FIRST DIVISION
G.R. No. 181163, July 24, 2013
ASIAN TERMINALS, INC., Petitioner, v.
PHILAM INSURANCE CO., INC. (NOW
CHARTIS PHILIPPINES INSURANCE, INC.),
Respondent.
R E S OLUTIO N
[G.R. NO. 181262]
R E S OLUTIO N
PHILAM INSURANCE CO., INC. (NOW
CHARTIS PHILIPPINES INSURANCE, INC.),
Petitioner, v. WESTWIND SHIPPING
CORPORATION AND ASIAN TERMINALS,
INC., Respondents.
R E S OLUTIO N
[G.R. NO. 181319]
R E S OLUTIO N
WESTWIND SHIPPING CORPORATION,
Petitioner, v. PHILAM INSURANCE CO., INC.
(NOW CHARTIS PHILIPPINES INSURANCE,
INC.) AND ASIAN TERMINALS, INC.,
Respondents.
DECISION
VILLARAMA, JR., J.:
Before us are three consolidated petitions for review
on certiorari assailing the Decision1 dated October 15,
2007 and the Resolution2 dated January 11, 2008 of
the Court of Appeals (CA) which affirmed with
modification the Decision3 of the Regional Trial
Court (RTC) of Makati City, Branch 148, in Civil
Case No. 96-062. The RTC had ordered Westwind
Shipping Corporation (Westwind) and Asian
Terminals, Inc. (ATI) to pay, jointly and severally,
Philam Insurance Co., Inc. (Philam) the sum of
P633,957.15, with interest at 12% per annum from
the date of judicial demand and P158,989.28 as
attorneys fees.
The facts of the case follow:cralavvonlinelawlibrary
On April 15, 1995, Nichimen Corporation shipped to
Universal Motors Corporation (Universal Motors)
219 packages containing 120 units of brand new
Nissan Pickup Truck Double Cab 4x2 model, without
engine, tires and batteries, on board the vessel S/S
Calayan Iris from Japan to Manila. The shipment,
which had a declared value of US$81,368 or
P29,400,000, was insured with Philam against all
risks under Marine Policy No. 708-8006717-4.4
The carrying vessel arrived at the port of Manila on
April 20, 1995, and when the shipment was unloaded
by the staff of ATI, it was found that the package
marked as 03-245-42K/1 was in bad order.5 The Turn
Over Survey of Bad Order Cargoes6 dated April 21,
1995 identified two packages, labeled 03-245-42K/1
and 03/237/7CK/2, as being dented and broken.
Thereafter, the cargoes were stored for temporary
safekeeping inside CFS Warehouse in Pier No. 5.
On May 11, 1995, the shipment was withdrawn by
R.F. Revilla Customs Brokerage, Inc., the authorized
broker of Universal Motors, and delivered to the
latters warehouse in Mandaluyong City. Upon the
request7 of Universal Motors, a bad order survey was
conducted on the cargoes and it was found that one
Frame Axle Sub without LWR was deeply dented on
the buffle plate while six Frame Assembly with Bush
were deformed and misaligned.8 Owing to the extent
of the damage to said cargoes, Universal Motors
declared them a total loss.
On August 4, 1995, Universal Motors filed a formal
claim for damages in the amount of P643,963.84
against Westwind,9 ATI10 and R.F. Revilla Customs
Brokerage, Inc.11 When Universal Motors demands
remained unheeded, it sought reparation from and
was compensated in the sum of P633,957.15 by
Philam. Accordingly, Universal Motors issued a
Subrogation Receipt12 dated November 15, 1995 in
favor of Philam.
On January 18, 1996, Philam, as subrogee of
Universal Motors, filed a Complaint13 for damages
against Westwind, ATI and R.F. Revilla Customs
Brokerage, Inc. before the RTC of Makati City,
Branch 148.
On September 24, 1999, the RTC rendered judgment
in favor of Philam and ordered Westwind and ATI to
pay Philam, jointly and severally, the sum of
P633,957.15 with interest at the rate of 12% per
annum, P158,989.28 by way of attorneys fees and
expenses of litigation.
The court a quo ruled that there was sufficient
evidence to establish the respective participation of
Westwind and ATI in the discharge of and consequent
damage to the shipment. It found that the subject
cargoes were compressed while being hoisted using a
cable that was too short and taut. The trial court
observed that while the staff of ATI undertook the
physical unloading of the cargoes from the carrying
vessel, Westwinds duty officer exercised full
supervision and control throughout the process. It
held Westwind vicariously liable for failing to prove
that it exercised extraordinary diligence in the
supervision of the ATI stevedores who unloaded the
cargoes from the vessel. However, the court absolved
R.F. Revilla Customs Brokerage, Inc. from liability in
light of its finding that the cargoes had been damaged
before delivery to the consignee.
The trial court acknowledged the subrogation
between Philam and Universal Motors on the strength
of the Subrogation Receipt dated November 15,
1995. It likewise upheld Philams claim for the value
Page 1 of 44
of the alleged damaged vehicle parts contained in
Case Nos. 03-245-42K/1 and 03-245-51K or
specifically for 7 [pieces] of Frame Axle Sub
Without Lower and Frame Assembly with Bush.14
Westwind filed a Motion for Reconsideration15 which
was, however, denied in an Order16 dated October 26,
2000.
On appeal, the CA affirmed with modification the
ruling of the RTC. In a Decision dated October 15,
2007, the appellate court directed Westwind and ATI
to pay Philam, jointly and severally, the amount of
P190,684.48 with interest at the rate of 12% per
annum until fully paid, attorneys fees of P47,671 and
litigation expenses.
The CA stressed that Philam may not modify its
allegations by claiming in its Appellees Brief 17 that
the six pieces of Frame Assembly with Bush, which
were purportedly damaged, were also inside Case No.
03-245-42K/1. The CA noted that in its Complaint,
Philam alleged that one (1) pc. FRAME AXLE SUB
W/O LWR from Case No. 03-245-42K/1 [was]
completely deformed and misaligned, and six (6)
other pcs. of FRAME ASSEMBLY WITH BUSH
from Case No. 03-245-51K [were] likewise
completely deformed and misaligned.18
The appellate court accordingly affirmed Westwind
and ATIs joint and solidary liability for the damage
to only one (1) unit of Frame Axle Sub without
Lower inside Case No. 03-245-42K/1. It also noted
that when said cargo sustained damage, it was not yet
in the custody of the consignee or the person who had
the right to receive it. The CA pointed out that
Westwinds duty to observe extraordinary diligence
in the care of the cargoes subsisted during unloading
thereof by ATIs personnel since the former exercised
full control and supervision over the discharging
operation.
Similarly, the appellate court held ATI liable for the
negligence of its employees who carried out the
offloading of cargoes from the ship to the pier. As
regards the extent of ATIs liability, the CA ruled that
ATI cannot limit its liability to P5,000 per damaged
package. It explained that Section 7.0119 of the
Contract for Cargo Handling Services20 does not
apply in this case since ATI was not yet in custody
and control of the cargoes when the Frame Axle Sub
without Lower suffered damage.
Citing Belgian Overseas Chartering and Shipping
N.V. v. Philippine First Insurance Co., Inc.,21 the
appellate court also held that Philams action for
damages had not prescribed notwithstanding the
absence of a notice of claim.
All the parties moved for reconsideration, but their
motions were denied in a Resolution dated January
11, 2008. Thus, they each filed a petition for review
on certiorari which were consolidated together by this
Court considering that all three petitions assail the
same CA decision and resolution and involve the
same parties.
Essentially, the issues posed by petitioner ATI in G.R.
No. 181163, petitioner Philam in G.R. No. 181262
and petitioner Westwind in G.R. No. 181319 can be
summed up into and resolved by addressing three
questions: (1) Has Philams action for damages
prescribed? (2) Who between Westwind and ATI
should be held liable for the damaged cargoes? and
(3) What is the extent of their liability?
Petitioners Arguments
G.R. No. 181163
Petitioner ATI disowns liability for the damage to the
Frame Axle Sub without Lower inside Case No. 03-
245-42K/1. It shifts the blame to Westwind, whom it
charges with negligence in the supervision of the
stevedores who unloaded the cargoes. ATI admits that
the damage could have been averted had Westwind
observed extraordinary diligence in handling the
goods. Even so, ATI suspects that Case No. 03-245-
42K/1 is weak and defective22 considering that it
alone sustained damage out of the 219 packages.
Notwithstanding, petitioner ATI submits that, at most,
it can be held liable to pay only P5,000 per package
pursuant to its Contract for Cargo Handling Services.
ATI maintains that it was not properly notified of the
actual value of the cargoes prior to their discharge
from the vessel.
G.R. No. 181262
Petitioner Philam supports the CA in holding both
Westwind and ATI liable for the deformed and
misaligned Frame Axle Sub without Lower inside
Case No. 03-245-42K/1. It, however, faults the
appellate court for disallowing its claim for the value
of six Chassis Frame Assembly which were likewise
supposedly inside Case Nos. 03-245-51K and 03-
245-42K/1. As to the latter container, Philam anchors
its claim on the results of the Inspection/Survey
Report23 of Chartered Adjusters, Inc., which the court
received without objection from Westwind and ATI.
Petitioner believes that with the offer and consequent
admission of evidence to the effect that Case No. 03-
245-42K/1 contains six pieces of dented Chassis
Frame Assembly, Philams claim thereon should be
treated, in all respects, as if it has been raised in the
pleadings. Thus, Philam insists on the reinstatement
of the trial courts award in its favor for the payment
of P633,957.15 plus legal interest, P158,989.28 as
attorneys fees and costs.
Page 2 of 44
G.R. No. 181319
Petitioner Westwind denies joint liability with ATI for
the value of the deformed Frame Axle Sub without
Lower in Case No. 03-245-42K/1. Westwind argues
that the evidence shows that ATI was already in
actual custody of said case when the Frame Axle Sub
without Lower inside it was misaligned from being
compressed by the tight cable used to unload it.
Accordingly, Westwind ceased to have responsibility
over the cargoes as provided in paragraph 4 of the
Bill of Lading which provides that the responsibility
of the carrier shall cease when the goods are taken
into the custody of the arrastre.
Westwind contends that sole liability for the damage
rests on ATI since it was the latters stevedores who
operated the ships gear to unload the cargoes.
Westwind reasons that ATI is an independent
company, over whose employees and operations it
does not exercise control. Moreover, it was ATIs
employees who selected and used the wrong cable to
lift the box containing the cargo which was damaged.
Westwind likewise believes that ATI is bound by its
acceptance of the goods in good order despite a
finding that Case No. 03-245-42K/1 was partly torn
and crumpled on one side. Westwind also notes that
the discovery that a piece of Frame Axle Sub without
Lower was completely deformed and misaligned
came only on May 12, 1995 or 22 days after the
cargoes were turned over to ATI and after the same
had been hauled by R.F. Revilla Customs Brokerage,
Inc.
Westwind further argues that the CA erred in holding
it liable considering that Philams cause of action has
prescribed since the latter filed a formal claim with it
only on August 17, 1995 or four months after the
cargoes arrived on April 20, 1995. Westwind stresses
that according to the provisions of clause 20,
paragraph 224 of the Bill of Lading as well as Article
36625 of the Code of Commerce, the consignee had
until April 20, 1995 within which to make a claim
considering the readily apparent nature of the
damage, or until April 27, 1995 at the latest, if it is
assumed that the damage is not readily apparent.
Lastly, petitioner Westwind contests the imposition of
12% interest on the award of damages to Philam
reckoned from the time of extrajudicial demand.
Westwind asserts that, at most, it can only be charged
with 6% interest since the damages claimed by
Philam does not constitute a loan or forbearance of
money.
The Courts Ruling
The three consolidated petitions before us call for a
determination of who between ATI and Westwind is
liable for the damage suffered by the subject cargo
and to what extent. However, the resolution of the
issues raised by the present petitions is predicated on
the appreciation of factual issues which is beyond the
scope of a petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, as amended.
It is settled that in petitions for review on certiorari,
only questions of law may be put in issue. Questions
of fact cannot be entertained.26
There is a question of law if the issue raised is
capable of being resolved without need of reviewing
the probative value of the evidence. The resolution of
the issue must rest solely on what the law provides on
the given set of circumstances. Once it is clear that
the issue invites a review of the evidence presented,
the question posed is one of fact. If the query requires
a re-evaluation of the credibility of witnesses, or the
existence or relevance of surrounding circumstances
and their relation to each other, the issue in that query
is factual.27
In the present petitions, the resolution of the question
as to who between Westwind and ATI should be
liable for the damages to the cargo and to what extent
would have this Court pass upon the evidence on
record. But while it is not our duty to review,
examine and evaluate or weigh all over again the
probative value of the evidence presented,28 the Court
may nonetheless resolve questions of fact when the
case falls under any of the following
exceptions:cralavvonlinelawlibrary
(1) when the findings are grounded entirely on
speculation, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of
fact are conflicting; (6) when in making its findings
the Court of Appeals went beyond the issues of the
case, or its findings are contrary to the admissions of
both the appellant and the appellee; (7) when the
findings are contrary to those of the trial court; (8)
when the findings are conclusions without citation of
specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the
petitioners main and reply briefs are not disputed by
the respondent; and (10) when the findings of fact are
premised on the supposed absence of evidence and
contradicted by the evidence on
record.29nadcralavvonlinelawlibrary
In the cases at bar, the fifth and seventh exceptions
apply. While the CA affirmed the joint liability of ATI
and Westwind, it held them liable only for the value
of one unit of Frame Axle Sub without Lower inside
Case No. 03-245-42K/1. The appellate court
disallowed the award of damages for the six pieces of
Frame Assembly with Bush, which petitioner Philam
alleged, for the first time in its Appellees Brief, to be
Page 3 of 44
 likewise inside Case No. 03-245-42K/1. Lastly, the
CA reduced the award of attorneys fees to P47,671.
Foremost, the Court holds that petitioner Philam has
adequately established the basis of its claim against
petitioners ATI and Westwind. Philam, as insurer, was
subrogated to the rights of the consignee, Universal
Motors Corporation, pursuant to the Subrogation
Receipt executed by the latter in favor of the former.
The right of subrogation accrues simply upon
payment by the insurance company of the insurance
claim.30 Petitioner Philams action finds support in
Article 2207 of the Civil Code, which provides as
follows:cralavvonlinelawlibrary
Art. 2207. If the plaintiffs property has been insured,
and he has received indemnity from the insurance
company for the injury or loss arising out of the
wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person
who has violated the contract. x x x.
In their respective comments31 to Philams Formal
Offer of Evidence,32 petitioners ATI and Westwind
objected to the admission of Marine Certificate No.
708-8006717-4 and the Subrogation Receipt as
documentary exhibits B and P, respectively.
Petitioner Westwind objects to the admission of both
documents for being hearsay as they were not
authenticated by the persons who executed them. For
the same reason, petitioner ATI assails the
admissibility of the Subrogation Receipt. As regards
Marine Certificate No. 708-8006717-4, ATI makes
issue of the fact that the same was issued only on
April 27, 1995 or 12 days after the shipment was
loaded on and transported via S/S Calayan Iris.
ATTY. PALACIOS
How were you able to get hold of this subrogation
Q documents may not be admitted in evidence for
receipt?
Because I personally delivered the claim check to
A
consignee and have them [receive] the said check.
I see. Therefore, what you are saying is that you
personally delivered the claim check of Universal
Q Motors Corporation to that company and you have
the subrogation receipt signed by them
personally?
A Yes, sir.
Q And it was signed in your presence?
A Yes, sir.38
The nature of documents as either public or private
determines how the documents may be presented as
evidence in court. Public documents, as enumerated
under Section 19,33 Rule 132 of the Rules of Court,
are self-authenticating and require no further
authentication in order to be presented as evidence in
court.34
In contrast, a private document is any other writing,
deed or instrument executed by a private person
without the intervention of a notary or other person
legally authorized by which some disposition or
agreement is proved or set forth. Lacking the official
or sovereign character of a public document, or the
solemnities prescribed by law, a private document
requires authentication35 in the manner prescribed
under Section 20, Rule 132 of the
Rules:cralavvonlinelawlibrary
SEC. 20. Proof of private document. Before any
private document offered as authentic is received in
evidence, its due execution and authenticity must be
proved either:cralavvonlinelawlibrary
(a) By anyone who saw the document executed or
written; or
(b) By evidence of the genuineness of the signature
or handwriting of the maker.
Any other private document need only be identified
as that which it is claimed to be.
The requirement of authentication of a private
document is excused only in four instances,
specifically: (a) when the document is an ancient one
within the context of Section 21, 36 Rule 132 of the
Rules; (b) when the genuineness and authenticity of
the actionable document have not been specifically
denied under oath by the adverse party; (c) when the
genuineness and authenticity of the document have
been admitted; or (d) when the document is not being
offered as genuine.37
Indubitably, Marine Certificate No. 708-8006717-4
and the Subrogation Receipt are private documents
which Philam and the consignee, respectively, issue
in the pursuit of their business. Since none of the
exceptions to the requirement of authentication of a
private document obtains in these cases, said
Philam without being properly authenticated.
Contrary to the contention of petitioners ATI and
Westwind, however, Philam presented its claims
officer, Ricardo Ongchangco, Jr. to testify on the
execution of the Subrogation Receipt, as
follows:cralavvonlinelawlibrary
Page 4 of 44
 Indeed, all that the Rules require to establish the
authenticity of a document is the testimony of a
person who saw the document executed or written.
Thus, the trial court did not err in admitting the
Subrogation Receipt in evidence despite petitioners
ATI and Westwinds objections that it was not
authenticated by the person who signed it.
However, the same cannot be said about Marine
Certificate No. 708-8006717-4 which Ongchangcho,
Jr.
ATTY. PALACIOS
Now, I am presenting to you a copy of this
marine certificate 708-8006717-4 issued by
Philam Insurance Company, Inc. to Universal
Q
Motors Corporation on April 15, 1995. Will
you tell us what relation does it have to that
policy risk claim mentioned in that letter?
This is a photocopy of the said policy issued
A by the consignee Universal Motors
Corporation.
ATTY. PALACIOS
I see. [May] I request, if Your Honor please,
that this marine risk policy of the plaintiff as
submitted by claimant Universal Motors
Corporation be marked as Exhibit B.
CO
UR
T thirty-six, be accepted, as it is hereby accepted to be
Mark it.39
merely identified in court. There is nothing in
Ongchangco, Jr.s testimony which indicates that he
saw Philams authorized representative sign said
document, thus:cralavvonlinelawlibrary
As regards the issuance of Marine Certificate No.
708-8006717-4 after the fact of loss occurred, suffice
it to say that said document simply certifies the
existence of an open insurance policy in favor of the
consignee. Hence, the reference to an Open Policy
Number 9595093 in said certificate. The Court finds
it completely absurd to suppose that any insurance
company, of sound business practice, would assume a
loss that has already been realized, when the
profitability of its business rests precisely on the non-
happening of the risk insured against.
Yet, even with the exclusion of Marine Certificate
No. 708-8006717-4, the Subrogation Receipt, on its
own, is adequate proof that petitioner Philam paid the
consignees claim on the damaged goods. Petitioners
ATI and Westwind failed to offer any evidence to
controvert the same. In Malayan Insurance Co., Inc.
v. Alberto,40 the Court explained the effect of payment
by the insurer of the insurance claim in this
wise:cralavvonlinelawlibrary
We have held that payment by the insurer to the
insured operates as an equitable assignment to the
insurer of all the remedies that the insured may have
against the third party whose negligence or wrongful
act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity
of contract. It accrues simply upon payment by the
insurance company of the insurance claim. The
doctrine of subrogation has its roots in equity. It is
designed to promote and accomplish justice; and is
the mode that equity adopts to compel the ultimate
payment of a debt by one who, in justice, equity, and
good conscience, ought to pay.41
Neither do we find support in petitioner Westwinds
contention that Philams right of action has
prescribed.
The Carriage of Goods by Sea Act (COGSA) or
Public Act No. 521 of the 74th US Congress, was
accepted to be made applicable to all contracts for the
carriage of goods by sea to and from Philippine ports
in foreign trade by virtue of Commonwealth Act
(C.A.) No. 65.42 Section 1 of C.A. No. 65
states:cralavvonlinelawlibrary
Section 1. That the provisions of Public Act
Numbered Five hundred and twenty-one of the
Seventy-fourth Congress of the United States,
approved on April sixteenth, nineteen hundred and
made applicable to all contracts for the carriage of
goods by sea to and from Philippine ports in foreign
trade: Provided, That nothing in the Act shall be
construed as repealing any existing provision of the
Code of Commerce which is now in force, or as
limiting its application.
The prescriptive period for filing an action for the
loss or damage of the goods under the COGSA is
found in paragraph (6), Section 3,
thus:cralavvonlinelawlibrary
(6) Unless notice of loss or damage and the general
nature of such loss or damage be given in writing to
the carrier or his agent at the port of discharge before
or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof
under the contract of carriage, such removal shall be
prima facie evidence of the delivery by the carrier of
the goods as described in the bill of lading. If the loss
or damage is not apparent, the notice must be given
within three days of the delivery.
Said notice of loss or damage maybe endorsed upon
the receipt for the goods given by the person taking
delivery thereof.
The notice in writing need not be given if the state of
the goods has at the time of their receipt been the
subject of joint survey or inspection.
In any event the carrier and the ship shall be
Page 5 of 44
discharged from all liability in respect of loss or
damage unless suit is brought within one year after
delivery of the goods or the date when the goods
should have been delivered: Provided, That if a notice
of loss or damage, either apparent or concealed, is not
given as provided for in this section, that fact shall
not affect or prejudice the right of the shipper to bring
suit within one year after the delivery of the goods or
the date when the goods should have been delivered.
In the Bill of Lading43 dated April 15, 1995, Rizal
Commercial Banking Corporation (RCBC) is
indicated as the consignee while Universal Motors is
listed as the notify party. These designations are in
line with the subject shipment being covered by
Letter of Credit No. I501054, which RCBC issued
upon the request of Universal Motors.
A letter of credit is a financial device developed by
merchants as a convenient and relatively safe mode
of dealing with sales of goods to satisfy the
seemingly irreconcilable interests of a seller, who
refuses to part with his goods before he is paid, and a
buyer, who wants to have control of his goods before
paying.44 However, letters of credit are employed by
the parties desiring to enter into commercial
transactions, not for the benefit of the issuing bank
but mainly for the benefit of the parties to the original
transaction,45 in these cases, Nichimen Corporation as
the seller and Universal Motors as the buyer. Hence,
the latter, as the buyer of the Nissan CKD parts,
should be regarded as the person entitled to delivery
of the goods. Accordingly, for purposes of reckoning
when notice of loss or damage should be given to the
carrier or its agent, the date of delivery to Universal
Motors is controlling.
S/S Calayan Iris arrived at the port of Manila on
April 20, 1995, and the subject cargoes were
discharged to the custody of ATI the next day. The
goods were then withdrawn from the CFS Warehouse
on May 11, 1995 and the last of the packages
delivered to Universal Motors on May 17, 1995. Prior
to this, the latter filed a Request for Bad Order
Survey46 on May 12, 1995 following a joint
inspection where it was discovered that six pieces of
Chassis Frame Assembly from two bundles were
deformed and one Front Axle Sub without Lower
from a steel case was dented. Yet, it was not until
August 4, 1995 that Universal Motors filed a formal
claim for damages against petitioner Westwind.
Even so, we have held in Insurance Company of
North America v. Asian Terminals, Inc. that a request
for, and the result of a bad order examination, done
within the reglementary period for furnishing notice
of loss or damage to the carrier or its agent, serves the
purpose of a claim. A claim is required to be filed
within the reglementary period to afford the carrier or
depositary reasonable opportunity and facilities to
check the validity of the claims while facts are still
fresh in the minds of the persons who took part in the
transaction and documents are still available.47 Here,
Universal Motors filed a request for bad order survey
on May 12, 1995, even before all the packages could
be unloaded to its warehouse.
Moreover, paragraph (6), Section 3 of the COGSA
clearly states that failure to comply with the notice
requirement shall not affect or prejudice the right of
the shipper to bring suit within one year after delivery
of the goods. Petitioner Philam, as subrogee of
Universal Motors, filed the Complaint for damages
on January 18, 1996, just eight months after all the
packages were delivered to its possession on May 17,
1995. Evidently, petitioner Philams action against
petitioners Westwind and ATI was seasonably filed.
This brings us to the question that must be resolved
in these consolidated petitions. Who between
Westwind and ATI should be liable for the damage to
the cargo?
It is undisputed that Steel Case No. 03-245-42K/1
was partly torn and crumpled on one side while it
was being unloaded from the carrying vessel. The
damage to said container was noted in the Bad Order
Cargo Receipt48 dated April 20, 1995 and Turn Over
Survey of Bad Order Cargoes dated April 21, 1995.
The Turn Over Survey of Bad Order Cargoes
ATTY. LLAMAS
Having been present during the entire
Q discharging operation, do you remember who
else were present at that time?
Our surveyor and our checker the foreman of
A
ATI.
Q Were there officials of the ship present also?
Yes, sir there was an officer of the vessel on
A
duty at that time.54
x x
xx
Q Who selected the cable slink to be used?
A ATI Operation.
Q Are you aware of how they made that selection?
Before the vessel arrived we issued a manifesto
of the storage plan informing the ATI of what
A
type of cargo and equipment will be utilitized in
discharging the cargo.55
x x
xx
You testified that it was the ATI foremen who
Q select the cable slink to be used in
discharging, is that correct?
Yes sir, because they are the one who select the
slink and they know the kind of cargoes because
A
they inspected it before the discharge of said
cargo.
Are you aware that the ship captain is consulted
Q
in the selection of the cable sling?
Because the ship captain knows for a fact the
equipment being utilized in the discharge of the
cargoes because before the ship leave thePage
port6 of
of44
A
Japan the crew already utilized the proper
equipment fitted to the cargo.56 (Emphasis
supplied.)
indicates that said steel case was not opened at the
time of survey and was accepted by the arrastre in
good order. Meanwhile, the Bad Order Cargo Receipt
bore a notation B.O. not yet t/over to ATI. On the
basis of these documents, petitioner ATI claims that
the contents of Steel Case No. 03-245-42K/1 were
damaged while in the custody of petitioner Westwind.
We agree.
Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the
goods transported by them. Subject to certain
exceptions enumerated under Article 173449 of the
Civil Code, common carriers are responsible for the
loss, destruction, or deterioration of the goods. The
extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally
placed in the possession of, and received by the
carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive
them.50
The court a quo, however, found both petitioners
Westwind and ATI, jointly and severally, liable for the
damage to the cargo. It observed that while the staff
of ATI undertook the physical unloading of the
cargoes from the carrying vessel, Westwinds duty
officer exercised full supervision and control over the
entire process. The appellate court affirmed the
solidary liability of Westwind and ATI, but only for
the damage to one Frame Axle Sub without Lower.
Upon a careful review of the records, the Court finds
no reason to deviate from the finding that petitioners
Westwind and ATI are concurrently accountable for
the damage to the content of Steel Case No. 03-245-
42K/1.
Section 251 of the COGSA provides that under every
contract of carriage of goods by the sea, the carrier in
relation to the loading, handling, stowage, carriage,
custody, care and discharge of such goods, shall be
subject to the responsibilities and liabilities and
entitled to the rights and immunities set forth in the
Act. Section 3 (2)52 thereof then states that among the
carriers responsibilities are to properly load, handle,
stow, carry, keep, care for and discharge the goods
carried.53
At the trial, Westwinds Operation Assistant,
Menandro G. Ramirez, testified on the presence of a
ship officer to supervise the unloading of the subject
cargoes.
It is settled in maritime law jurisprudence that
cargoes while being unloaded generally remain under
the custody of the carrier.57 The Damage Survey
Report58 of the survey conducted by Phil. Navtech
Services, Inc. from April 20-21, 1995 reveals that
Case No. 03-245-42K/1 was damaged by ATI
stevedores due to overtightening of a cable sling hold
during discharge from the vessels hatch to the pier.
Since the damage to the cargo was incurred during
the discharge of the shipment and while under the
supervision of the carrier, the latter is liable for the
damage caused to the cargo.
This is not to say, however, that petitioner ATI is
without liability for the damaged cargo.
The functions of an arrastre operator involve the
handling of cargo deposited on the wharf or between
the establishment of the consignee or shipper and the
ships tackle. Being the custodian of the goods
discharged from a vessel, an arrastre operators duty
is to take good care of the goods and to turn them
over to the party entitled to their possession.59
Handling cargo is mainly the arrastre operators
principal work so its drivers/operators or employees
should observe the standards and measures necessary
to prevent losses and damage to shipments under its
custody.60
While it is true that an arrastre operator and a carrier
may not be held solidarily liable at all times,61the
facts of these cases show that apart from ATIs
stevedores being directly in charge of the physical
unloading of the cargo, its foreman picked the cable
sling that was used to hoist the packages for transfer
to the dock. Moreover, the fact that 218 of the 219
packages were unloaded with the same sling
unharmed is telling of the inadequate care with which
ATIs stevedore handled and discharged Case No. 03-
245-42K/1.
With respect to petitioners ATI and Westwinds
liability, we agree with the CA that the same should
be confined to the value of the one piece Frame Axle
Sub without Lower.
In the Bad Order Inspection Report62 prepared by
Universal Motors, the latter referred to Case No. 03-
245-42K/1 as the source of said Frame Axle Sub
without Lower which suffered a deep dent on its
buffle plate. Yet, it identified Case No. 03-245-51K
as the container which bore the six pieces Frame
Assembly with Bush. Thus, in Philams Complaint, it
alleged that the entire shipment showed one (1) pc.
FRAME AXLE SUB W/O LWR from Case No. 03-
245-42K/1 [was] completely deformed and
misaligned, and six (6) other pcs. of FRAME
ASSEMBLY WITH BUSH from Case No. 03-245-
51K [were] likewise completely deformed and
misaligned.63 Philam later claimed in its Appellees
Brief that the six pieces of Frame Assembly with
Bush were also inside the damaged Case No. 03-245-
42K/1.
Page 7 of 44

