence in the vigilance over the goods transported. Extraordinary diligence is defined as that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. Under Article 1735, if the goods are lost, destroyed, or deteriorated, the common carrier is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence. The presumption may be overturned by competent evidence showing the carrier exercised such diligence.

• Discharge of Carrier’s Obligation Without Original Bill of Lading (Article 353, Code of Commerce) — The return of the original bill of lading is not a condition precedent for the carrier to be discharged of its contractual obligation. When the consignee cannot return the original bill of lading because of loss or any other cause, Article 353 of the Code of Commerce provides that the consignee’s signed receipt for the goods delivered produces the same effects as the return of the bill of lading. Delivery to the consignee or his authorized representative, with proper acknowledgment by way of signed delivery receipts, constitutes substantial compliance with the carrier’s duty and negates fault or negligence.

• Attorney’s Fees as Damages — Under Article 2208 of the Civil Code, an award of attorney’s fees requires factual and legal justifications and must fall within the instances enumerated by law. An adverse decision does not ipso facto justify such an award. The right to litigate should not be penalized absent a showing of bad faith or malice. The discretion of courts to award attorney’s fees must be exercised with great care, closely approximating the statutory instances.

• Actual Damages — Actual or compensatory damages under Article 2199 of the Civil Code must be supported by proof of the actual pecuniary loss suffered.

• “Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights.”

• “[T]he surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices.”

• “The right to litigate should bear no premium. An adverse decision does not ipso facto justify an award of attorney’s fees to the winning party.”

• “J” Marketing Corp. v. Sia, Jr., G.R. No. 127823, 29 January 1998, 285 SCRA 580 — Cited for the rule that an adverse decision does not ipso facto justify an award of attorney’s fees.

• BPI Family Savings Bank, Inc. v. Manikan, G.R. No. 148789, 16 January 2003, 395 SCRA 373 — Cited to emphasize that the discretion to award attorney’s fees must be exercised with great care, closely adhering to the instances exemplified by law.

• Ramos v. Court of Appeals, G.R. No. 124354, 29 December 1999, 321 SCRA 584 — Cited for the requirement under Article 2199 of the Civil Code that actual damages must be proved by evidence of pecuniary loss.

• Article 1733, Civil Code — Declares that common carriers are bound to observe extraordinary diligence in the vigilance over goods and the safety of passengers. Applied to define the standard of care required of respondent LSC.

• Article 1735, Civil Code — Establishes the presumption that common carriers are at fault or negligent when goods are lost, destroyed, or deteriorated, unless they prove observance of extraordinary diligence. Used to frame the burden of proof borne by respondent.

• Article 353, Code of Commerce — Provides that after the contract of carriage has been complied with, the bill of lading shall be returned to the carrier, but if the consignee cannot return it because of loss or any other cause, a receipt for the goods delivered produces the same effects. Applied to validate respondent’s practice of obtaining delivery receipts against certified true copies of bills of lading.

• Article 2208, Civil Code — Enumerates the instances when attorney’s fees may be recovered. The Court found none of these instances present to justify the trial court’s award.

• Article 2199, Civil Code — Provides that actual or compensatory damages must be duly proved. Applied to delete the award for lack of evidence of pecuniary loss.

Davide, Jr., C.J. (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ.