The Supreme Court’s decision in Designer Baskets, Inc. v. Air Sea Transport, Inc. and Asia Cargo Container Lines (G.R. No. 184513, March 9, 2016) concerned a situation wherein the unpaid seller sued not only the buyer but also the carrier and its agent for the payment of the value of the goods, and for the release of the goods without the surrender of the bill of lading.

The carrier’s agent issued a bill of lading to the unpaid seller who retained the bills of lading pending the payment of the goods by the buyer. The bill of lading does not contain a provision requiring the carrier to release or deliver the shipment to the consignee only upon the surrender of the original bill of lading. The buyer and the carrier entered into an Indemnity Agreement wherein the former obligated the latter to deliver the shipment without the surrender of the bill of lading and in return the buyer agreed to indemnify the carrier free from any liability as a result of the release of the shipment.

The Supreme Court ruled that the carrier has no liability for releasing the goods to the consignee without the surrender of the bill of lading. Although the general rule is that upon receipt of the goods, the consignee surrenders the bill of lading, Article 353 of the Code of Commerce provides for two exceptions: when the bill of lading gets lost or for other cause. In either case, the consignee must provide a recept to the carrier for the goods delivered.

The unpaid seller’s retention of the bill of lading coupled with the Indemnity Agreement entered into by the buyer and the carrier resulted in substantial compliance with Article 353 of the Code of Commerce.

The Supreme Court further held that Articles 1733, 1734 and 1735 of the New Civil Code, which speak of the carrier’s liability for the loss, destruction, or deterioration of the goods and the presumption of neglience do not apply. The responsibility of the carrier under these provisions lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation, until the goods are delivered by the carrier to the consignee. In this case, it is undisputed that the goods were timely delivered to the proper consignee.

Finally, the Supreme Court said that the carrier cannot be held liable for the unpaid value of the goods, as it is not a party to the contract of sale. The carrier’s liability if any should be pursuant to the contract of carriage of goods, and the law on the transportation of the goods, not on the contract of sale between the unpaid seller and buyer of the goods.