However, there is nothing in the records to show
conclusively that the six Frame Assembly with Bush
were likewise contained in and damaged inside Case
No. 03-245-42K/1. In the Inspection Survey Report
of Chartered Adjusters, Inc., it mentioned six pieces
of chassis frame assembly with deformed body
mounting bracket. However, it merely noted the same
as coming from two bundles with no identifying
marks.
Lastly, we agree with petitioner Westwind that the
CA erred in imposing an interest rate of 12% on the
award of damages. Under Article 2209 of the Civil
Code, when an obligation not constituting a loan or
forbearance of money is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. 64
In the similar case of Belgian Overseas Chartering
and Shipping N.V. v. Philippine First Insurance Co.,
Inc.,65 the Court reduced the rate of interest on the
damages awarded to the carrier therein to 6% from
the time of the filing of the complaint until the
finality of the decision.
WHEREFORE, the Court AFFIRMS with
MODIFICATION the Decision dated October 15,
2007 and the Resolution dated January 11, 2008 of
the Court of Appeals in CA-G.R. CV No. 69284 in
that the interest rate on the award of P190,684.48 is
reduced to 6% per annum from the date of
extrajudicial demand, until fully paid.
With costs against the petitioners in G.R. No. 181163
and G.R. No. 181319, respectively.
SO ORDERED.
ASIAN TERMINALS, INC. vs. PHILAM
INSURANCE CO., INC
July 2, 2014 1 Comment
G.R. Nos. 181163, 181262, and 181319, July 24,
2013 (VILLARAMA, JR., J)
FACTS:
On April 15, 1995, Nichimen Corporation shipped to
Universal Motors Corporation 219 packages
containing 120 units of brand new Nissan Pickup
Truck Double Cab 42 model, without engine, tires
and batteries, on board the vessel S/S Calayan Iris
from Japan to Manila. The shipment, which had a
declared value of US$81,368 or P29,400,000, was
insured with Philam against all risks under the marine
Policy no. 708-8006717-4.
The carrying vessel arrived at the port of manila on
April 20, 1995, and when the shipment was unloaded
by the staff of ATI, it was found that the package
marked as 03-245-42K/1 was in bad order. The Turn
Over Survey of bad order cargoes dated April 21,
1995 identified two packages, labelled 03-245-42K/1
and 03/237/7CK/2, as being dented and broken.
Thereafter, the cargoes were stored for temporary
safekeeping inside CFS Warehouse in Pier No. 5.
On May 11, 1995, the shipment was withdrawn by
R.F. Revilla Customs Brokerage, Inc., the authorized
broker of Universal Motors, and delivered to the
latters warehouse in Mandaluyong City. Upon the
request of Universal Motors, a bad order survey was
conducted on the cargoes and it was found that one
Frame Axle Sub without LWR was deeply dented on
the buffle plate while six Frame Assembly with Bush
were deformed and misaligned. Owing to the extent
of the damage to said cargoes, Universal Motors
declared them a total loss.
On August 4, 1995, Universal Motors filed a formal
claim for damages in the amount of P643,963.84
against Westwind, ATI and R.F. Revilla Customs
Brokerage, Inc. When Universal Motors demands
remained unheeded, it sought reparation from and
was compensated in the sum of P633,957.15 by
Philam. Accordingly, Universal Motors issued a
Subrogation Receipt dated November 15, 1995 in
favor of Philam.
On January 18, 1996, Philam, as subrogee of
Universal Motors, filed a Complaint for damages
against Westwind, ATI and R.F. Revilla Customs
Brokerage, Inc. before the Regional Trial Court of
Makati City. The trial court rendered judgment in
favour of Philam which ruling was affirmed by the
Court of Appeals modifying the amount to be paid by
Page 8 of 44
Westwind and ATI.
ISSUE:
Whether or not Philam may claim against Westwind
and ATI as a subrogee
HELD:
YES. The Court holds that petitioner Philam has
adequately established the basis of its claim against
petitioners ATI and Westwind. Philam, as insurer, was
subrogated to the rights of the consignee, Universal
Motors Corporation, pursuant to the Subrogation
receipt executed by the latter in favour of the former.
The right of subrogation accrues simply upon
payment by the insurance company of the insurance
claim.
Petitioner Philams action finds support in Article
2207 of the Civil Code which provides that if the
plaintiffs property has been insured, and he has
received indemnity from the insurance company for
the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company
shall be subrogated to the rights of the insured against
the wrongdoer or the person who has violated the
contract.
In Malayan Insurance Co., Inc. vs. Alberto, the Court
explained the effect of payment by the insurer of the
insurance claim in this wise:
We have held that payment by the insurer to the
insured operates as an equitable assignment to the
insurer of all the remedies that the insured may have
against the third party whose negligence or wrongful
act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity
of contract. It accrues simply upon payment by the
insurance company of the insurance claim. The
doctrine of subrogation has its roots in equity. It is
designed to promote and accomplish justice; and is
the mode that equity adopts to compel the ultimate
payment of a debt by one who, in justice, equity, and
good conscience, ought to pay
G.R. No. 200289 November 25, 2013
WESTWIND SHIPPING CORPORATION,
Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and
ASIAN TERMINALS INC., Respondents.
x-----------------------x
G.R. No. 200314
ORIENT FREIGHT INTERNATIONAL INC.,
Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and
ASIAN TERMINALS INC., Respondents.
DECISION
PERALTA, J.:
These two consolidated cases challenge, by way of
petition for certiorari under Rule 45 of the 1997
Rules of Civil Procedure, September 13, 2011
Decision1 and January 19, 2012 Resolution2 of the
Court of Appeals (CA) in CA-G.R. CV No. 86752,
which reversed and set aside the January 27, 2006
Decision3 of the Manila City Regional Trial Court
Branch (RTC) 30. The facts, as established by the
records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation
shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the
consignee, San Miguel Corporation (SMC). The
shipment, covered by Bill of Lading No. KBMA-
1074,4 was loaded and received clean on board M/V
Golden Harvest Voyage No. 66, a vessel owned and
operated by Westwind Shipping Corporation
(Westwind).
SMC insured the cargoes against all risks with UCPB
General Insurance Co., Inc. (UCPB) for US Dollars:
One Hundred Eighty-Four Thousand Seven Hundred
Ninety-Eight and Ninety-Seven Centavos
(US$184,798.97), which, at the time, was equivalent
to Philippine Pesos: Six Million Two Hundred Nine
Thousand Two Hundred Forty-Five and Twenty-
Eight Centavos (P6,209,245.28).
The shipment arrived in Manila, Philippines on
August 31, 1993 and was discharged in the custody
of the arrastre operator, Asian Terminals, Inc. (ATI),
formerly Marina Port Services, Inc.5 During the
unloading operation, however, six containers/skids
worth Philippine Pesos: One Hundred Seventeen
Thousand Ninety-Three and Twelve Centavos
(P117,093.12) sustained dents and punctures from the
Page 9 of 44
forklift used by the stevedores of Ocean Terminal
Services, Inc. (OTSI) in centering and shuttling the
containers/skids. As a consequence, the local ship
agent of the vessel, Baliwag Shipping Agency, Inc.,
issued two Bad Order Cargo Receipt dated September
1, 1993.
On September 7, 1993, Orient Freight International,
Inc. (OFII), the customs broker of SMC, withdrew
from ATI the 197 containers/skids, including the six
in damaged condition, and delivered the same at
SMCs warehouse in Calamba, Laguna through J.B.
Limcaoco Trucking (JBL). It was discovered upon
discharge that additional nine containers/skids valued
at Philippine Pesos: One Hundred Seventy-Five
Thousand Six Hundred Thirty-Nine and Sixty-Eight
Centavos (P175,639.68) were also damaged due to
the forklift operations; thus, making the total number
of 15 containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a
claim against UCPB, Westwind, ATI, and OFII to
recover the amount corresponding to the damaged 15
containers/skids. When UCPB paid the total sum of
Philippine Pesos: Two Hundred Ninety-Two
Thousand Seven Hundred Thirty-Two and Eighty
Centavos (P292,732.80), SMC signed the subrogation
receipt. Thereafter, in the exercise of its right of
subrogation, UCPB instituted on August 30, 1994 a
complaint for damages against Westwind, ATI, and
OFII.6
After trial, the RTC dismissed UCPBs complaint and
the counterclaims of Westwind, ATI, and OFII. It
ruled that the right, if any, against ATI already
prescribed based on the stipulation in the 16 Cargo
Gate Passes issued, as well as the doctrine laid down
in International Container Terminal Services, Inc. v.
Prudential Guarantee & Assurance Co. Inc. 7 that a
claim for reimbursement for damaged goods must be
filed within 15 days from the date of consignees
knowledge. With respect to Westwind, even if the
action against it is not yet barred by prescription,
conformably with Section 3 (6) of the Carriage of
Goods by Sea Act (COGSA) and Our rulings in E.E.
Elser, Inc., et al. v. Court of Appeals, et al. 8 and
Belgian Overseas Chartering and Shipping N.V. v.
Phil. First Insurance Co., Inc.,9 the court a quo still
opined that Westwind is not liable, since the
discharging of the cargoes were done by ATI
personnel using forklifts and that there was no
allegation that it (Westwind) had a hand in the
conduct of the stevedoring operations. Finally, the
trial court likewise absolved OFII from any liability,
reasoning that it never undertook the operation of the
forklifts which caused the dents and punctures, and
that it merely facilitated the release and delivery of
the shipment as the customs broker and
representative of SMC.
On appeal by UCPB, the CA reversed and set aside
the trial court. The fallo of its September 13, 2011
Decision directed:
WHEREFORE, premises considered, the instant
appeal is hereby GRANTED. The Decision dated
January 27, 2006 rendered by the court a quo is
REVERSED AND SET ASIDE. Appellee Westwind
Shipping Corporation is hereby ordered to pay to the
appellant UCPB General Insurance Co., Inc., the
amount of One Hundred Seventeen Thousand and
Ninety-Three Pesos and Twelve Centavos
(Php117,093.12), while Orient Freight International,
Inc. is hereby ordered to pay to UCPB the sum of
One Hundred Seventy-Five Thousand Six Hundred
Thirty-Nine Pesos and Sixty-Eight Centavos
(Php175,639.68). Both sums shall bear interest at the
rate of six (6%) percent per annum, from the filing of
the complaint on August 30, 1994 until the judgment
becomes final and executory. Thereafter, an interest
rate of twelve (12%) percent per annum shall be
imposed from the time this decision becomes final
and executory until full payment of said amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the
claim against ATI already prescribed, it rendered a
contrary view as regards the liability of Westwind
and OFII. For the appellate court, Westwind, not ATI,
is responsible for the six damaged containers/skids at
the time of its unloading. In its rationale, which
substantially followed Philippines First Insurance
Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it
concluded that the common carrier, not the arrastre
operator, is responsible during the unloading of the
cargoes from the vessel and that it is not relieved
from liability and is still bound to exercise
extraordinary diligence at the time in order to see to it
that the cargoes under its possession remain in good
order and condition. The CA also considered that
OFII is liable for the additional nine damaged
containers/skids, agreeing with UCPBs contention
that OFII is a common carrier bound to observe
extraordinary diligence and is presumed to be at fault
or have acted negligently for such damage. Noting
the testimony of OFIIs own witness that the delivery
of the shipment to the consignee is part of OFIIs job
as a cargo forwarder, the appellate court ruled that
Article 1732 of the New Civil Code (NCC) does not
distinguish between one whose principal business
activity is the carrying of persons or goods or both
and one who does so as an ancillary activity. The
appellate court further ruled that OFII cannot excuse
itself from liability by insisting that JBL undertook
the delivery of the cargoes to SMCs warehouse. It
opined that the delivery receipts signed by the
inspector of SMC showed that the containers/skids
were received from OFII, not JBL. At the most, the
CA said, JBL was engaged by OFII to supply the
trucks necessary to deliver the shipment, under its
supervision, to SMC.
Only Westwind and OFII filed their respective
motions for reconsideration, which the CA denied;
hence, they elevated the case before Us via petitions
docketed as G.R. Nos. 200289 and 200314,
respectively.
Westwind argues that it no longer had actual or
constructive custody of the containers/skids at the
Page 10 of 44
time they were damaged by ATIs forklift operator
during the unloading operations. In accordance with
the stipulation of the bill of lading, which allegedly
conforms to Article 1736 of the NCC, it contends that
its responsibility already ceased from the moment the
cargoes were delivered to ATI, which is reckoned
from the moment the goods were taken into the
latters custody. Westwind adds that ATI, which is a
completely independent entity that had the right to
receive the goods as exclusive operator of
stevedoring and arrastre functions in South Harbor,
Manila, had full control over its employees and
stevedores as well as the manner and procedure of the
discharging operations.
As for OFII, it maintains that it is not a common
carrier, but only a customs broker whose participation
is limited to facilitating withdrawal of the shipment in
the custody of ATI by overseeing and documenting
the turnover and counterchecking if the quantity of
the shipments were in tally with the shipping
documents at hand, but without participating in the
physical withdrawal and loading of the shipments
into the delivery trucks of JBL. Assuming that it is a
common carrier, OFII insists that there is no need to
rely on the presumption of the law that, as a
common carrier, it is presumed to have been at fault
or have acted negligently in case of damaged goods
considering the undisputed fact that the damages to
the containers/skids were caused by the forklift
blades, and that there is no evidence presented to
show that OFII and Westwind were the
owners/operators of the forklifts. It asserts that the
loading to the trucks were made by way of forklifts
owned and operated by ATI and the unloading from
the trucks at the SMC warehouse was done by way of
forklifts owned and operated by SMC employees.
Lastly, OFII avers that neither the undertaking to
deliver nor the acknowledgment by the consignee of
the fact of delivery makes a person or entity a
common carrier, since delivery alone is not the
controlling factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v.
Wallem Phils. Shipping, Inc.12 applies, as it settled the
query on which between a common carrier and an
arrastre operator should be responsible for damage or
loss incurred by the shipment during its unloading.
We elucidated at length:
Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the
goods transported by them. Subject to certain
exceptions enumerated under Article 1734 of the
Civil Code, common carriers are responsible for the
loss, destruction, or deterioration of the goods. The
extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally
placed in the possession of, and received by the
carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive
them.
For marine vessels, Article 619 of the Code of
Commerce provides that the ship captain is liable for
the cargo from the time it is turned over to him at the
dock or afloat alongside the vessel at the port of
loading, until he delivers it on the shore or on the
discharging wharf at the port of unloading, unless
agreed otherwise. In Standard Oil Co. of New York v.
Lopez Castelo, the Court interpreted the ship
captains liability as ultimately that of the shipowner
by regarding the captain as the representative of the
shipowner.
Lastly, Section 2 of the COGSA provides that under
every contract of carriage of goods by sea, the carrier
in relation to the loading, handling, stowage, carriage,
custody, care, and discharge of such goods, shall be
subject to the responsibilities and liabilities and
entitled to the rights and immunities set forth in the
Act. Section 3 (2) thereof then states that among the
carriers responsibilities are to properly and carefully
load, handle, stow, carry, keep, care for, and
discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre
operator involve the handling of cargo deposited on
the wharf or between the establishment of the
consignee or shipper and the ship's tackle. Being the
custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the
goods and to turn them over to the party entitled to
their possession.
Handling cargo is mainly the arrastre operator's
principal work so its drivers/operators or employees
should observe the standards and measures necessary
to prevent losses and damage to shipments under its
custody.
In Firemans Fund Insurance Co. v. Metro Port
Service, Inc., the Court explained the relationship and
responsibility of an arrastre operator to a consignee of
a cargo, to quote:
The legal relationship between the consignee and the
arrastre operator is akin to that of a depositor and
warehouseman. The relationship between the
consignee and the common carrier is similar to that of
the consignee and the arrastre operator. Since it is the
duty of the ARRASTRE to take good care of the
goods that are in its custody and to deliver them in
good condition to the consignee, such responsibility
also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore
charged with and obligated to deliver the goods in
good condition to the consignee. (Emphasis supplied)
(Citations omitted)
The liability of the arrastre operator was reiterated in
Eastern Shipping Lines, Inc. v. Court of Appeals with
the clarification that the arrastre operator and the
carrier are not always and necessarily solidarily liable
as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct
insofar as it ruled that an arrastre operator and a
carrier may not be held solidarily liable at all times.
Page 11 of 44
But the precise question is which entity had custody
of the shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA
states that among the carriers responsibilities are to
properly and carefully load, care for and discharge
the goods carried. The bill of lading covering the
subject shipment likewise stipulates that the carriers
liability for loss or damage to the goods ceases after
its discharge from the vessel. Article 619 of the Code
of Commerce holds a ship captain liable for the cargo
from the time it is turned over to him until its
delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen
Company v. M/V Farland, it was ruled that like the
duty of seaworthiness, the duty of care of the cargo is
non-delegable, and the carrier is accordingly
responsible for the acts of the master, the crew, the
stevedore, and his other agents. It has also been held
that it is ordinarily the duty of the master of a vessel
to unload the cargo and place it in readiness for
delivery to the consignee, and there is an implied
obligation that this shall be accomplished with sound
machinery, competent hands, and in such manner that
no unnecessary injury shall be done thereto. And the
fact that a consignee is required to furnish persons to
assist in unloading a shipment may not relieve the
carrier of its duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that
cargoes while being unloaded generally remain under
the custody of the carrier x x x.13
In Regional Container Lines (RCL) of Singapore v.
The Netherlands Insurance Co. (Philippines), Inc.14
and Asian Terminals, Inc. v. Philam Insurance Co.,
Inc.,15 the Court echoed the doctrine that cargoes,
while being unloaded, generally remain under the
custody of the carrier. We cannot agree with
Westwinds disputation that "the carrier in Wallem
clearly exercised supervision during the discharge of
the shipment and that is why it was faulted and held
liable for the damage incurred by the shipment during
such time." What Westwind failed to realize is that
the extraordinary responsibility of the common
carrier lasts until the time the goods are actually or
constructively delivered by the carrier to the
consignee or to the person who has a right to receive
them. There is actual delivery in contracts for the
transport of goods when possession has been turned
over to the consignee or to his duly authorized agent
and a reasonable time is given him to remove the
