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Sea-Land Service Inc. v. CA, AP Moller/Maersk Line and Maersk-Tabacalera Shipping Inc (2000) Ynares-Santiago, J. Bare facts: AP Moller and Sealand entered into an agreement to share space for cargo. Under this agreement, they could either be a principal carrier or a containership operator, depending on the circumstances. One day, Flores delivered to AP Moller a cargo to be shipped somewhere. Pursuant to their agreement to share space, AP Moller loaded the cargo on a Sealand ship. However, Sealand delayed in delivery so the consignee (another party not stated who) refused to receive the cargo. Because of this, Flores files a complaint for reimbursement, AP Moller files an answer and a Third Party Complaint. Facts:

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Sea Land and AP Moller/Maersk (AMML) are carriers of cargo in containerships as well as common carriers. They entered into a contract Cooperation in the Pacific whereby they mutually agreed to purchase, share and exchange needed space for cargo. o Under the agreement, they could be either a principal carrier or a containership operator. Some clauses in the agreement provide for arbitration. One day, Florex Intl delivered to AP Moller a cargo of foodstuffs. Oakland, California was to be port of discharge and San Francisco was to be place of delivery. o The corresponding Bill of Lading was issued to Florex by AP Moller Pursuant to the agreement, AP Moller loaded the cargo on a vessel owned by Sealand. (therefore in this particular transaction, AP Moller was the principal carrier while Sealand was the containership operator). The consignee (cases didnt say who) refused to pay for the cargo, alleging delay in delivery.

FLORES files COMPLAINT: Thus, Flores filed a complaint against Maersk Tabacalera Shipping (case didnt say what the relationship was between Maersk Tabacalera and AP Moller) for reimbursement of the value of the cargo. o Florex says the cargo was received by the consignee only on June 28, 1991 instead of June 5, 1991 as agreed (because the cargo was discharged in Long Beach instead of Oakland) AP MOLLER files ANSWER: AP Moller filed an Answer alleging that even assuming that Florex was entitled to reimbursement, it was Sealand who should be liable. AP MOLLER files THIRD PARTY COMPLAINT: AP Moller filed a third party comp against Sealand saying that whatever damaged sustained by Florex were caused by Sealand, which actually received, transported , and unloaded Florexs cargo SEALAND files MTD: MTD is based on the ground of failure to state a cause of action and lack of jurisdiction, the amount of damages not having been specified. Sealand also prayed either for dismissal or suspension of the Third Party Complaint on the ground that there exists an arbitration agreement between it and AP Moller. LC DENIES SEALANDs MTD. MR denied. SEALAND files a PETITION for CERTIORARI with CA. Meanwhile, SEALAND files an ANSWER to the THIRD PARTY COMPLAINT. CA DISMISSES PETITION for CERTIORARI. MR denied. SEALAND filed PETITION FOR REVIEW with SC.

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Issues/Held: Did the CA err in refusing to have the third party complaint dismissed for failure to state a cause of action? --- NO CA did not err. There was no failure to state a cause of action. Did CA err in ruling that the failure to state a cause of action may be remedied by reference to its attachments? --NO, CA did not err. Failure to state a COA may be remedied by reference to attachments. In this case, did CA err in ruling that arbitration is NOT a condition precedent to suit? --- YES. CA erred in ruling that the terms of the contract do not require arbitration as a condition precedent to judicial action Ratio: On failure to state a cause of action CA did not err in reading the Complaint (of Florex) and AP Mollers Answer together with the Third Party Complaint to determine whether a cause of action is properly alleged. In Fil-Estate Golf and Development vs. CA, SC ruled that in the determination of whether or not the complaint states a cause of action, the annexes attached to the complaint may be considered, they being parts of the complaint. ------NOT RELATED. The following discusses their agreement for an arbitration------Based on the agreement it was clear that the LC and CA erred in denying Sealands prayer for arbitration It is clear from the agreement that:

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Disputes between the Principal Carrier and the Containership Operator arising from contracts of carriage shall be governed by the provisions of the bills of lading issued to the Principal Carrier by the Containership Operato The Principal Carrier shall use its best efforts to defend or settle all suits against it for loss of or damage to cargo pursuant to bills of lading issued by it. The Principal Carrier shall have the right to seek damages and/or indemnity from the Containership Operator by arbitration The Principal Carrier shall have the right to commence such arbitration any time until 1 year after its liability has been finally determined by agreement, arbitration award or judgment, provided that the Containership Operator was given notice in writing by the Principal Carrier within three months of the Principal Carrier receiving notice in writing of said claim

Allowing AP Mollers Third Party Claim against Sealand to proceed would be in violation of a certain clause (clause 16.2) of the Agreement. The clause provides that whatever dispute there may be between the Principal Carrier and the Containership Operator arising from contracts of carriage shall be governed by the provisions of the bills of lading. On the other hand, to sustain the Third Party Complaint would be to allow AP Moller to hold Sealand liable under the bill of lading issued by the Principal Carrier (AP Moller) to Florex, under which Flores is suing in its Complaint, NOT under the bill of lading that Sealand, as containership operator, issued to AP Moller as Principal Carrier. CA ruled that the terms of the Agreement "explicitly required that the principal carrier's claim against the containership operator first be finally determined by a court judgment, before the right to arbitration accrues." However, the CA failed to consider that arbitration IS the mode to finally determine the liability of the Containership Operator. This is clear from the mandate of Clause 16.3 that "the Principal Carrier shall have the right to seek damages and/or an indemnity from the Containership Operator by arbitration. Because of the agreement clauses, arbitration is the mode provided by which AP Moller as Principal Carrier can seek damages and/or indemnity from Sealand, as Containership Operator. Stated differently, AP Moller is barred from taking judicial action against Sealand by the clear terms of their Agreement. The crucial point is that collection of damages and/or indemnity from Sealand should be by arbitration. Petition granted.