goods.16 In this case, since the discharging of the
containers/skids, which were covered by only one bill
of lading, had not yet been completed at the time the
damage occurred, there is no reason to imply that
there was already delivery, actual or constructive, of
the cargoes to ATI. Indeed, the earlier case of Delsan
Transport Lines, Inc. v. American Home Assurance
Corp.17serves as a useful guide, thus:
Delsans argument that it should not be held liable for
the loss of diesel oil due to backflow because the
same had already been actually and legally delivered
to Caltex at the time it entered the shore tank holds
no water. It had been settled that the subject cargo
was still in the custody of Delsan because the
discharging thereof has not yet been finished when
the backflow occurred. Since the discharging of the
cargo into the depot has not yet been completed at the
time of the spillage when the backflow occurred,
there is no reason to imply that there was actual
delivery of the cargo to the consignee. Delsan is
straining the issue by insisting that when the diesel
oil entered into the tank of Caltex on shore, there was
legally, at that moment, a complete delivery thereof
to Caltex. To be sure, the extraordinary responsibility
of common carrier lasts from the time the goods are
unconditionally placed in the possession of, and
received by, the carrier for transportation until the
same are delivered, actually or constructively, by the
carrier to the consignee, or to a person who has the
right to receive them. The discharging of oil products
to Caltex Bulk Depot has not yet been finished,
Delsan still has the duty to guard and to preserve the
cargo. The carrier still has in it the responsibility to
guard and preserve the goods, a duty incident to its
having the goods transported.
To recapitulate, common carriers, from the nature of
their business and for reasons of public policy, are
bound to observe extraordinary diligence in vigilance
over the goods and for the safety of the passengers
transported by them, according to all the
circumstances of each case. The mere proof of
delivery of goods in good order to the carrier, and
their arrival in the place of destination in bad order,
make out a prima facie case against the carrier, so
that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is
incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances
inconsistent with its liability.18
The contention of OFII is likewise untenable. A
customs broker has been regarded as a common
carrier because transportation of goods is an integral
part of its business.19 In Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc.,20
the Court already reiterated: It is settled that under a
given set of facts, a customs broker may be regarded
as a common carrier.1wphi1 Thus, this Court, in
A.F. Sanchez Brokerage, Inc. v. The Honorable Court
of Appeals held:
The appellate court did not err in finding petitioner, a
customs broker, to be also a common carrier, as
defined under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air, for
compensation, offering their services to the public.
xxxx
Article 1732 does not distinguish between one whose
principal business activity is the carrying of goods
and one who does such carrying only as an ancillary
activity. The contention, therefore, of petitioner that it
Page 12 of 44
is not a common carrier but a customs broker whose
principal function is to prepare the correct customs
declaration and proper shipping documents as
required by law is bereft of merit. It suffices that
petitioner undertakes to deliver the goods for
pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc.,
this Court held that as the transportation of goods is
an integral part of a customs broker, the customs
broker is also a common carrier. For to declare
otherwise "would be to deprive those with whom [it]
contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry
goods for [its] customers, is part and parcel of
petitioners business."21
That OFII is a common carrier is buttressed by the
testimony of its own witness, Mr. Loveric
Panganiban Cueto, that part of the services it offers to
clients is cargo forwarding, which includes the
delivery of the shipment to the consignee.22 Thus, for
undertaking the transport of cargoes from ATI to
SMCs warehouse in Calamba, Laguna, OFII is
considered a common carrier. As long as a person or
corporation holds itself to the public for the purpose
of transporting goods as a business, it is already
considered a common carrier regardless of whether it
owns the vehicle to be used or has to actually hire
one.
As a common carrier, OFII is mandated to observe,
under Article 1733 of the Civil Code,23 extraordinary
diligence in the vigilance over the goods24 it
transports according to the peculiar circumstances of
each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been
at fault or to have acted negligently unless it proves
that it observed extraordinary diligence.25 In the case
at bar it was established that except for the six
containers/skids already damaged OFII received the
cargoes from ATI in good order and condition; and
that upon its delivery to SMC additional nine
containers/skids were found to be in bad order as
noted in the Delivery Receipts issued by OFII and as
indicated in the Report of Cares Marine Cargo
Surveyors. Instead of merely excusing itself from
liability by putting the blame to ATI and SMC it is
incumbent upon OFII to prove that it actively took
care of the goods by exercising extraordinary
diligence in the carriage thereof. It failed to do so.
Hence its presumed negligence under Article 1735 of
the Civil Code remains unrebutted.
WHEREFORE, premises considered the petitions of
Westwind and OFII in G.R. Nos. 200289 and 200314
respectively are DENIED. The September 13 2011
Decision and January 19 2012 Resolution of the
Court of Appeals in CA-G.R. CV No. 86752 which
reversed and set aside the January 27 2006 Decision
of the Manila City Regional Trial Court Branch 30
are AFFIRMED.
SO ORDERED.
666 SCRA 226
Ponente: Peralta, J.
DOCTRINE:
The term carriage of goods in the Carriage of
Goods by Sea Act (COGSA) covers the period from
the time the goods are loaded to the vessel to the time
they are discharged therefrom.
The carrier and the ship shall be discharged from
all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or
the date when the goods should have been delivered.
FACTS:
On November 9, 2002, Macro-Lito Corporation,
through M/V DIMI P vessel, 185 packages of
electrolytic tin free steel, complete and in good
condition.
The goods are covered by a bill of lading, had a
declared value of $169,850.35 and was insured with
the Insuracne Company of North America
(Petitioner) against all risk.
The carrying vessel arrived at the port of Manila
on November 19, 2002, and when the shipment was
discharged therefrom, it was noted that 7 of the
packages were damaged and in bad condition.
On Novermber 21, 2002, the shipment was then
turned over to the custody of Asian Terminals. Inc.
(Respondent) for storage and safekeeping pending its
withrawal by the consignee.
On November 29, 2002, prior to the withrawal of
the shipment, a joint inspection of the said cargo was
conducted. The examination report showed that an
additional 5 packages were found to be damaged and
in bad order.
On January 6, 2003, the consignee, San Miguel
Corporation filed separate claims against both the
Petioner and the Respondent for the damage caused
to the packages.
The Petitioner then paid San Miguel Corporation
the amound of PhP 431,592.14 which is based on a
report of its independent adjuster.
The Petitioner then formally demanded reparation
against the Respondent for the amount it paid San
Miguel Corporation.
For the failure of the Respondent to satisfy the
demand of the Petitioner, the Petitioner filed for an
action for damages with the RTC of Makati.
The trial court found that indeed, the shipment
suffered additional damage under the custody of the
Respondent prior to the turn over of the said
shipment to San Miguel.
As to the extent of liability, Respondent invoked
Page 13 of 44
the Contract for Cargo Handling Services executed
between the Philippine Ports Authority and the
Respondent. Under the contract, the Respondents
liability for damage to cargoes in its custody is
limited to PhP5,000 for each package, unless the
value of the cargo shipment is otherwise specified or
manifested in writing together with the declared Bill
of Lading. The trial Court found that the shipper and
consignee with the said requirements.
However, the trial court dismissed the complaint
on the ground that the Petitioners claim was barred
by the statute of limitations. It held that the Carriage
of Goods by Sea Act (COGSA), embodied in
Commonwealth Act No. 65 is applicable. The trial
court held that under the said law, the shipper has the
right to bring a suit within one year after the delivery
of the goods or the date when the goods should have
been delivered, in respect of loss or damage thereto.
Petitioner then filed before the Supreme Court a
petition for review on certiorari assailing the trial
courts order of dismissal.
ISSUE/S:
1.) Whether or not the trial court committed an
error in dismissing the complaint of the petitioner
based on the one-year prescriptive period for filing a
suit under the COGSA to an arrastre operator? YES.
2.) Whether or not the Petitioner is entitled to
recover actual damages against the Respondent?
YES, but only PhP164,428.76
HELD:
The term carriage of goods covers the period through M/V "DIMI P" vessel, one hundred eighty-
from the time when the goods are loaded to the time
when they are discharged from the ship. Thus, it can
be inferred that the period of time when the goods
have been discharged from the ship and given to the
custody of the arrastre operator is not covered by the
COGSA.
The Petitioner, who filed the present action for the
5 INSURANCE G.R. No. 180784
COMPANY OF
NORTH Present:
AMERICA,
Petitioner, CARPIO, * J.,
PERALTA, Acting
Chairperson,
- versus - ABAD,
PEREZ, ** and
MENDOZA, JJ.
Promulgated:
ASIAN February 15, 2012
TERMINALS,
INC.,
Respondent.
packages that were damaged while in the custody of
the respondent was not fortright in its claim, as it
knew that the damages it sought, based on the report
of its adjuster covered 9 packages. Based on the
report, only four of the nine packages were damaged
in the custody of the Respondent. The Petitioner can
be granted only the amount of damages that is due to
it.
THIRD DIVISION
x------------------------------------
-------------x
DECISION
PERALTA, J.:
This is a petition for review on certiorari[1] of
the Decision of the Regional Trial Court (RTC) of
Makati City, Branch 138 (trial court) in Civil Case
No. 05-809 and its Order dated December 4, 2007 on
the ground that the trial court committed reversible
error of law.
The trial court dismissed petitioners
complaint for actual damages on the ground of
prescription under the Carriage of Goods by Sea Act
(COGSA).
The facts are as follows:
On November 9, 2002, Macro-Lite Korea
Corporation shipped to San Miguel Corporation,
five (185) packages (231,000 sheets) of electrolytic
tin free steel, complete and in good order condition
and covered by Bill of Lading No.
[2]
POBUPOHMAN20638. The shipment had a
declared value of US$169,850.35[3] and was insured
with petitioner Insurance Company of North America
against all risks under Marine Policy No. MOPA-
06310.[4]
The carrying vessel arrived at the port of
Manila on November 19, 2002, and when the
shipment was discharged therefrom, it was noted that
seven (7) packages thereof were damaged and in bad
order.[5] The shipment was then turned over to the
custody of respondent Asian Terminals, Inc. (ATI) on
November 21, 2002 for storage and safekeeping
pending its withdrawal by the consignee's authorized
Page 14 of 44
customs broker, R.V. Marzan Brokerage Corp.
(Marzan).
On November 22, 23 and 29, 2002, the
subject shipment was withdrawn by Marzan from the
custody of respondent. On November 29, 2002, prior
to the last withdrawal of the shipment, a joint
inspection of the said cargo was conducted per the
Request for Bad Order Survey[6] dated November 29,
2002, and the examination report, which was written
on the same request, showed that an additional five
(5) packages were found to be damaged and in bad
order.
On January 6, 2003, the consignee, San
Miguel Corporation, filed separate claims[7] against
respondent and petitioner for the damage to 11,200
sheets of electrolytic tin free steel.
Petitioner engaged the services of an
independent adjuster/surveyor, BA McLarens Phils.,
Inc., to conduct an investigation and evaluation on
the claim and to prepare the necessary report.[8] BA
McLarens Phils., Inc. submitted to petitioner an
Survey Report[9] dated January 22, 2003 and another
report[10] dated May 5, 2003 regarding the damaged
shipment. It noted that out of the reported twelve (12)
damaged skids, nine (9) of them were rejected and
three (3) skids were accepted by the consignees
representative as good order. BA McLarens Phils.,
Inc. evaluated the total cost of damage to the nine (9)
rejected skids (11,200 sheets of electrolytic tin free
steel) to be P431,592.14.
The petitioner, as insurer of the said cargo,
paid the consignee the amount of P431,592.14 for the
damage caused to the shipment, as evidenced by the
Subrogation Receipt dated January 8, 2004.
Thereafter, petitioner, formally demanded reparation
against respondent. As respondent failed to satisfy its
demand, petitioner filed an action for damages with
the RTC of Makati City.
The trial court found, thus:
The Court finds that the
subject shipment indeed suffered
additional damages. The Request for
Bad Order Survey No. 56422 shows
that prior to the turn over of the
shipment from the custody of ATI to
the consignee, aside from the seven
(7) packages which were already
damaged upon arrival at the port of
Manila, five (5) more packages were
found with "dent, cut and crumple"
while in the custody of ATI. This
document was issued by ATI and was
jointly executed by the representatives
of ATI, consignee and customs, and
the Shed Supervisor. Thus, ATI is now
estopped from claiming that there was
no additional damage suffered by the
shipment. It is, therefore, only logical
to conclude that the damage was
caused solely by the negligence of
defendant ATI. This evidence of the
plaintiff was refuted by the defendant
by merely alleging that "the damage to
the 5 Tin Plates is only in its external
packaging. However, the fact remains
that the consignee has rejected the
same as total loss for not being
suitable for their intended purpose. In
addition, the photographs presented by
the plaintiff show that the shipment
also suffered severe dents and some
packages were even critically
[11]
crumpled.
As to the extent of liability, ATI invoked the
Contract for Cargo Handling Services executed
between the Philippine Ports Authority and Marina
Ports Services, Inc. (now Asian Terminals, Inc.).
Under the said contract, ATI's liability for damage to
cargoes in its custody is limited to P5,000.00 for
each package, unless the value of the cargo shipment
is otherwise specified or manifested or
communicated in writing, together with the declared
Bill of Lading value and supported by a certified
packing list to the contractor by the interested party
or parties before the discharge or lading unto vessel
of the goods.
The trial court found that there was
compliance by the shipper and consignee with the
above requirement. The Bill of Lading, together with
the corresponding invoice and packing list, was
shown to ATI prior to the discharge of the goods
from the vessel. Since the shipment was released
Page 15 of 44
from the custody of ATI, the trial court found that the
same was declared for tax purposes as well as for the
assessment of arrastre charges and other fees. For the
purpose, the presentation of the invoice, packing list
and other shipping documents to ATI for the proper
assessment of the arrastre charges and other fees
satisfied the condition of declaration of the actual
invoices of the value of the goods to overcome the
limitation of liability of the arrastre operator.[12]
Further, the trial court found that there was a
valid subrogation between the petitioner and the
assured/consignee San Miguel Corporation. The
respondent admitted the existence of Global Marine
Policy No. MOPA-06310 with San Miguel
Corporation and Marine Risk Note No. 3445,[13]
which showed that the cargo was indeed insured with
petitioner. The trial court held that petitioners claim
is compensable because the Subrogation Receipt,16
which was admitted as to its existence by respondent,
was sufficient to establish not only the relationship of
the insurer and the assured, but also the amount paid
to settle the insurance claim.[14]
However, the trial court dismissed the
complaint on the ground that the petitioners claim
was already barred by the statute of limitations. It
held that COGSA, embodied in Commonwealth Act
(CA) No. 65, applies to this case, since the goods
were shipped from a foreign port to the Philippines.
The trial court stated that under the said law,
particularly paragraph 4, Section 3 (6)[15] thereof, the
shipper has the right to bring a suit within one year
after the delivery of the goods or the date when the
goods should have been delivered, in respect of loss
or damage thereto.
The trial court held:
In the case at bar, the records
show that the shipment was delivered
to the consignee on 22, 23 and 29 of
November 2002. The plaintiff took
almost a year to approve and pay the
claim of its assured, San Miguel,
despite the fact that it had initially
received the latter's claim as well as
the inspection report and survey report
of McLarens as early as January 2003.
The assured/consignee had only until
November of 2003 within which to
file a suit against the defendant.
However, the instant case was filed
only on September 7, 2005 or almost
three (3) years from the date the
subject shipment was delivered to the
consignee. The plaintiff, as insurer of
the shipment which has paid the claim
of the insured, is subrogated to all the
rights of the said insured in relation to
the reimbursement of such claim. As
such, the plaintiff cannot acquire
better rights than that of the insured.
Thus, the plaintiff has no one but itself
to blame for having acted
lackadaisically on San Miguel's claim.
WHEREFORE, the complaint and
counterclaim are hereby DISMISSED.
[16]
Petitioners motion for reconsideration was
denied by the trial court in the Order[17] dated
December 4, 2007.
Petitioner filed this petition under Rule 45 of
the Rules of Court directly before this Court, alleging
that it is raising a pure question of law:
THE TRIAL COURT
COMMITTED A PURE AND
SERIOUS ERROR OF LAW IN
APPLYING THE ONE-YEAR
PRESCRIPTIVE PERIOD FOR
FILING A SUIT UNDER THE
CARRIAGE OF GOODS BY SEA
ACT (COGSA) TO AN ARRASTRE
OPERATOR.[18]
Petitioner states that while it is in full accord
with the trial court in finding respondent liable for the
damaged shipment, it submits that the trial courts
dismissal of the complaint on the ground of
prescription under the COGSA is legally erroneous. It
contends that the one-year limitation period for
bringing a suit in court under the COGSA is not
applicable to this case, because the prescriptive
period applies only to the carrier and the ship. It
argues that respondent, which is engaged in
warehousing, arrastre and stevedoring business, is not
Page 16 of 44
a carrier as defined by the COGSA, because it is not
engaged in the business of transportation of goods by
sea in international trade as a common carrier.
Petitioner asserts that since the complaint was filed
against respondent arrastre operator only, without
impleading the carrier, the prescriptive period under
the COGSA is not applicable to this case.
Moreover, petitioner contends that the term
carriage of goods in the COGSA covers the period
from the time the goods are loaded to the vessel to
the time they are discharged therefrom. It points out
that it sued respondent only for the additional five (5)
packages of the subject shipment that were found
damaged while in respondents custody, long after the
shipment was discharged from the vessel. The said
damage was confirmed by the trial court and proved
by the Request for Bad Order Survey No. 56422.[19]
Petitioner prays that the decision of the trial
court be reversed and set aside and a new judgment
be promulgated granting its prayer for actual
damages.
The main issues are: (1) whether or not the
one-year prescriptive period for filing a suit under the
COGSA applies to this action for damages against
respondent arrastre operator; and (2) whether or not
petitioner is entitled to recover actual damages in the
amount of P431,592.14 from respondent.
To reiterate, petitioner came straight to this
Court to appeal from the decision of the trial court
under Rule 45 of the Rules of Court on the ground
that it is raising only a question of law.
Microsoft Corporation v. Maxicorp, Inc.[20]
explains the difference between questions of law and
questions of fact, thus:
The distinction between
questions of law and questions of fact
is settled. A question of law exists
when the doubt or difference centers on
what the law is on a certain state of
facts. A question of fact exists if the
doubt centers on the truth or falsity of
the alleged facts. Though this
delineation seems simple,
determining the true nature and extent
of the distinction is sometimes
problematic. For example, it is
incorrect to presume that all cases
where the facts are not in dispute
automatically involve purely questions
of law.
There is a question of law if the issue
raised is capable of being resolved
without need of reviewing the
probative value of the evidence. The
resolution of the issue must rest solely
on what the law provides on the given
set of circumstances. Once it is clear
that the issue invites a review of the
evidence presented, the question posed
is one of fact. If the query requires a re-
evaluation of the credibility of
witnesses, or the existence or relevance
of surrounding circumstances and their
relation to each other, the issue in that
query is factual. x x x[21]
In this case, although petitioner alleged that it
is merely raising a question of law, that is, whether or
not the prescriptive period under the COGSA applies
to an action for damages against respondent arrastre
operator, yet petitioner prays for the reversal of the
decision of the trial court and that it be granted the
relief sought, which is the award of actual damages in
the amount of P431,592.14. For a question to be one
of law, it must not involve an examination of the
probative value of the evidence presented by the
litigants or any of them.[22] However, to resolve the
issue of whether or not petitioner is entitled to
recover actual damages from respondent requires the
Court to evaluate the evidence on record; hence,
petitioner is also raising a question of fact.
Under Section 1, Rule 45, providing for
appeals by certiorari before the Supreme Court, it is
clearly enunciated that only questions of law may be
set forth.[23] The Court may resolve questions of fact
only when the case falls under the following
exceptions:
(1) when the findings are grounded
entirely on speculation, surmises, or
conjectures; (2) when the inference
made is manifestly mistaken, absurd, or
Page 17 of 44
 impossible; (3) when there is grave
abuse of discretion; (4) when the
judgment is based on a
misapprehension of facts; (5) when
the findings of fact are conflicting; (6)
when in making its findings the Court
of Appeals went beyond the issues of
the case, or its findings are contrary to
the admissions of both the appellant
and the appellee; (7) when the findings
are contrary to those of the trial court;
(8) when the findings are conclusions
without citation of specific evidence on
which they are based; (9) when the
facts set forth in the petition as well as
in the petitioner's main and reply briefs
are not disputed by the respondent; and
(10) when the findings of fact are
premised on the supposed absence of
evidence and contradicted by the
evidence on record.[24]
In this case, the fourth exception cited above
applies, as the trial court rendered judgment based on
a misapprehension of facts.
We first resolve the issue on whether or not
the one-year prescriptive period for filing a suit under
the COGSA applies to respondent arrastre operator.
The Carriage of Goods by Sea Act (COGSA),
Public Act No. 521 of the 74th US Congress, was
accepted to be made applicable to all contracts for the
carriage of goods by sea to and from Philippine ports
in foreign trade by virtue of CA No. 65.
Section 1 of CA No. 65 states:
Section 1. That the provisions
of Public Act Numbered Five hundred
and twenty-one of the Seventy-fourth
Congress of the United States,
approved on April sixteenth, nineteen
hundred and thirty-six, be accepted, as
it is hereby accepted to be made
applicable to all contracts for the
carriage of goods by sea to and from
Philippine ports in foreign trade:
Provided, That nothing in the Act shall
be construed as repealing any existing
provision of the Code of Commerce
which is now in force, or as limiting
its application.
Section 1, Title I of CA No. 65 defines the
relevant terms in Carriage of Goods by Sea, thus:
Section 1. When used in this Act -
(a) The term "carrier" includes
the owner or the charterer who enters
into a contract of carriage with a
shipper.
(b) The term "contract of
carriage" applies only to contracts of
carriage covered by a bill of lading or
any similar document of title, insofar as
such document relates to the carriage of
goods by sea, including any bill of
lading or any similar document as
aforesaid issued under or pursuant to a
charter party from the moment at which
such bill of lading or similar document
of title regulates the relations between a
carrier and a holder of the same.
(c) The term "goods" includes
goods, wares, merchandise, and articles
of every kind whatsoever, except live
animals and cargo which by the
contract of carriage is stated as being
carried on deck and is so carried.
(d) The term "ship" means any
vessel used for the carriage of goods by
sea.
(e) The term "carriage of
goods" covers the period from the
time when the goods are loaded to
the time when they are discharged
from the ship.[25]
It is noted that the term carriage of goods
covers the period from the time when the goods are
loaded to the time when they are discharged from the
ship; thus, it can be inferred that the period of time
when the goods have been discharged from the ship
and given to the custody of the arrastre operator is not
covered by the COGSA.
The prescriptive period for filing an action for
the loss or damage of the goods under the COGSA is
found in paragraph (6), Section 3, thus:
6) Unless notice of loss or
damage and the general nature of such
loss or damage be given in writing to
the carrier or his agent at the port of
discharge before or at the time of the
removal of the goods into the custody
of the person entitled to delivery
thereof under the contract of carriage,
such removal shall be prima facie
Page 18 of 44
 evidence of the delivery by the carrier
of the goods as described in the bill of
lading. If the loss or damage is not
apparent, the notice must be given
within three days of the delivery.
Said notice of loss or damage
maybe endorsed upon the receipt for
the goods given by the person taking
delivery thereof.
The notice in writing need not
be given if the state of the goods has at
the time of their receipt been the
subject of joint survey or inspection.
In any event the carrier and
the ship shall be discharged from all
liability in respect of loss or damage
unless suit is brought within one
year after delivery of the goods or
the date when the goods should have
been delivered: Provided, That if a
notice of loss or damage, either
apparent or concealed, is not given as
provided for in this section, that fact
shall not affect or prejudice the right
of the shipper to bring suit within one
year after the delivery of the goods or
the date when the goods should have
been delivered.[26]
From the provision above, the carrier and the
ship may put up the defense of prescription if the
action for damages is not brought within one year
after the delivery of the goods or the date when the
goods should have been delivered. It has been held
that not only the shipper, but also the consignee or
legal holder of the bill may invoke the prescriptive
period.[27] However, the COGSA does not mention
that an arrastre operator may invoke the prescriptive
period of one year; hence, it does not cover the
arrastre operator.
Respondent arrastre operators responsibility
and liability for losses and damages are set forth in
Section 7.01 of the Contract for Cargo Handling
Services executed between the Philippine Ports
Authority and Marina Ports Services, Inc. (now
Asian Terminals, Inc.), thus:
Section 7.01 Responsibility
and Liability for Losses and Damages;
Exceptions - The CONTRACTOR
shall, at its own expense, handle all
merchandise in all work undertaken by
it hereunder, diligently and in a
skillful, workman-like and efficient
manner. The CONTRACTOR shall
be solely responsible as an
independent contractor, and hereby
agrees to accept liability and to pay
to the shipping company,
consignees, consignors or other
interested party or parties for the
loss, damage or non-delivery of
cargoes in its custody and control to
the extent of the actual invoice value
of each package which in no case
shall be more than FIVE
THOUSAND PESOS (P5,000.00)
each, unless the value of the cargo
shipment is otherwise specified or
manifested or communicated in
writing together with the declared
Bill of Lading value and supported
by a certified packing list to the
CONTRACTOR by the interested
party or parties before the discharge
or loading unto vessel of the goods.
This amount of Five Thousand Pesos
(P5,000.00) per package may be
reviewed and adjusted by the
AUTHORITY from time to time. The
CONTRACTOR shall not be
responsible for the condition or the
contents of any package received, nor
for the weight nor for any loss, injury
or damage to the said cargo before or
while the goods are being received or
remains in the piers, sheds,
warehouses or facility, if the loss,
injury or damage is caused by force
majeure or other causes beyond the
CONTRACTOR's control or capacity
to prevent or remedy; PROVIDED,
that a formal claim together with
the necessary copies of Bill of
Lading, Invoice, Certified Packing
List and Computation arrived at
covering the loss, injury or damage
or non-delivery of such goods shall
have been filed with the
CONTRACTOR within fifteen (15)
days from day of issuance by the
CONTRACTOR of a certificate of
non-delivery; PROVIDED, however,
that if said CONTRACTOR fails to
issue such certification within
fifteen (15) days from receipt of a
written request by the
shipper/consignee or his duly
authorized representative or any
interested party, said certification
shall be deemed to have been issued,
and thereafter, the fifteen (15) day
Page 19 of 44
 period within which to file the claim
commences; PROVIDED, finally,
that the request for certification of
loss shall be made within thirty (30)
days from the date of delivery of the
package to the consignee.[28]
Based on the Contract above, the consignee
has a period of thirty (30) days from the date of
delivery of the package to the consignee within which
to request a certificate of loss from the arrastre
operator. From the date of the request for a certificate
of loss, the arrastre operator has a period of fifteen
(15) days within which to issue a certificate of non-
delivery/loss either actually or constructively.
Moreover, from the date of issuance of a certificate of
non-delivery/loss, the consignee has fifteen (15) days
within which to file a formal claim covering the loss,
injury, damage or non-delivery of such goods with all
accompanying documentation against the arrastre
operator.
Petitioner clarified that it sued respondent
only for the additional five (5) packages of the
subject shipment that were found damaged while in
respondents custody, which fact of damage was
sustained by the trial court and proved by the Request
for Bad Order Survey No. 56422.[29]
Petitioner pointed out the importance of the
Request for Bad Order Survey by citing New
Zealand Insurance Company Limited v. Navarro.[30]
In the said case, the Court ruled that the request for,
and the result of, the bad order examination, which
were filed and done within fifteen days from the
haulage of the goods from the vessel, served the
purpose of a claim, which is to afford the carrier or
depositary reasonable opportunity and facilities to
check the validity of the claims while facts are still
fresh in the minds of the persons who took part in the
transaction and documents are still available. Hence,
even if the consignee therein filed a formal claim
beyond the stipulated period of 15 days, the arrastre
operator was not relieved of liability as the purpose
of a formal claim had already been satisfied by the
consignees timely request for the bad order
examination of the goods shipped and the result of
the said bad order examination.
To elaborate, New Zealand Insurance
Company, Ltd. v. Navarro held:
We took special note of the
above pronouncement six (6) years
later in Firemans Fund Insurance
Co. v. Manila Port Service Co., et al.
There, fifteen (15) cases of nylon
merchandise had been discharged
from the carrying vessel and received
by defendant Manila Port Service Co.,
the arrastre operator, on 7 July 1961.
Out of those fifteen (15) cases,
however, only twelve (12) had been
delivered to the consignee in good
condition. Consequently, on 20 July
1961, the consignee's broker requested
a bad order examination of the
shipment, which was later certified by
defendant's own inspector to be short
of three (3) cases. On 15 August 1961,
a formal claim for indemnity was then
filed by the consignee, who was later
replaced in the action by plaintiff
Fireman's Fund Insurance Co., the
insurer of the goods. Defendant,
however, refused to honor the claim,
arguing that the same had not been
filed within fifteen (15) days from the
date of discharge of the shipment from
the carrying vessel, as required under
the arrastre Management Contract then
in force between itself and the Bureau
of Customs. The trial court upheld this
argument and hence dismissed the
complaint. On appeal by the
consignee, this Court, speaking
through Mr. Justice J.B.L. Reyes,
reversed the trial court and found the
defendant arrastre operator liable for
the value of the lost cargo, explaining
as follows:
However, the trial court has
overlooked the significance of the
request for, and the result of, the bad
order examination, which were filed
and done within fifteen days from the
haulage of the goods from the vessel.
Said request and result, in effect,
served the purpose of a claim, which
is
to afford the
carrier or depositary
reasonable
opportunity and
facilities to check the
validity of the claims
while facts are still
Page 20 of 44
 fresh in the minds of
the persons who took
part in the transaction
and documents are
still available.
(Consunji vs. Manila
Port Service, L-15551,
29 November 1960)
Indeed, the examination undertaken
by the defendant's own inspector not
only gave the defendant an
opportunity to check the goods but is
itself a verification of its own liability
x x x.
In other words, what the Court
considered as the crucial factor in
declaring the defendant arrastre
operator liable for the loss occasioned,
in the Fireman's Fund case, was the
fact that defendant, by virtue of the
consignee's request for a bad order
examination, had been able formally
to verify the existence and extent of its
liability within fifteen (15) days from
the date of discharge of the shipment
from the carrying vessel -- i.e., within
the same period stipulated under the
Management Contract for the
consignee to file a formal claim. That
a formal claim had been filed by the
consignee beyond the stipulated
period of fifteen (15) days neither
relieved defendant of liability nor
excused payment thereof, the
purpose of a formal claim, as
contemplated in Consunji, having
already been fully served and
satisfied by the consignee's timely
request for, and the eventual result
of, the bad order examination of the
nylon merchandise shipped.
Relating the doctrine of
Fireman's Fund to the case at bar, the
record shows that delivery to the
warehouse of consignee Monterey
Farms Corporation of the 5,974 bags
of soybean meal, had been completed
by respondent Razon (arrastre
operator) on 9 July 1974. On that
same day, a bad order examination of
the goods delivered was requested by
the consignee and was, in fact,
conducted by respondent Razon's own
inspector, in the presence of
representatives of both the Bureau of
Customs and the consignee. The
ensuing bad order examination report
what the trial court considered a
"certificate of loss confirmed that out
of the 5,974 bags of soybean meal
loaded on board the M/S
"Zamboanga" and shipped to Manila,
173 bags had been damaged in
transitu while an additional 111 bags
had been damaged after the entire
shipment had been discharged from
the vessel and placed in the custody of
respondent Razon. Hence, as early as
9 July 1974 (the date of last delivery
to the consignee's warehouse),
respondent Razon had been able to
verify and ascertain for itself not
only the existence of its liability to
the consignee but, more
significantly, the exact amount
thereof - i.e., P5,746.61, representing
the value of 111 bags of soybean meal.
We note further that such verification
and ascertainment of liability on the
part of respondent Razon, had been
accomplished "within thirty (30)
days from the date of delivery of last
package to the consignee, broker or
importer" as well as "within fifteen
(15) days from the date of issuance
by the Contractor [respondent
Razon] of a certificate of loss,
damage or injury or certificate of
non-delivery" the periods prescribed
under Article VI, Section 1 of the
Management Contract here involved,
within which a request for certificate
of loss and a formal claim,
respectively, must be filed by the
consignee or his agent. Evidently,
therefore, the rule laid down by the
Court in Fireman's Fund finds
appropriate application in the case at
bar.[31]
In this case, the records show that the goods
were deposited with the arrastre operator on
November 21, 2002. The goods were withdrawn from
the arrastre operator on November 22, 23 and 29,
2002. Prior to the withdrawal on November 29, 2002,
the broker of the importer, Marzan, requested for a
bad order survey in the presence of a Customs
representative and other parties concerned. The joint
inspection of cargo was conducted and it was found
that an additional five (5) packages were found in bad
order as evidenced by the document entitled Request
for Bad Order Survey[32] dated November 29, 2002,
which document also contained the examination
report, signed by the Customs representative,
Supervisor/Superintendent, consignees representative,
Page 21 of 44
and the ATI Inspector. order condition by the vessel[s]
representative. These skids were
identified as nos. 2HD804211,
Thus, as early as November 29, 2002, the date 2HD804460, SHD804251,
of the last withdrawal of the goods from the arrastre SHD803784, 2HD803763,
operator, respondent ATI was able to verify that five 2HD803765 and 2HD803783 and
(5) packages of the shipment were in bad order while covered with Bad Order Tally Receipts
in its custody. The certificate of non-delivery referred No. 3709, 3707, 3703 and 3704.
Thereafter, the same were stored inside
to in the Contract is similar to or identical with the the warehouse of Pier No. 9, South
examination report on the request for bad order Harbor, Manila, pending delivery to the
survey.[33] Like in the case of New Zealand consignees warehouse.
Insurance Company Ltd. v. Navarro, the verification
and ascertainment of liability by respondent ATI On November 22, 23 and 29, 2002, the
subject cargo was withdrawn from the
had been accomplished within thirty (30) days
Pier by the consignee authorized
from the date of delivery of the package to the broker, R. V. Marzan Brokerage Corp.
consignee and within fifteen (15) days from the and the same was delivered to the
date of issuance by the Contractor (respondent consignees final warehouse located at
ATI) of the examination report on the request for Silangan, Canlubang, Laguna complete
with twelve (12) skids in bad order
bad order survey. Although the formal claim was
condition.
filed beyond the 15-day period from the issuance of
the examination report on the request for bad order VISUAL INSPECTION
survey, the purpose of the time limitations for the
filing of claims had already been fully satisfied by the We conducted an ocular inspection on
the reported damaged Electrolytic Tin
request of the consignees broker for a bad order
Free Steel, Matte Finish at the
survey and by the examination report of the arrastre consignees warehouse located at Brgy.
operator on the result thereof, as the arrastre operator Silangan, Canlubang, Laguna and
had become aware of and had verified the facts giving noted that out of the reported twelve
rise to its liability.[34] Hence, the arrastre operator (12) damaged skids, nine (9) of them
were rejected and three (3) skids
suffered no prejudice by the lack of strict compliance
were accepted by the consignees
with the 15-day limitation to file the formal complaint. representative as complete and
[35]
without exceptions.

The next factual issue is whether or not xxxx

petitioner is entitled to actual damages in the amount
EVALUATION OF INDEMNITY
of P431,592.14. The payment of the said amount by
petitioner to the assured/consignee was based on the We evaluated the loss/damage
Evaluation Report[36] of BA McLarens Phils., Inc., sustained by the subject shipments and
thus: arrived as follows:

xxxx
CIRCUMSTANCES OF LOSS
As reported, the shipment consisting of
185 packages (344.982 MT)
Electrolytic Tin Free Steel, JISG
3315SPTFS, MRT-4CA, Matte Finish
arrived Manila via Ocean Vessel, M/V
DIMI P V-075 on November 9, 2002
and subsequently docked alongside Pier
No. 9, South Harbor, Manila. The
cargo of Electrolyic Tin Free Steel
was discharged ex-vessel complete
with seven (7) skidsnoted in bad
PRODUCT NOS. PRODUCTS
NAMED NO. OF SHEETS NET WT.
PER PACKING LIST
2HD803763 Electrolytic Tin Free 1,200 1,908
Steel JISG3315
2HD803783 -do- 1,200 1,908
2HD803784 -do- 1,200 1,908
2HD804460 -do- 1,400 1,698
2HD803765 -do- 1,200 1,908
2HD804522 -do- 1,200 1,987
2HD804461 -do- 1,400 1,698
2HD804540 -do- 1,200 1,987
2HD804549 -do- 1,200 1,987
9 SKIDS TOTAL 11,200 16,989 kgs.

Page 22 of 44
P9,878,547.58 P478,959.88
------------------ = 42.7643 x 11,200
231,000
Less: Deductible 0.50% based on sum insured
49,392.74
Total P429,567.14
Add: Surveyors Fee 2,025.00
Sub-Total P431,592.14
Note: Above evaluation is Assureds
tentative liability as the salvage
proceeds on the damaged stocks has yet
to be determined.
RECOVERY ASPECT
Prospect of recovery would be feasible
against the shipping company and
the Arrastre operator considering the
copies of Bad Order Tally Receipts
and Bad Order Certificate issued by
the subject parties.[37]
To clarify, based on the Evaluation Report,
seven (7) skids were damaged upon arrival of the
vessel per the Bad Order Cargo Receipts [38] issued by
the shipping company, and an additional five (5)
skids were damaged in the custody of the arrastre
operator per the Bad Order Certificate/Examination
Report[39] issued by the arrastre contractor. The
Evaluation Report states that out of the reported
twelve damaged skids, only nine were rejected, and
three were accepted as good order by the consignees
representative. Out of the nine skids that were
rejected, five skids were damaged upon arrival of
the vessel as shown by the product numbers in the
Evaluation Report, which product numbers matched
those in the Bad Order Cargo Receipts[40] issued by the
shipping company. It can then be safely inferred that
the four remaining rejected skids were damaged in
the custody of the arrastre operator, as the Bad
Order Certificate/Examination Report did not indicate
the product numbers thereof.
Hence, it should be pointed out that the
Evaluation Report shows that the claim for actual
damages in the amount of P431,592.14 covers five
(5)[41] out of the seven (7) skids that were found to
be damaged upon arrival of the vessel and covered
by Bad Order Cargo Receipt Nos. 3704, 3706, 3707
and 3709,[42] which claim should have been filed with
the shipping company. Petitioner must have realized
that the claim for the said five (5) skids was already
barred under COGSA; hence, petitioner filed the claim
for actual damages only against respondent arrastre
operator.
As regards the four (4) skids that were
damaged in the custody of the arrastre operator,
petitioner is still entitled to recover from respondent.
The Court has ruled that the Request for Bad Order
Survey and the examination report on the said request
satisfied the purpose of a formal claim, as respondent
was made aware of and was able to verify that five (5)
skids were damaged or in bad order while in its
custody before the last withdrawal of the shipment on
November 29, 2002. Hence, even if the formal claim
was filed beyond the 15-day period stipulated in the
Contract, respondent was not prejudiced thereby, since
it already knew of the number of skids damaged in its
possession per the examination report on the request
for bad order survey.
Remand of the case to the trial court for the
determination of the liability of respondent to
petitioner is not necessary as the Court can resolve the
same based on the records before it.[43] The Court
notes that petitioner, who filed this action for damages
for the five (5) skids that were damaged while in the
custody of respondent, was not forthright in its claim,
as it knew that the damages it sought in the amount of
P431,592.14, which was based on the Evaluation
Report of its adjuster/surveyor, BA McLarens Phils.,
Inc., covered nine (9) skids. Based on the same
Evaluation Report, only four of the nine skids were
damaged in the custody of respondent. Petitioner
should have been straightforward about its exact
claim, which is borne out by the evidence on record,
as petitioner can be granted only the amount of
damages that is due to it.
Based on the Evaluation Report[44] of BA
McLarens Phils., Inc., dated May 5, 2003, the four (4)
skids damaged while in the custody of the arrastre
operator and the amount of actual damages therefore
are as follows:
PRODUCT NOS. PRODUCTS
NAMED NO. OF SHEETS NET WT.
PER
Page 23 of 44
 which affirmed with modification the decision of the
ACKRegional Trial Court (RTC), Branch 38 of Manila.
INGAntecedent Facts
LIS Since 1989, Wyeth Philippines, Inc. (Wyeth) and
T respondent Reputable Forwarder Services, Inc.
2HD804522 Electrolytic Tin Free 1,200 1,987 (Reputable) had been annually executing a contract
Steel JISG3315 of carriage, whereby the latter undertook to transport
2HD804461 -do- 1,400 1,698 and deliver the former s products to its customers,
2HD804540 -do- 1,200 1,987 dealers or salesmen.3rll
2HD804549 -do- 1,200 1,987 On November 18, 1993, Wyeth procured Marine
---------------------------------------------------------------- Policy No. MAR 13797 (Marine Policy) from
------------------------------------------ respondent Philippines First Insurance Co., Inc.
4 SKIDS TOTAL 5,000 (Philippines First) to secure its interest over its own
[45]
P9,878,547.58 (Insured value) P213,821.50 products. Philippines First thereby insured Wyeth s
------------------ = 42.7643 x 5,000 nutritional, pharmaceutical and other products usual
231,000 (Total number of sheets) or incidental to the insured s business while the same
Less: Deductible 0.50% based on sum insured[46] were being transported or shipped in the Philippines.
49,392.74 The policy covers all risks of direct physical loss or
Total P164,428.76 damage from any external cause, if by land, and
provides a limit of P6,000,000.00 per any one land
vehicle.
In view of the foregoing, petitioner is entitled On December 1, 1993, Wyeth executed its annual
to actual damages in the amount of P164,428.76 for contract of carriage with Reputable. It turned out,
however, that the contract was not signed by Wyeth s
the four (4) skids damaged while in the custody of representative/s.4 Nevertheless, it was admittedly
respondent. signed by Reputable s representatives, the terms
thereof faithfully observed by the parties and, as
WHEREFORE, the petition is GRANTED. previously stated, the same contract of carriage had
The Decision of the Regional Trial Court of Makati been annually 5
executed by the parties every year
since 1989. rll
City, Branch 138, dated October 17, 2006, in Civil Under the contract, Reputable undertook to answer
Case No. 05-809, and its Order dated December 4, for "all risks with respect to the goods and shall be
2007, are hereby REVERSED and SET ASIDE. liable to the COMPANY (Wyeth), for the loss,
Respondent Asian Terminals, Inc. is ORDERED to destruction, or damage of the goods/products due to
pay petitioner Insurance Company of North America any and all causes whatsoever, including theft,
robbery, flood, storm, earthquakes, lightning, and
actual damages in the amount of One Hundred Sixty-
other force majeure while the goods/products are in
Four Thousand Four Hundred Twenty-Eight Pesos and transit and until actual delivery to the customers,
Seventy-Six Centavos (P164,428.76). Twelve percent salesmen, and dealers of the COMPANY".6rll
(12%) interest per annum shall be imposed on the The contract also required Reputable to secure an
7
amount of actual damages from the date the award insurance policy on Wyeth s goods. Thus, on
February 11, 1994, Reputable signed a Special Risk
becomes final and executory until its full satisfaction.
Insurance Policy (SR Policy) with petitioner Malayan
for the amount of P1,000,000.00.
Costs against petitioner. On October 6, 1994, during the effectivity of the
Marine Policy and SR Policy, Reputable received
SO ORDERED. from Wyeth 1,000 boxes of Promil infant formula
SECOND DIVISION worth P2,357,582.70 to be delivered by Reputable to
[G.R. NO. 184300 - July 11, 2012] Mercury Drug Corporation in Libis, Quezon City.
MALAYAN INSURANCE CO., INC., Petitioner, v. Unfortunately, on the same date, the truck carrying
PHILIPPINES FIRST INSURANCE CO., INC. Wyeth s products was hijacked by about 10 armed
and REPUTABLE FORWARDER SERVICES, men. They threatened to kill the truck driver and two
INC., Respondents. of his helpers should they refuse to turn over the
DECISION truck and its contents to the said highway robbers.
REYES, J.: The hijacked truck was recovered two weeks later
Before the Court is a petitiOn for review on without its cargo.
certiorari filed by petitioner Malayan Insurance Co., On March 8, 1995, Philippines First, after due
1
lnc. (Malayan) assailing the Decision dated February investigation and adjustment, and pursuant to the
2
29, 2008 and Resolution dated August 28, 2008 of Marine Policy, paid Wyeth P2,133,257.00 as
the Court of Appeals (CA) in CA-G.R. CV No. 71204 indemnity. Philippines First then demanded
reimbursement from Reputable, having been
Page 24 of 44
subrogated to the rights of Wyeth by virtue of the respective appeals from the RTC decision.
payment. The latter, however, ignored the demand. Reputable asserted that the RTC erred in holding that
Consequently, Philippines First instituted an action its contract of carriage with Wyeth was binding
for sum of money against Reputable on August 12, despite Wyeth s failure to sign the same. Reputable
1996.8 In its complaint, Philippines First stated that further contended that the provisions of the contract
Reputable is a "private corporation engaged in the are unreasonable, unjust, and contrary to law and
business of a common carrier." In its answer, 9 public policy.
Reputable claimed that it is a private carrier. It also For its part, Malayan invoked Section 5 of its SR
claimed that it cannot be made liable under the Policy, which provides:rl
contract of carriage with Wyeth since the contract Section 5. INSURANCE WITH OTHER
was not signed by Wyeth s representative and that the COMPANIES. The insurance does not cover any loss
cause of the loss was force majeure, i.e., the hijacking or damage to property which at the time of the
incident. happening of such loss or damage is insured by or
Subsequently, Reputable impleaded Malayan as third- would but for the existence of this policy, be insured
party defendant in an effort to collect the amount by any Fire or Marine policy or policies except in
covered in the SR Policy. According to Reputable, "it respect of any excess beyond the amount which
was validly insured with Malayan for P1,000,000.00 would have been payable under the Fire or Marine
with respect to the lost products under the latter s policy or policies had this insurance not been
Insurance Policy No. SR-0001-02577 effective effected.
February 1, 1994 to February 1, 1995" and that the Malayan argued that inasmuch as there was already a
SR Policy covered the risk of robbery or marine policy issued by Philippines First securing the
hijacking.10rll same subject matter against loss and that since the
Disclaiming any liability, Malayan argued, among monetary coverage/value of the Marine Policy is
others, that under Section 5 of the SR Policy, the more than enough to indemnify the hijacked cargo,
insurance does not cover any loss or damage to Philippines First alone must bear the loss.
property which at the time of the happening of such Malayan sought the dismissal of the third-party
loss or damage is insured by any marine policy and complaint against it. In the alternative, it prayed that
that the SR Policy expressly excluded third-party it be held liable for no more than P468,766.70, its
liability. alleged pro-rata share of the loss based on the amount
After trial, the RTC rendered its Decision11 finding covered by the policy, subject to the provision of
Reputable liable to Philippines First for the amount of Section 12 of the SR Policy, which states:rl
indemnity it paid to Wyeth, among others. In turn, 12. OTHER INSURANCE CLAUSE. If at the time
Malayan was found by the RTC to be liable to of any loss or damage happening to any property
Reputable to the extent of the policy coverage. The hereby insured, there be any other subsisting
dispositive portion of the RTC decision insurance or insurances, whether effected by the
provides:rl insured or by any other person or persons, covering
WHEREFORE, on the main Complaint, judgment is the same property, the company shall not be liable to
hereby rendered finding [Reputable] liable for the pay or contribute more than its ratable proportion of
loss of the Wyeth products and orders it to pay such loss or damage.
Philippines First the On February 29, 2008, the CA rendered the assailed
following:rbl r l l decision sustaining the ruling of the RTC, the decretal
lbrr portion of which reads:rl
1. the amount of P2,133,257.00 representing the WHEREFORE, in view of the foregoing, the assailed
amount paid by Philippines First to Wyeth for the loss Decision dated 29 September 2000, as modified in
of the products in question; the Order dated 21 July 2001, is AFFIRMED with
2. the amount of P15,650.00 representing the MODIFICATION in that the award of attorney s fees
adjustment fees paid by Philippines First to hired in favor of Reputable is DELETED.
adjusters/surveyors; SO ORDERED.13rll
3. the amount of P50,000.00 as attorney s fees; and The CA ruled, among others, that: (1) Reputable is
4. the costs of suit. estopped from assailing the validity of the contract of
chanrobles virtual law libraryOn the third-party carriage on the ground of lack of signature of Wyeth s
Complaint, judgment is hereby rendered finding representative/s; (2) Reputable is liable under the
Malayan liable to indemnify [Reputable] the contract for the value of the goods even if the same
following:rbl r l l was lost due to fortuitous event; and (3) Section 12 of
lbrr the SR Policy prevails over Section 5, it being the
1. the amount of P1,000,000.00 representing the latter provision; however, since the ratable proportion
proceeds of the insurance policy; provision of Section 12 applies only in case of double
2. the amount of P50,000.00 as attorney s fees; and insurance, which is not present, then it should not be
3. the costs of suit. applied and Malayan should be held liable for the full
chanrobles virtual law librarySO ORDERED.12rll amount of the policy coverage, that is,
Dissatisfied, both Reputable and Malayan filed their P1,000,000.00.14rll
Page 25 of 44
On March 14, 2008, Malayan moved for
reconsideration of the assailed decision but it was
denied by the CA in its Resolution dated August 28,
2008.15rll 1) Whether Reputable is a private carrier;
Hence, this petition.
Malayan insists that the CA failed to properly resolve
the issue on the "statutory limitations on the liability
of common carriers" and the "difference between an
other insurance clause and an over insurance clause ."
Malayan also contends that the CA erred when it held
that Reputable is a private carrier and should be
bound by the contractual stipulations in the contract
of carriage. This argument is based on its assertion
that Philippines First judicially admitted in its
complaint that Reputable is a common carrier and as
such, Reputable should not be held liable pursuant to
Article 1745(6) of the Civil Code.16Necessarily, if
Reputable is not liable for the loss, then there is no
reason to hold Malayan liable to Reputable.
Further, Malayan posits that there resulted in an
impairment of contract when the CA failed to apply
the express provisions of Section 5 (referred to by
Malayan as over insurance clause) and Section 12
(referred to by Malayan as other insurance clause) of
its SR Policy as these provisions could have been
read together there being no actual conflict between
them.
Reputable, meanwhile, contends that it is exempt
from liability for acts committed by thieves/robbers
who act with grave or irresistible threat whether it is a
common carrier or a private/special carrier. It,
however, maintains the correctness of the CA ruling
that Malayan is liable to Philippines First for the full
amount of its policy coverage and not merely a
ratable portion thereof under Section 12 of the SR
Policy.
Finally, Philippines First contends that the factual
finding that Reputable is a private carrier should be
accorded the highest degree of respect and must be
considered conclusive between the parties, and that a
review of such finding by the Court is not warranted
under the circumstances. As to its alleged judicial
admission that Reputable is a common carrier,
Philippines First proffered the declaration made by
Reputable that it is a private carrier. Said declaration
was allegedly reiterated by Reputable in its third
party complaint, which in turn was duly admitted by
Malayan in its answer to the said third-party
complaint. In addition, Reputable even presented
evidence to prove that it is a private carrier.
As to the applicability of Sections 5 and 12 in the SR
Policy, Philippines First reiterated the ruling of the
CA. Philippines First, however, prayed for a slight
modification of the assailed decision, praying that
Reputable and Malayan be rendered solidarily liable
to it in the amount of P998,000.00, which represents
the balance from the P1,000.000.00 coverage of the
SR Policy after deducting P2,000.00 under Section
10 of the said SR Policy.17rll definitive pronouncement, as to the nature of
Issues
The liability of Malayan under the SR Policy hinges
on the following issues for
resolution:rbl r l l
lbrr
2) Whether Reputable is strictly bound by the
stipulations in its contract of carriage with Wyeth,
such that it should be liable for any risk of loss or
damage, for any cause whatsoever, including that due
to theft or robbery and other force majeure;
3) Whether the RTC and CA erred in rendering
"nugatory" Sections 5 and Section 12 of the SR
Policy; andcralawlibrary
4) Whether Reputable should be held solidarily liable
with Malayan for the amount of P998,000.00 due to
Philippines First.
chanrobles virtual law libraryThe Court s Ruling
On the first issue Reputable is a private carrier.
The Court agrees with the RTC and CA that
Reputable is a private carrier. Well-entrenched in
jurisprudence is the rule that factual findings of the
trial court, especially when affirmed by the appellate
court, are accorded the highest degree of respect and
considered conclusive between the parties, save for
certain exceptional and meritorious circumstances,
none of which are present in this case.18rll
Malayan relies on the alleged judicial admission of
Philippines First in its complaint that Reputable is a
common carrier.19 Invoking Section 4, Rule 129 of
the Rules on Evidence that "an admission verbal or
written, made by a party in the course of the
proceeding in the same case, does not require proof,"
it is Malayan s position that the RTC and CA should
have ruled that
Reputable is a common carrier. Consequently,
pursuant to Article 1745(6) of the Civil Code, the
liability of Reputable for the loss of Wyeth s goods
should be dispensed with, or at least diminished.
It is true that judicial admissions, such as matters
alleged in the pleadings do not require proof, and
need not be offered to be considered by the court.
"The court, for the proper decision of the case, may
and should consider, without the introduction of
evidence, the facts admitted by the parties."20The rule
on judicial admission, however, also states that such
allegation, statement, or admission is conclusive as
against the pleader,21 and that the facts alleged in the
complaint are deemed admissions of the plaintiff and
binding upon him.22 In this case, the pleader or the
plaintiff who alleged that Reputable is a common
carrier was Philippines First. It cannot, by any stretch
of imagination, be made conclusive as against
Reputable whose nature of business is in question.
It should be stressed that Philippines First is not privy
to the SR Policy between Wyeth and Reputable;
rather, it is a mere subrogee to the right of Wyeth to
collect from Reputable under the terms of the
contract of carriage. Philippines First is not in any
position to make any admission, much more a
Reputable s business and there appears no other
connection between Philippines First and Reputable
Page 26 of 44
which suggests mutual familiarity between them.
Moreover, records show that the alleged judicial
admission of Philippines First was essentially
disputed by Reputable when it stated in paragraphs 2,
4, and 11 of its answer that it is actually a private or
special carrier.23 In addition, Reputable stated in
paragraph 2 of its third-party complaint that it is "a
private carrier engaged in the carriage of goods."24
Such allegation was, in turn, admitted by Malayan in
paragraph 2 of its answer to the third-party
complaint.25 There is also nothing in the records
which show that Philippines First persistently
maintained its stance that Reputable is a common
carrier or that it even contested or proved otherwise
Reputable s position that it is a private or special
carrier.
Hence, in the face of Reputable s contrary admission
as to the nature of its own business, what was stated
by Philippines First in its complaint is reduced to
nothing more than mere allegation, which must be
proved for it to be given any weight or value. The
settled rule is that mere allegation is not
proof.26rll to operate only in case of double insurance, or where
More importantly, the finding of the RTC and CA that
Reputable is a special or private carrier is warranted
by the evidence on record, primarily, the unrebutted
testimony of Reputable s Vice President and General
Manager, Mr. William Ang Lian Suan, who expressly
stated in open court that Reputable serves only one
customer, Wyeth.27rll favor of Wyeth, then Malayan s stand should be
Under Article 1732 of the Civil Code, common
carriers are persons, corporations, firms, or
associations engaged in the business of carrying or
transporting passenger or goods, or both by land,
water or air for compensation, offering their services
to the public. On the other hand, a private carrier is
one wherein the carriage is generally undertaken by
special agreement and it does not hold itself out to
carry goods for the general public.28 A common
carrier becomes a private carrier when it undertakes
to carry a special cargo or chartered to a special
person only.29 For all intents and purposes, therefore,
Reputable operated as a private/special carrier with
regard to its contract of carriage with Wyeth.
On the second issue Reputable is bound by the terms
of the contract of carriage.
The extent of a private carrier s obligation is dictated
by the stipulations of a contract it entered into,
provided its stipulations, clauses, terms and
conditions are not contrary to law, morals, good
customs, public order, or public policy. "The Civil
Code provisions on common carriers should not be
applied where the carrier is not acting as such but as a
private carrier. Public policy governing common
carriers has no force where the public at large is not
involved."30rll cargo loss."34rll
Thus, being a private carrier, the extent of Reputable
s liability is fully governed by the stipulations of the
contract of carriage, one of which is that it shall be
liable to Wyeth for the loss of the goods/products due
to any and all causes whatsoever, including theft,
robbery and other force majeure while the
goods/products are in transit and until actual delivery
to Wyeth s customers, salesmen and dealers.31rll
On the third issue other insurance vis- -vis over
insurance.
Malayan refers to Section 5 of its SR Policy as an
"over insurance clause" and to Section 12 as a
"modified other insurance clause".32 In rendering
inapplicable said provisions in the SR Policy, the CA
ruled in this wise:rl
Since Sec. 5 calls for Malayan s complete absolution
in case the other insurance would be sufficient to
cover the entire amount of the loss, it is in direct
conflict with Sec. 12 which provides only for a pro-
rated contribution between the two insurers. Being
the later provision, and pursuant to the rules on
interpretation of contracts, Sec. 12 should therefore
prevail.
x x x
x x x The intention of both Reputable and Malayan
should be given effect as against the wordings of Sec.
12 of their contract, as it was intended by the parties
the benefits of the policies of both plaintiff-appellee
and Malayan should pertain to Reputable alone. But
since the court a quo correctly ruled that there is no
double insurance in this case inasmuch as Reputable
was not privy thereto, and therefore did not stand to
benefit from the policy issued by plaintiff-appellee in
rejected.
To rule that Sec. 12 operates even in the absence of
double insurance would work injustice to Reputable
which, despite paying premiums for a P1,000,000.00
insurance coverage, would not be entitled to recover
said amount for the simple reason that the same
property is covered by another insurance policy, a
policy to which it was not a party to and much less,
from which it did not stand to benefit. Plainly, this
unfair situation could not have been the intention of
both Reputable and Malayan in signing the insurance
contract in question.33rll
In questioning said ruling, Malayan posits that
Sections 5 and 12 are separate provisions applicable
under distinct circumstances. Malayan argues that "it
will not be completely absolved under Section 5 of its
policy if it were the assured itself who obtained
additional insurance coverage on the same property
and the loss incurred by Wyeth s cargo was more than
that insured by Philippines First s marine policy. On
the other hand, Section 12 will not completely
absolve Malayan if additional insurance coverage on
the same cargo were obtained by someone besides
Reputable, in which case Malayan s SR policy will
contribute or share ratable proportion of a covered
Malayan s position cannot be countenanced.
Section 5 is actually the other insurance clause (also
called "additional insurance" and "double
insurance"), one akin to Condition No. 3 in issue in
Geagonia v. CA,35 which validity was upheld by the
Page 27 of 44
Court as a warranty that no other insurance exists.
The Court ruled that Condition No. 3 36 is a condition
which is not proscribed by law as its incorporation in
the policy is allowed by Section 75 of the Insurance
Code. It was also the Court s finding that unlike the
other insurance clauses, Condition No. 3 does not
absolutely declare void any violation thereof but
expressly provides that the condition "shall not apply
when the total insurance or insurances in force at the
time of the loss or damage is not more than
P200,000.00."
In this case, similar to Condition No. 3 in Geagonia,
Section 5 does not provide for the nullity of the SR
Policy but simply limits the liability of Malayan only
up to the excess of the amount that was not covered
by the other insurance policy. In interpreting the
"other insurance clause" in Geagonia, the Court ruled
that the prohibition applies only in case of double
insurance. The Court ruled that in order to constitute
a violation of the clause, the other insurance must be
upon same subject matter, the same interest therein,
and the same risk. Thus, even though the multiple
insurance policies involved were all issued in the
name of the same assured, over the same subject
matter and covering the same risk, it was ruled that
there was no violation of the "other insurance clause"
since there was no double insurance.
Section 12 of the SR Policy, on the other hand, is the
over insurance clause. More particularly, it covers the
situation where there is over insurance due to double
insurance. In such case, Section 15 provides that
Malayan shall "not be liable to pay or contribute
more than its ratable proportion of such loss or
damage." This is in accord with the principle of
contribution provided under Section 94(e) of the
Insurance Code,37 which states that "where the
insured is over insured by double insurance, each
insurer is bound, as between himself and the other
insurers, to contribute ratably to the loss in proportion
to the amount for which he is liable under his
contract."
Clearly, both Sections 5 and 12 presuppose the
existence of a double insurance. The pivotal question
that now arises is whether there is double insurance
in this case such that either Section 5 or Section 12 of
the SR Policy may be applied.
By the express provision of Section 93 of the
Insurance Code, double insurance exists where the
same person is insured by several insurers separately
in respect to the same subject and interest. The
requisites in order for double insurance to arise are as
follows:38rbl r l l To rule that Sec. 12 operates even in the absence of
lbrr double insurance would work injustice to Reputable
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
chanrobles virtual law libraryIn the present case,
while it is true that the Marine Policy and the SR
Policy were both issued over the same subject matter,
i.e. goods belonging to Wyeth, and both covered the
same peril insured against, it is, however, beyond
cavil that the said policies were issued to two
different persons or entities. It is undisputed that
Wyeth is the recognized insured of Philippines First
under its Marine Policy, while Reputable is the
recognized insured of Malayan under the SR Policy.
The fact that Reputable procured Malayan s SR
Policy over the goods of Wyeth pursuant merely to
the stipulated requirement under its contract of
carriage with the latter does not make Reputable a
mere agent of Wyeth in obtaining the said SR Policy.
The interest of Wyeth over the property subject
matter of both insurance contracts is also different
and distinct from that of Reputable s. The policy
issued by Philippines First was in consideration of
the legal and/or equitable interest of Wyeth over its
own goods. On the other hand, what was issued by
Malayan to Reputable was over the latter s insurable
interest over the safety of the goods, which may
become the basis of the latter s liability in case of loss
or damage to the property and falls within the
contemplation of Section 15 of the Insurance
Code.39rll
Therefore, even though the two concerned insurance
policies were issued over the same goods and cover
the same risk, there arises no double insurance since
they were issued to two different persons/entities
having distinct insurable interests. Necessarily, over
insurance by double insurance cannot likewise exist.
Hence, as correctly ruled by the RTC and CA, neither
Section 5 nor Section 12 of the SR Policy can be
applied.
Apart from the foregoing, the Court is also wont to
strictly construe the controversial provisions of the
SR Policy against Malayan. This is in keeping with
the rule that:rl
"Indemnity and liability insurance policies are
construed in accordance with the general rule of
resolving any ambiguity therein in favor of the
insured, where the contract or policy is prepared by
the insurer. A contract of insurance, being a contract
of adhesion, par excellence, any ambiguity therein
should be resolved against the insurer; in other
words, it should be construed liberally in favor of the
insured and strictly against the insurer. Limitations of
liability should be regarded with extreme jealousy
and must be construed in such a way as to preclude
the insurer from noncompliance with its
obligations."40rll
Moreover, the CA correctly ruled that:rl
which, despite paying premiums for a P1,000,000.00
insurance coverage, would not be entitled to recover
said amount for the simple reason that the same
property is covered by another insurance policy, a
policy to which it was not a party to and much less,
from which it did not stand to benefit. x x x41rll
On the fourth issue Reputable is not solidarily liable
with Malayan.
Page 28 of 44
There is solidary liability only when the obligation
expressly so states, when the law so provides or when
the nature of the obligation so requires.
In Heirs of George Y. Poe v. Malayan lnsurance
Company., lnc.,42 the Court ruled that:rl
Where the insurance contract provides for indemnity
against liability to third persons, the liability of the
insurer is direct and such third persons can directly
sue the insurer. The direct liability of the insurer
under indemnity contracts against third
party[-]liability does not mean, however, that the
insurer can be held solidarily liable with the insured
and/or the other parties found at fault, since they are
being held liable under different obligations. The
liability of the insured carrier or vehicle owner is
based on tort, in accordance with the provisions of
the Civil Code; while that of the insurer arises from
contract, particularly, the insurance policy:43 (Citation
omitted and emphasis supplied)
Suffice it to say that Malayan's and Reputable's
respective liabilities arose from different obligations-
Malayan's is based on the SR Policy while
Reputable's is based on the contract of carriage.
All told, the Court finds no reversible error in the
judgment sought to be reviewed.
WHEREFORE, premises considered, the petition is
DENIED. The Decision dated February 29, 2008 and
Resolution dated August 28, 2008 of the Court of
Appeals in CA-G.R. CV No. 71204 are hereby
AFFIRMED.
Cost against petitioner Malayan Insurance Co., Inc.
SO ORDERED.
SECOND DIVISION
LOADMASTERS G.R. No. 179446
CUSTOMS
SERVICES, INC., Present:
Petitioner,
CARPIO,
Chairperson,
NACHURA,
PERALTA,
- versus - ABAD, and
MENDOZA, JJ.
MENDOZA, J.:
This is a petition for review on certiorari under Rule
45 of the Revised Rules of Court assailing the August
24, 2007 Decision[1] of the Court of Appeals (CA) in
CA-G.R. CV No. 82822, entitled R&B Insurance
Corporation v. Glodel Brokerage Corporation and
Loadmasters Customs Services, Inc., which held
petitioner Loadmasters Customs Services, Inc.
(Loadmasters) liable to respondent Glodel Brokerage
Corporation (Glodel) in the amount of P1,896,789.62
representing the insurance indemnity which R&B
Insurance Corporation (R&B Insurance) paid to the
insured-consignee, Columbia Wire and Cable
Corporation (Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine
Policy No. MN-00105/2001 in favor of Columbia to
insure the shipment of 132 bundles of electric copper
cathodes against All Risks. On August 28, 2001, the
cargoes were shipped on board the vessel Richard
Rey from Isabela, Leyte, to Pier 10, North Harbor,
Manila. They arrived on the same date.
Columbia engaged the services of Glodel for
J., the release and withdrawal of the cargoes from the
pier and the subsequent delivery to its
warehouses/plants. Glodel, in turn, engaged the
services of Loadmasters for the use of its delivery
trucks to transport the cargoes to Columbias
warehouses/plants in Bulacan and Valenzuela City.

GLODEL The goods were loaded on board twelve (12)

BROKERAGE
CORPORATION and Promulgated: trucks owned by Loadmasters, driven by its
R&B INSURANCE employed drivers and accompanied by its employed
CORPORATION, January 10, 2011 truck helpers. Six (6) truckloads of copper cathodes
Respondents.
were to be delivered to Balagtas, Bulacan, while the
X other six (6) truckloads were destined for Lawang
---------------------------------------------------------------- Bato, Valenzuela City. The cargoes in six truckloads
---------------------- X for Lawang Bato were duly delivered in Columbias
DECISION warehouses there. Of the six (6) trucks en route to
Balagtas, Bulacan, however, only five (5) reached the

Page 29 of 44
destination. One (1) truck, loaded with 11 bundles or 2. To pay plaintiff
R&B Insurance
232 pieces of copper cathodes, failed to deliver its Corporation the
cargo. amount equivalent to
10% of the principal
amount recovered as
Later on, the said truck, an Isuzu with Plate No. and for attorneys fees
NSD-117, was recovered but without the copper plus P1,500.00 per
appearance in Court;
cathodes. Because of this incident, Columbia filed
with R&B Insurance a claim for insurance indemnity 3. To pay plaintiff
in the amount of P1,903,335.39. After the requisite R&B Insurance
Corporation the sum
investigation and adjustment, R&B Insurance paid
of P22,427.18 as
Columbia the amount of P1,896,789.62 as insurance litigation expenses.
indemnity.

WHEREAS, the defendant

R&B Insurance, thereafter, filed a complaint Loadmasters Customs Services, Inc.s
counterclaim for damages and
for damages against both Loadmasters and Glodel
attorneys fees against plaintiff are
before the Regional Trial Court, Branch 14, Manila hereby dismissed.
(RTC), docketed as Civil Case No. 02-103040. It
sought reimbursement of the amount it had paid to With costs against defendant Glodel
Columbia for the loss of the subject cargo. It claimed Brokerage Corporation.
that it had been subrogated to the right of the SO ORDERED.[4]
consignee to recover from the party/parties who may
be held legally liable for the loss.[2]
Both R&B Insurance and Glodel appealed the
RTC decision to the CA.
On November 19, 2003, the RTC rendered a
decision[3] holding Glodel liable for damages for the
On August 24, 2007, the CA rendered the
loss of the subject cargo and dismissing Loadmasters
assailed decision which reads in part:
counterclaim for damages and attorneys fees against
R&B Insurance. The dispositive portion of the
Considering that appellee is an
decision reads: agent of appellant Glodel, whatever
liability the latter owes to appellant
WHEREFORE, all premises R&B Insurance Corporation as
considered, the plaintiff having insurance indemnity must likewise be
established by preponderance of the amount it shall be paid by appellee
evidence its claims against defendant Loadmasters.
Glodel Brokerage Corporation,
judgment is hereby rendered ordering WHEREFORE, the foregoing
the latter: considered, the appeal is PARTLY
GRANTED in that the appellee
Loadmasters is likewise held liable to
1. To pay plaintiff appellant Glodel in the amount of
R&B Insurance P1,896,789.62 representing the
Corporation the sum insurance indemnity appellant Glodel
of P1,896,789.62 as has been held liable to appellant R&B
actual and Insurance Corporation.
compensatory
damages, with Appellant Glodels appeal to
interest from the date absolve it from any liability is herein
of complaint until DISMISSED.
fully paid;
SO ORDERED.[5]
Page 30 of 44

Hence, Loadmasters filed the present petition
for review on certiorari before this Court presenting
the following
ISSUES
1. Can Petitioner Loadmasters be
held liable to Respondent Glodel in
spite of the fact that the latter
respondent Glodel did not file a
cross-claim against it
(Loadmasters)?
2. Under the set of facts established
and undisputed in the case, can
petitioner Loadmasters be legally
considered as an Agent of
respondent Glodel?[6]
To totally exculpate itself from responsibility
for the lost goods, Loadmasters argues that it cannot
be considered an agent of Glodel because it never
represented the latter in its dealings with the
consignee. At any rate, it further contends that Glodel
has no recourse against it for its (Glodels) failure to
file a cross-claim pursuant to Section 2, Rule 9 of the
1997 Rules of Civil Procedure.
Glodel, in its Comment,[7] counters that Loadmasters
is liable to it under its cross-claim because the latter
was grossly negligent in the transportation of the
subject cargo. With respect to Loadmasters claim that
it is already estopped from filing a cross-claim,
Glodel insists that it can still do so even for the first
time on appeal because there is no rule that provides
otherwise. Finally, Glodel argues that its relationship
with Loadmasters is that of Charter wherein the
transporter (Loadmasters) is only hired for the
specific job of delivering the merchandise. Thus, the
diligence required in this case is merely ordinary
diligence or that of a good father of the family, not
the extraordinary diligence required of common
carriers.
R&B Insurance, for its part, claims that Glodel is
deemed to have interposed a cross-claim against
Loadmasters because it was not prevented from
presenting evidence to prove its position even
without amending its Answer. As to the relationship
between Loadmasters and Glodel, it contends that a
contract of agency existed between the two
corporations.[8]
Subrogation is the substitution of one person
in the place of another with reference to a lawful
claim or right, so that he who is substituted succeeds
to the rights of the other in relation to a debt or claim,
including its remedies or securities.[9] Doubtless,
R&B Insurance is subrogated to the rights of the
insured to the extent of the amount it paid the
consignee under the marine insurance, as provided
under Article 2207 of the Civil Code, which reads:
ART. 2207. If the plaintiffs
property has been insured, and he has
received indemnity from the insurance
company for the injury or loss arising
out of the wrong or breach of contract
complained of, the insurance company
shall be subrogated to the rights of the
insured against the wrong-doer or the
person who has violated the contract.
If the amount paid by the insurance
company does not fully cover the
injury or loss, the aggrieved party
shall be entitled to recover the
deficiency from the person causing the
loss or injury.
As subrogee of the rights and interest of the
consignee, R&B Insurance has the right to seek
reimbursement from either Loadmasters or Glodel or
both for breach of contract and/or tort.
The issue now is who, between Glodel and
Loadmasters, is liable to pay R&B Insurance for the
amount of the indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether
Loadmasters and Glodel are common carriers to
determine their liability for the loss of the subject
cargo. Under Article 1732 of the Civil Code, common
carriers are persons, corporations, firms, or
associations engaged in the business of carrying or
transporting passenger or goods, or both by land,
Page 31 of 44
water or air for compensation, offering their services
to the public.
Based on the aforecited definition,
Loadmasters is a common carrier because it is
engaged in the business of transporting goods by
land, through its trucking service. It is a common
carrier as distinguished from a private carrier
wherein the carriage is generally undertaken by
special agreement and it does not hold itself out to
carry goods for the general public.[10] The distinction
is significant in the sense that the rights and
obligations of the parties to a contract of private
carriage are governed principally by their
stipulations, not by the law on common carriers.[11]
In the present case, there is no indication that
the undertaking in the contract between Loadmasters
and Glodel was private in character. There is no
showing that Loadmasters solely and exclusively
rendered services to Glodel.
In fact, Loadmasters admitted that it is a
common carrier.[12]
In the same vein, Glodel is also considered a
common carrier within the context of Article 1732. In
its Memorandum,[13] it states that it is a corporation
duly organized and existing under the laws of the
Republic of the Philippines and is engaged in the
business of customs brokering. It cannot be
considered otherwise because as held by this Court in
Schmitz Transport & Brokerage Corporation v.
Transport Venture, Inc.,[14] a customs broker is also
regarded as a common carrier, the transportation of
goods being an integral part of its business.
Loadmasters and Glodel, being both common
carriers, are mandated from the nature of their
business and for reasons of public policy, to observe
the extraordinary diligence in the vigilance over the
goods transported by them according to all the
circumstances of such case, as required by Article
1733 of the Civil Code. When the Court speaks of
extraordinary diligence, it is that extreme measure of
care and caution which persons of unusual prudence
and circumspection observe for securing and
preserving their own property or rights.[15] This
exacting standard imposed on common carriers in a
contract of carriage of goods is intended to tilt the
scales in favor of the shipper who is at the mercy of
the common carrier once the goods have been lodged
for shipment.[16] Thus, in case of loss of the goods, the
common carrier is presumed to have been at fault or
to have acted negligently.[17] This presumption of fault
or negligence, however, may be rebutted by proof
that the common carrier has observed extraordinary
diligence over the goods.
With respect to the time frame of this
extraordinary responsibility, the Civil Code provides
that the exercise of extraordinary diligence lasts from
the time the goods are unconditionally placed in the
possession of, and received by, the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to
the person who has a right to receive them.[18]
Premises considered, the Court is of the view
that both Loadmasters and Glodel are jointly and
severally liable to R & B Insurance for the loss of the
subject cargo. Under Article 2194 of the New Civil
Code, the responsibility of two or more persons who
are liable for a quasi-delict is solidary.
Loadmasters claim that it was never privy to
the contract entered into by Glodel with the
consignee Columbia or R&B Insurance as subrogee,
is not a valid defense. It may not have a direct
contractual relation with Columbia, but it is liable for
tort under the provisions of Article 2176 of the Civil
Code on quasi-delicts which expressly provide:
ART. 2176. Whoever by act or
omission causes damage to another,
there being fault or negligence, is
obliged to pay for the damage done.
Such fault or negligence, if there is no
pre-existing contractual relation
between the parties, is called a quasi-
delict and is governed by the
provisions of this Chapter.
Page 32 of 44
 Pertinent is the ruling enunciated in the case
of Mindanao Terminal and Brokerage Service, Inc. v.
Phoenix Assurance Company of New York,/McGee &
Co., Inc.[19] where this Court held that a tort may arise
despite the absence of a contractual relationship, to
wit:
We agree with the Court of Appeals
that the complaint filed by Phoenix
and McGee against Mindanao
Terminal, from which the present case
has arisen, states a cause of action.
The present action is based on quasi-
delict, arising from the negligent and
careless loading and stowing of the
cargoes belonging to Del Monte
Produce. Even assuming that both
Phoenix and McGee have only been
subrogated in the rights of Del Monte
Produce, who is not a party to the
contract of service between Mindanao
Terminal and Del Monte, still the
insurance carriers may have a cause of
action in light of the Courts consistent
ruling that the act that breaks the
contract may be also a tort. In fine, a
liability for tort may arise even under
a contract, where tort is that which
breaches the contract. In the present
case, Phoenix and McGee are not
suing for damages for injuries
arising from the breach of the
contract of service but from the
alleged negligent manner by which
Mindanao Terminal handled the
cargoes belonging to Del Monte
Produce. Despite the absence of
contractual relationship between Del
Monte Produce and Mindanao
Terminal, the allegation of negligence
on the part of the defendant should be
sufficient to establish a cause of action
arising from quasi-delict. [Emphases
supplied]
In connection therewith, Article 2180
provides:
ART. 2180. The obligation
imposed by Article 2176 is
demandable not only for ones own
acts or omissions, but also for those of
persons for whom one is responsible.
xxxx
Employers shall be liable for
the damages caused by their
employees and household helpers
acting within the scope of their
assigned tasks, even though the former
are not engaged in any business or
industry.
It is not disputed that the subject cargo was
lost while in the custody of Loadmasters whose
employees (truck driver and helper) were
instrumental in the hijacking or robbery of the
shipment. As employer, Loadmasters should be made
answerable for the damages caused by its employees
who acted within the scope of their assigned task of
delivering the goods safely to the warehouse.
Whenever an employees negligence causes
damage or injury to another, there instantly arises a
presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection
(culpa in eligiendo) or supervision (culpa in
vigilando) of its employees.[20] To avoid liability for a
quasi-delict committed by its employee, an employer
must overcome the presumption by presenting
convincing proof that he exercised the care and
diligence of a good father of a family in the selection
and supervision of his employee.[21] In this regard,
Loadmasters failed.
Glodel is also liable because of its failure to
exercise extraordinary diligence. It failed to ensure
that Loadmasters would fully comply with the
undertaking to safely transport the subject cargo to
the designated destination. It should have been more
prudent in entrusting the goods to Loadmasters by
taking precautionary measures, such as providing
escorts to accompany the trucks in delivering the
cargoes. Glodel should, therefore, be held liable with
Loadmasters. Its defense of force majeure is
unavailing.
At this juncture, the Court clarifies that there
exists no principal-agent relationship between Glodel
and Loadmasters, as erroneously found by the CA.
Article 1868 of the Civil Code provides: By the
contract of agency a person binds himself to render
some service or to do something in representation or
Page 33 of 44
on behalf of another, with the consent or authority of
the latter. The elements of a contract of agency are:
(1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the
execution of a juridical act in relation to a third
person; (3) the agent acts as a representative and not
for himself; (4) the agent acts within the scope of his
authority.[22]
Accordingly, there can be no contract of
agency between the parties. Loadmasters never
represented Glodel. Neither was it ever authorized to
make such representation. It is a settled rule that the
basis for agency is representation, that is, the agent
acts for and on behalf of the principal on matters
within the scope of his authority and said acts have
the same legal effect as if they were personally
executed by the principal. On the part of the
principal, there must be an actual intention to appoint
or an intention naturally inferable from his words or
actions, while on the part of the agent, there must be
an intention to accept the appointment and act on it.
[23]
Such mutual intent is not obtaining in this case.
What then is the extent of the respective
liabilities of Loadmasters and Glodel? Each
wrongdoer is liable for the total damage suffered by
R&B Insurance. Where there are several causes for
the resulting damages, a party is not relieved from
liability, even partially. It is sufficient that the
negligence of a party is an efficient cause without
which the damage would not have resulted. It is no
defense to one of the concurrent tortfeasors that the
damage would not have resulted from his negligence
alone, without the negligence or wrongful acts of the
other concurrent tortfeasor. As stated in the case of
Far Eastern Shipping v. Court of Appeals,[24]
X x x. Where several causes
producing an injury are concurrent and
each is an efficient cause without
which the injury would not have
happened, the injury may be attributed
to all or any of the causes and
recovery may be had against any or all
of the responsible persons although
under the circumstances of the case, it
may appear that one of them was more
culpable, and that the duty owed by
them to the injured person was not the
same. No actor's negligence ceases to
be a proximate cause merely because
it does not exceed the negligence of
other actors. Each wrongdoer is
responsible for the entire result and is
liable as though his acts were the sole
cause of the injury.
There is no contribution
between joint tortfeasors whose
liability is solidary since both of them
are liable for the total damage. Where
the concurrent or successive negligent
acts or omissions of two or more
persons, although acting
independently, are in combination the
direct and proximate cause of a single
injury to a third person, it is
impossible to determine in what
proportion each contributed to the
injury and either of them is
responsible for the whole injury.
Where their concurring negligence
resulted in injury or damage to a third
party, they become joint tortfeasors
and are solidarily liable for the
resulting damage under Article 2194
of the Civil Code. [Emphasis
supplied]
The Court now resolves the issue of whether
Glodel can collect from Loadmasters, it having failed
to file a cross-claim against the latter.
Undoubtedly, Glodel has a definite cause of
action against Loadmasters for breach of contract of
service as the latter is primarily liable for the loss of
the subject cargo. In this case, however, it cannot
succeed in seeking judicial sanction against
Loadmasters because the records disclose that it did
not properly interpose a cross-claim against the latter.
Glodel did not even pray that Loadmasters be liable
for any and all claims that it may be adjudged liable
in favor of R&B Insurance. Under the Rules, a
compulsory counterclaim, or a cross-claim, not set
up shall be barred.[25] Thus, a cross-claim cannot be
set up for the first time on appeal.
For the consequence, Glodel has no one to
blame but itself. The Court cannot come to its aid on
equitable grounds. Equity, which has been aptly
described as a justice outside legality, is applied only
in the absence of, and never against, statutory law or
Page 34 of 44
judicial rules of procedure.[26] The Court cannot be a A
BAD,
lawyer and take the cudgels for a party who has been and
at fault or negligent. M
E
N
D
O
Z
A
WHEREFORE, the petition is PARTIALLY ,
GRANTED. The August 24, 2007 Decision of the J
Court of Appeals is MODIFIED to read as follows: J
.
WHEREFORE, judgment is NYK-FILJAPAN SHIPPING CORP.,
rendered declaring petitioner LEP PROFIT INTERNATIONAL,
Loadmasters Customs Services, Inc. INC. (ORD), LEP INTERNATIONAL
and respondent Glodel Brokerage PHILIPPINES, INC., DMT CORP.,
Corporation jointly and severally ADVATECH INDUSTRIES, INC.,
liable to respondent R&B Insurance MARINA PORT SERVICES, INC.,
Corporation for the insurance SERBROS CARRIER CORPORATION,
indemnity it paid to consignee and SEABOARD-EASTERN
Columbia Wire & Cable Corporation INSURANCE CO., INC.,
and ordering both parties to pay, Respondents.
jointly and severally, R&B Insurance
Corporation a] the amount of x ------------------------------------------------- x
P1,896,789.62 representing the
insurance indemnity; b] the amount NEW WORLD INTERNATIONAL G.R. No.
equivalent to ten (10%) percent 174241
thereof for attorneys fees; and c] the DEVELOPMENT (PHILS.), INC.,
amount of P22,427.18 for litigation Petitioner,
expenses.
- versus -
The cross-claim belatedly SEABOARD-EASTERN Promulgated:
prayed for by respondent Glodel INSURANCE CO., INC.,
Brokerage Corporation against Respondent. August 24, 2011
petitioner Loadmasters Customs
Services, Inc. is DENIED. x
----------------------------------------------------------------
----------------------- x
SO ORDERED.
DECISION

ABAD, J.:

THIRD DIVISION These consolidated petitions involve a cargo owners

right to recover damages from the loss of insured
NEW WORLD INTERNATIONAL G.R. No. goods under the Carriage of Goods by Sea Act and
171468
DEVELOPMENT (PHILS.), INC., the Insurance Code.
Petitioner, Present:

VELASCO, JR., J., Chairperson, The Facts and the Case

- versus - LEONARDO-DE CASTRO,*
P
ERALT Petitioner New World International Development
A, (Phils.), Inc. (New World) bought from DMT
Page 35 of 44
Corporation (DMT) through its agent, Advatech
Industries, Inc. (Advatech) three emergency generator
sets worth US$721,500.00.
DMT shipped the generator sets by truck from
Wisconsin, United States, to LEP Profit International,
Inc. (LEP Profit) in Chicago, Illinois. From there, the
shipment went by train to Oakland, California, where
it was loaded on S/S California Luna V59, owned and
operated by NYK Fil-Japan Shipping Corporation
(NYK) for delivery to petitioner New World in
Manila. NYK issued a bill of lading, declaring that it
received the goods in good condition.
NYK unloaded the shipment in Hong Kong and
transshipped it to S/S ACX Ruby V/72 that it also
owned and operated. On its journey to Manila,
however, ACX Ruby encountered typhoon Kadiang
whose captain filed a sea protest on arrival at the
Manila South Harbor on October 5, 1993 respecting
the loss and damage that the goods on board his
vessel suffered.
Marina Port Services, Inc. (Marina), the Manila
South Harbor arrastre or cargo-handling operator,
received the shipment on October 7, 1993. Upon
inspection of the three container vans separately
carrying the generator sets, two vans bore signs of
external damage while the third van appeared
unscathed. The shipment remained at Pier 3s
Container Yard under Marinas care pending clearance
from the Bureau of Customs. Eventually, on October
20, 1993 customs authorities allowed petitioners
customs broker, Serbros Carrier Corporation
(Serbros), to withdraw the shipment and deliver the
same to petitioner New Worlds job site in Makati
City.
An examination of the three generator sets in the
presence of petitioner New Worlds representatives,
Federal Builders (the project contractor) and
surveyors of petitioner New Worlds insurer,
SeaboardEastern Insurance Company (Seaboard),
revealed that all three sets suffered extensive damage
and could no longer be repaired. For these reasons,
New World demanded recompense for its loss from
respondents NYK, DMT, Advatech, LEP Profit, LEP
International Philippines, Inc. (LEP), Marina, and
Serbros. While LEP and NYK acknowledged receipt
of the demand, both denied liability for the loss.
Since Seaboard covered the goods with a marine
insurance policy, petitioner New World sent it a
formal claim dated November 16, 1993. Replying on
February 14, 1994, Seaboard required petitioner New
World to submit to it an itemized list of the damaged
units, parts, and accessories, with corresponding
values, for the processing of the claim. But petitioner
New World did not submit what was required of it,
insisting that the insurance policy did not include the
submission of such a list in connection with an
insurance claim. Reacting to this, Seaboard refused to
process the claim.
On October 11, 1994 petitioner New World
filed an action for specific performance and damages
against all the respondents before the Regional Trial
Court (RTC) of Makati City, Branch 62, in Civil Case
94-2770.
On August 16, 2001 the RTC rendered a decision
absolving the various respondents from liability with
the exception of NYK. The RTC found that the
generator sets were damaged during transit while in
the care of NYKs vessel, ACX Ruby. The latter
failed, according to the RTC, to exercise the degree
of diligence required of it in the face of a foretold
raging typhoon in its path.
The RTC ruled, however, that petitioner New World
Page 36 of 44
filed its claim against the vessel owner NYK beyond
the one year provided under the Carriage of Goods by
Sea Act (COGSA). New World filed its complaint on
October 11, 1994 when the deadline for filing the
action (on or before October 7, 1994) had already
lapsed. The RTC held that the one-year period should
be counted from the date the goods were delivered to
the arrastre operator and not from the date they were
delivered to petitioners job site.[1]
As regards petitioner New Worlds claim against
Seaboard, its insurer, the RTC held that the latter
cannot be faulted for denying the claim against it
since New World refused to submit the itemized list
that Seaboard needed for assessing the damage to the
shipment. Likewise, the belated filing of the
complaint prejudiced Seaboards right to pursue a
claim against NYK in the event of subrogation.
On appeal, the Court of Appeals (CA) rendered
judgment on January 31, 2006,[2] affirming the RTCs
rulings except with respect to Seaboards liability. The
CA held that petitioner New World can still recoup its
loss from Seaboards marine insurance policy,
considering a) that the submission of the itemized
listing is an unreasonable imposition and b) that the
one-year prescriptive period under the COGSA did
not affect New Worlds right under the insurance
policy since it was the Insurance Code that governed
the relation between the insurer and the insured.
Although petitioner New World promptly filed a
petition for review of the CA decision before the
Court in G.R. 171468, Seaboard chose to file a
motion for reconsideration of that decision. On
August 17, 2006 the CA rendered an amended
decision, reversing itself as regards the claim against
Seaboard. The CA held that the submission of the
itemized listing was a reasonable requirement that
Seaboard asked of New World. Further, the CA held
that the one-year prescriptive period for maritime
claims applied to Seaboard, as insurer and subrogee
of New Worlds right against the vessel owner. New
Worlds failure to comply promptly with what was
required of it prejudiced such right.
Instead of filing a motion for reconsideration,
petitioner instituted a second petition for review
before the Court in G.R. 174241, assailing the CAs
amended decision.
The Issues Presented
The issues presented in this case are as follows:
a) In G.R. 171468, whether or not the CA
erred in affirming the RTCs release from liability of
respondents DMT, Advatech, LEP, LEP Profit,
Marina, and Serbros who were at one time or another
involved in handling the shipment; and
b) In G.R. 174241, 1) whether or not the CA erred in
ruling that Seaboards request from petitioner New
World for an itemized list is a reasonable imposition
and did not violate the insurance contract between
them; and 2) whether or not the CA erred in failing to
rule that the one-year COGSA prescriptive period for
marine claims does not apply to petitioner New
Worlds prosecution of its claim against Seaboard, its
insurer.
The Courts Rulings
In G.R. 171468 --
Petitioner New World asserts that the roles of
respondents DMT, Advatech, LEP, LEP Profit,
Marina and Serbros in handling and transporting its
shipment from Wisconsinto Manila collectively
resulted in the damage to the same, rendering such
Page 37 of 44
respondents solidarily liable with NYK, the vessel
owner.
But the issue regarding which of the parties to
a dispute incurred negligence is factual and is not a
proper subject of a petition for review on certiorari.
And petitioner New World has been unable to make
out an exception to this rule.[3] Consequently, the
Court will not disturb the finding of the RTC,
affirmed by the CA, that the generator sets were
totally damaged during the typhoon which beset the
vessels voyage from Hong Kong to Manila and that it
was her negligence in continuing with that journey
despite the adverse condition which caused petitioner
New Worlds loss.
That the loss was occasioned by a typhoon, an
exempting cause under Article 1734 of the Civil
Code, does not automatically relieve the common
carrier of liability. The latter had the burden of
proving that the typhoon was the proximate and only
cause of loss and that it exercised due diligence to
prevent or minimize such loss before, during, and
after the disastrous typhoon.[4] As found by the RTC
and the CA, NYK failed to discharge this burden.
In G.R. 174241 --
One. The Court does not regard as substantial
the question of reasonableness of Seaboards
additional requirement of an itemized listing of the
damage that the generator sets suffered. The record
shows that petitioner New World complied with the
documentary requirements evidencing damage to its
generator sets.
The marine open policy that Seaboard issued
to New World was an all-risk policy. Such a policy
insured against all causes of conceivable loss or
damage except when otherwise excluded or when the
loss or damage was due to fraud or intentional
misconduct committed by the insured. The policy
covered all losses during the voyage whether or not
arising from a marine peril.[5]
Here, the policy enumerated certain
exceptions like unsuitable packaging, inherent vice,
delay in voyage, or vessels unseaworthiness, among
others.[6] But Seaboard had been unable to show that
petitioner New Worlds loss or damage fell within
some or one of the enumerated exceptions.
What is more, Seaboard had been unable to
explain how it could not verify the damage that New
Worlds goods suffered going by the documents that it
already submitted, namely, (1) copy of the Suppliers
Invoice KL2504; (2) copy of the Packing List; (3)
copy of the Bill of Lading 01130E93004458; (4) the
Delivery of Waybill Receipts 1135, 1222, and 1224;
(5) original copy of Marine Insurance Policy MA-
HO-000266; (6) copies of Damage Report from
Supplier and Insurance Adjusters; (7) Consumption
Report from the Customs Examiner; and (8) Copies
of Received Formal Claim from the following: a)
LEP International Philippines, Inc.; b) Marina Port
Services, Inc.; and c) Serbros Carrier Corporation.[7]
Notably, Seaboards own marine surveyor attended
the inspection of the generator sets.
Seaboard cannot pretend that the above
documents are inadequate since they were precisely
the documents listed in its insurance policy.[8] Being a
contract of adhesion, an insurance policy is construed
strongly against the insurer who prepared it. The
Court cannot read a requirement in the policy that
was not there.
Further, it appears from the exchanges of
communications between Seaboard and Advatech
that submission of the requested itemized listing was
Page 38 of 44
incumbent on the latter as the seller DMTs local
agent. Petitioner New World should not be made to
suffer for Advatechs shortcomings.
Two. Regarding prescription of claims,
Section 3(6) of the COGSA provides that the carrier
and the ship shall be discharged from all liability in
case of loss or damage unless the suit is brought
within one year after delivery of the goods or the date
when the goods should have been delivered.
But whose fault was it that the suit against
NYK, the common carrier, was not brought to court
on time? The last day for filing such a suit fell on
October 7, 1994. The record shows that petitioner
New World filed its formal claim for its loss with
Seaboard, its insurer, a remedy it had the right to
take, as early as November 16, 1993 or about 11
months before the suit against NYK would have
fallen due.
In the ordinary course, if Seaboard had
processed that claim and paid the same, Seaboard
would have been subrogated to petitioner New
Worlds right to recover from NYK. And it could have
then filed the suit as a subrogee. But, as discussed
above, Seaboard made an unreasonable demand on
February 14, 1994 for an itemized list of the damaged
units, parts, and accessories, with corresponding
values when it appeared settled that New Worlds loss
was total and when the insurance policy did not
require the production of such a list in the event of a
claim.
Besides, when petitioner New World declined
to comply with the demand for the list, Seaboard
against whom a formal claim was pending should not
have remained obstinate in refusing to process that
claim. It should have examined the same, found it
unsubstantiated by documents if that were the case,
and formally rejected it. That would have at least
given petitioner New World a clear signal that it
needed to promptly file its suit directly against NYK
and the others. Ultimately, the fault for the delayed
court suit could be brought to Seaboards doorstep.
Section 241 of the Insurance Code provides
that no insurance company doing business in the
Philippines shall refuse without just cause to pay or
settle claims arising under coverages provided by its
policies. And, under Section 243, the insurer has 30
days after proof of loss is received and ascertainment
of the loss or damage within which to pay the claim.
If such ascertainment is not had within 60 days from
receipt of evidence of loss, the insurer has 90 days to
pay or settle the claim. And, in case the insurer
refuses or fails to pay within the prescribed time, the
insured shall be entitled to interest on the proceeds of
the policy for the duration of delay at the rate of
twice the ceiling prescribed by the Monetary Board.
Notably, Seaboard already incurred delay
when it failed to settle petitioner New Worlds claim
as Section 243 required. Under Section 244, a prima
facie evidence of unreasonable delay in payment of
the claim is created by the failure of the insurer to
pay the claim within the time fixed in Section 243.
Consequently, Seaboard should pay interest
on the proceeds of the policy for the duration of the
delay until the claim is fully satisfied at the rate of
twice the ceiling prescribed by the Monetary Board.
The term ceiling prescribed by the Monetary Board
means the legal rate of interest of 12% per annum
provided in Central Bank Circular 416, pursuant to
Presidential Decree 116.[9] Section 244 of the
Insurance Code also provides for an award of
attorneys fees and other expenses incurred by the
assured due to the unreasonable withholding of
payment of his claim.
Page 39 of 44

In Prudential Guarantee and Assurance, Inc.
v. Trans-Asia Shipping Lines, Inc.,[10] the Court
regarded as proper an award of 10% of the insurance
proceeds as attorneys fees. Such amount is fair
considering the length of time that has passed in
prosecuting the claim.[11] Pursuant to the Courts ruling
in Eastern Shipping Lines, Inc. v. Court of Appeals,[12]
a 12% interest per annum from the finality of
judgment until full satisfaction of the claim should
likewise be imposed, the interim period equivalent to
a forbearance of credit.
Petitioner New World is entitled to the value
stated in the policy which is commensurate to the
value of the three emergency generator sets or
US$721,500.00 with double interest plus attorneys
fees as discussed above.
WHEREFORE, the Court DENIES the
petition in G.R. 171468 and AFFIRMS the Court of
Appeals decision of January 31, 2006 insofar as
petitioner New World International Development
(Phils.), Inc. is not allowed to recover against
respondents DMT Corporation, Advatech Industries,
Inc., LEP International Philippines, Inc., LEP Profit
International, Inc., Marina Port Services, Inc. and
Serbros Carrier Corporation.
With respect to G.R. 174241, the Court
GRANTS the petition and REVERSES and SETS
ASIDE the Court of Appeals Amended Decision of
August 17, 2006. The Court DIRECTS Seaboard-
Eastern Insurance Company, Inc. to pay petitioner
New World International Development (Phils.), Inc.
US$721,500.00 under Policy MA-HO-000266, with
24% interest per annum for the duration of delay in
accordance with Sections 243 and 244 of the
Insurance Code and attorneys fees equivalent to 10%
of the insurance proceeds. Seaboard shall also pay,
from finality of judgment, a 12% interest per annum
on the total amount due to petitioner until its full
satisfaction.
SO ORDERED.
SECOND DIVISION
G.R. No. 171092 March 15, 2010
EDNA DIAGO LHUILLIER, Petitioner,
vs.
BRITISH AIRWAYS, Respondent.
DECISION
DEL CASTILLO, J.:
Jurisdictio est potestas de publico introducta cum
necessitate juris dicendi. Jurisdiction is a power
introduced for the public good, on account of the
necessity of dispensing justice.1
Factual Antecedents
On April 28, 2005, petitioner Edna Diago Lhuillier
filed a Complaint2 for damages against respondent
British Airways before the Regional Trial Court
(RTC) of Makati City. She alleged that on February
28, 2005, she took respondents flight 548 from
London, United Kingdom to Rome, Italy. Once on
board, she allegedly requested Julian Halliday
(Halliday), one of the respondents flight attendants,
to assist her in placing her hand-carried luggage in
the overhead bin. However, Halliday allegedly
refused to help and assist her, and even sarcastically
remarked that "If I were to help all 300 passengers in
this flight, I would have a broken back!"
Petitioner further alleged that when the plane was
about to land in Rome, Italy, another flight attendant,
Nickolas Kerrigan (Kerrigan), singled her out from
among all the passengers in the business class section
to lecture on plane safety. Allegedly, Kerrigan made
her appear to the other passengers to be ignorant,
uneducated, stupid, and in need of lecturing on the
safety rules and regulations of the plane. Affronted,
petitioner assured Kerrigan that she knew the planes
safety regulations being a frequent traveler.
Thereupon, Kerrigan allegedly thrust his face a mere
few centimeters away from that of the petitioner and
menacingly told her that "We dont like your
attitude."
Upon arrival in Rome, petitioner complained to
respondents ground manager and demanded an
apology. However, the latter declared that the flight
stewards were "only doing their job."
Thus, petitioner filed the complaint for damages,
praying that respondent be ordered to pay P5 million
as moral damages, P2 million as nominal damages,
P1 million as exemplary damages, P300,000.00 as
attorneys fees, P200,000.00 as litigation expenses,
and cost of the suit.
On May 16, 2005, summons, together with a copy of
the complaint, was served on the respondent through
Violeta Echevarria, General Manager of Euro-
Philippine Airline Services, Inc.3
Page 40 of 44
On May 30, 2005, respondent, by way of special
appearance through counsel, filed a Motion to
Dismiss4 on grounds of lack of jurisdiction over the
case and over the person of the respondent.
Respondent alleged that only the courts of London,
United Kingdom or Rome, Italy, have jurisdiction
over the complaint for damages pursuant to the
Warsaw Convention,5 Article 28(1) of which
provides:
An action for damages must be brought at the option
of the plaintiff, either before the court of domicile of
the carrier or his principal place of business, or where
he has a place of business through which the contract
has been made, or before the court of the place of
destination.
Thus, since a) respondent is domiciled in London; b)
respondents principal place of business is in London;
c) petitioner bought her ticket in Italy (through
Jeepney Travel S.A.S, in Rome);6 and d) Rome, Italy
is petitioners place of destination, then it follows that
the complaint should only be filed in the proper
courts of London, United Kingdom or Rome, Italy.
Likewise, it was alleged that the case must be
dismissed for lack of jurisdiction over the person of
the respondent because the summons was erroneously
served on Euro-Philippine Airline Services, Inc.
which is not its resident agent in the Philippines.
On June 3, 2005, the trial court issued an Order
requiring herein petitioner to file her
Comment/Opposition on the Motion to Dismiss
within 10 days from notice thereof, and for
respondent to file a Reply thereon.7 Instead of filing a
Comment/Opposition, petitioner filed on June 27,
2005, an Urgent Ex-Parte Motion to Admit Formal
Amendment to the Complaint and Issuance of Alias
Summons.8 Petitioner alleged that upon verification
with the Securities and Exchange Commission, she
found out that the resident agent of respondent in the
Philippines is Alonzo Q. Ancheta. Subsequently, on
September 9, 2005, petitioner filed a Motion to
Resolve Pending Incident and Opposition to Motion
to Dismiss.9
Ruling of the Regional Trial Court
On October 14, 2005, the RTC of Makati City,
Branch 132, issued an Order10 granting respondents
Motion to Dismiss. It ruled that:
The Court sympathizes with the alleged ill-treatment
suffered by the plaintiff. However, our Courts have to
apply the principles of international law, and are
bound by treaty stipulations entered into by the
Philippines which form part of the law of the land.
One of this is the Warsaw Convention. Being a
signatory thereto, the Philippines adheres to its
stipulations and is bound by its provisions including
the place where actions involving damages to
plaintiff is to be instituted, as provided for under
Article 28(1) thereof. The Court finds no justifiable
reason to deviate from the indicated limitations as it
will only run counter to the provisions of the Warsaw
Convention. Said adherence is in consonance with the
comity of nations and deviation from it can only be
effected through proper denunciation as enunciated in
the Santos case (ibid). Since the Philippines is not the
place of domicile of the defendant nor is it the
principal place of business, our courts are thus
divested of jurisdiction over cases for damages.
Neither was plaintiffs ticket issued in this country
nor was her destination Manila but Rome in Italy. It
bears stressing however, that referral to the court of
proper jurisdiction does not constitute constructive
denial of plaintiffs right to have access to our courts
since the Warsaw Convention itself provided for
jurisdiction over cases arising from international
transportation. Said treaty stipulations must be
complied with in good faith following the time
honored principle of pacta sunt servanda.
The resolution of the propriety of service of
summons is rendered moot by the Courts want of
jurisdiction over the instant case.
WHEREFORE, premises considered, the present
Motion to Dismiss is hereby GRANTED and this
case is hereby ordered DISMISSED.
Petitioner filed a Motion for Reconsideration but the
motion was denied in an Order11 dated January 4,
2006.
Petitioner now comes directly before us on a Petition
for Review on Certiorari on pure questions of law,
raising the following issues:
Issues
I. WHETHER X X X PHILIPPINE COURTs HAVE
JURISDICTION OVER A TORTIOUS CONDUCT
COMMITTED AGAINST A FILIPINO CITIZEN
AND RESIDENT BY AIRLINE PERSONNEL OF A
FOREIGN CARRIER TRAVELLING BEYOND
THE TERRITORIAL LIMIT OF ANY FOREIGN
COUNTRY; AND THUS IS OUTSIDE THE AMBIT
OF THE WARSAW CONVENTION.
II. WHETHER x x x RESPONDENT AIR CARRIER
OF PASSENGERS, IN FILING ITS MOTION TO
DISMISS BASED ON LACK OF JURISDICTION
OVER THE SUBJECT MATTER OF THE CASE
AND OVER ITS PERSON MAY BE DEEMED AS
HAVING IN FACT AND IN LAW SUBMITTED
ITSELF TO THE JURISDICTION OF THE LOWER
COURT, ESPECIALLY SO, WHEN THE VERY
LAWYER ARGUING FOR IT IS HIMSELF THE
RESIDENT AGENT OF THE CARRIER.
Petitioners Arguments
Petitioner argues that her cause of action arose not
from the contract of carriage, but from the tortious
conduct committed by airline personnel of respondent
in violation of the provisions of the Civil Code on
Human Relations. Since her cause of action was not
predicated on the contract of carriage, petitioner
asserts that she has the option to pursue this case in
this jurisdiction pursuant to Philippine laws.
Respondents Arguments
In contrast, respondent maintains that petitioners
claim for damages fell within the ambit of Article
28(1) of the Warsaw Convention. As such, the same
can only be filed before the courts of London, United
Kingdom or Rome, Italy.
Page 41 of 44
Our Ruling
The petition is without merit.
The Warsaw Convention has the force and effect of
law in this country.
It is settled that the Warsaw Convention has the force
and effect of law in this country. In Santos III v.
Northwest Orient Airlines,12 we held that:
The Republic of the Philippines is a party to the
Convention for the Unification of Certain Rules
Relating to International Transportation by Air,
otherwise known as the Warsaw Convention. It took
effect on February 13, 1933. The Convention was
concurred in by the Senate, through its Resolution
No. 19, on May 16, 1950. The Philippine instrument
of accession was signed by President Elpidio Quirino
on October 13, 1950, and was deposited with the
Polish government on November 9, 1950. The
Convention became applicable to the Philippines on
February 9, 1951. On September 23, 1955, President
Ramon Magsaysay issued Proclamation No. 201,
declaring our formal adherence thereto, "to the end
that the same and every article and clause thereof
may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof."
The Convention is thus a treaty commitment
voluntarily assumed by the Philippine government
and, as such, has the force and effect of law in this
country.13
The Warsaw Convention applies because the air
travel, where the alleged tortious conduct occurred,
was between the United Kingdom and Italy, which
are both signatories to the Warsaw Convention.
Article 1 of the Warsaw Convention provides:
1. This Convention applies to all international
carriage of persons, luggage or goods performed by
aircraft for reward. It applies equally to gratuitous
carriage by aircraft performed by an air transport
undertaking.
2. For the purposes of this Convention the expression
"international carriage" means any carriage in which,
according to the contract made by the parties, the
place of departure and the place of destination,
whether or not there be a break in the carriage or a
transhipment, are situated either within the territories
of two High Contracting Parties, or within the
territory of a single High Contracting Party, if there is
an agreed stopping place within a territory subject to
the sovereignty, suzerainty, mandate or authority of
another Power, even though that Power is not a party
to this Convention. A carriage without such an agreed
stopping place between territories subject to the
sovereignty, suzerainty, mandate or authority of the
same High Contracting Party is not deemed to be
international for the purposes of this Convention.
(Emphasis supplied)
Thus, when the place of departure and the place of
destination in a contract of carriage are situated
within the territories of two High Contracting Parties,
said carriage is deemed an "international carriage".
The High Contracting Parties referred to herein were
the signatories to the Warsaw Convention and those
which subsequently adhered to it.14
In the case at bench, petitioners place of departure
was London, United Kingdom while her place of
destination was Rome, Italy.15 Both the United
Kingdom16 and Italy17 signed and ratified the Warsaw
Convention. As such, the transport of the petitioner is
deemed to be an "international carriage" within the
contemplation of the Warsaw Convention.
Since the Warsaw Convention applies in the instant
case, then the jurisdiction over the subject matter of
the action is governed by the provisions of the
Warsaw Convention.
Under Article 28(1) of the Warsaw Convention, the
plaintiff may bring the action for damages before
1. the court where the carrier is domiciled;
2. the court where the carrier has its principal place of
business;
3. the court where the carrier has an establishment by
which the contract has been made; or
4. the court of the place of destination.
In this case, it is not disputed that respondent is a
British corporation domiciled in London, United
Kingdom with London as its principal place of
business. Hence, under the first and second
jurisdictional rules, the petitioner may bring her case
before the courts of London in the United Kingdom.
In the passenger ticket and baggage check presented
by both the petitioner and respondent, it appears that
the ticket was issued in Rome, Italy. Consequently,
under the third jurisdictional rule, the petitioner has
the option to bring her case before the courts of Rome
in Italy. Finally, both the petitioner and respondent
aver that the place of destination is Rome, Italy,
which is properly designated given the routing
presented in the said passenger ticket and baggage
check. Accordingly, petitioner may bring her action
before the courts of Rome, Italy. We thus find that the
RTC of Makati correctly ruled that it does not have
jurisdiction over the case filed by the petitioner.
Santos III v. Northwest Orient Airlines18 applies in
this case.
Petitioner contends that Santos III v. Northwest
Orient Airlines19 cited by the trial court is
inapplicable to the present controversy since the facts
thereof are not similar with the instant case.
We are not persuaded.
In Santos III v. Northwest Orient Airlines,20 Augusto
Santos III, a resident of the Philippines, purchased a
ticket from Northwest Orient Airlines in San
Francisco, for transport between San Francisco and
Manila via Tokyo and back to San Francisco. He was
wait-listed in the Tokyo to Manila segment of his
ticket, despite his prior reservation. Contending that
Northwest Orient Airlines acted in bad faith and
discriminated against him when it canceled his
confirmed reservation and gave his seat to someone
who had no better right to it, Augusto Santos III sued
the carrier for damages before the RTC. Northwest
Orient Airlines moved to dismiss the complaint on
ground of lack of jurisdiction citing Article 28(1) of
the Warsaw Convention. The trial court granted the
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motion which ruling was affirmed by the Court of
Appeals. When the case was brought before us, we
denied the petition holding that under Article 28(1) of
the Warsaw Convention, Augusto Santos III must
prosecute his claim in the United States, that place
being the (1) domicile of the Northwest Orient
Airlines; (2) principal office of the carrier; (3) place
where contract had been made (San Francisco); and
(4) place of destination (San Francisco).21
We further held that Article 28(1) of the Warsaw
Convention is jurisdictional in character. Thus:
A number of reasons tends to support the
characterization of Article 28(1) as a jurisdiction and
not a venue provision. First, the wording of Article
32, which indicates the places where the action for
damages "must" be brought, underscores the
mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the
objectives of the Convention, which is to "regulate in
a uniform manner the conditions of international
transportation by air." Third, the Convention does not
contain any provision prescribing rules of jurisdiction
other than Article 28(1), which means that the phrase
"rules as to jurisdiction" used in Article 32 must refer
only to Article 28(1). In fact, the last sentence of
Article 32 specifically deals with the exclusive
enumeration in Article 28(1) as "jurisdictions,"
which, as such, cannot be left to the will of the parties
regardless of the time when the damage occurred.
xxxx
In other words, where the matter is governed by the
Warsaw Convention, jurisdiction takes on a dual
concept. Jurisdiction in the international sense must
be established in accordance with Article 28(1) of the
Warsaw Convention, following which the jurisdiction
of a particular court must be established pursuant to
the applicable domestic law. Only after the question
of which court has jurisdiction is determined will the
issue of venue be taken up. This second question
shall be governed by the law of the court to which the
case is submitted.22
Contrary to the contention of petitioner, Santos III v.
Northwest Orient Airlines23 is analogous to the instant
case because (1) the domicile of respondent is
London, United Kingdom;24 (2) the principal office of
respondent airline is likewise in London, United
Kingdom;25 (3) the ticket was purchased in Rome,
Italy;26 and (4) the place of destination is Rome,
Italy.27 In addition, petitioner based her complaint on
Article 217628 of the Civil Code on quasi-delict and
Articles 1929 and 2130 of the Civil Code on Human
Relations. In Santos III v. Northwest Orient
Airlines,31 Augusto Santos III similarly posited that
Article 28 (1) of the Warsaw Convention did not
apply if the action is based on tort. Hence, contrary to
the contention of the petitioner, the factual setting of
Santos III v. Northwest Orient Airlines32 and the
instant case are parallel on the material points.
Tortious conduct as ground for the petitioners
complaint is within the purview of the Warsaw
Convention.
Petitioner contends that in Santos III v. Northwest
Orient Airlines,33 the cause of action was based on a
breach of contract while her cause of action arose
from the tortious conduct of the airline personnel and
violation of the Civil Code provisions on Human
Relations.34 In addition, she claims that our
pronouncement in Santos III v. Northwest Orient
Airlines35 that "the allegation of willful misconduct
resulting in a tort is insufficient to exclude the case
from the comprehension of the Warsaw Convention,"
is more of an obiter dictum rather than the ratio
decidendi.36 She maintains that the fact that said acts
occurred aboard a plane is merely incidental, if not
irrelevant.37
We disagree with the position taken by the petitioner.
Black defines obiter dictum as "an opinion entirely
unnecessary for the decision of the case" and thus
"are not binding as precedent."38 In Santos III v.
Northwest Orient Airlines,39 Augusto Santos III
categorically put in issue the applicability of Article
28(1) of the Warsaw Convention if the action is based
on tort.
In the said case, we held that the allegation of willful
misconduct resulting in a tort is insufficient to
exclude the case from the realm of the Warsaw
Convention. In fact, our ruling that a cause of action
based on tort did not bring the case outside the sphere
of the Warsaw Convention was our ratio decidendi in
disposing of the specific issue presented by Augusto
Santos III. Clearly, the contention of the herein
petitioner that the said ruling is an obiter dictum is
without basis.
Relevant to this particular issue is the case of Carey
v. United Airlines,40 where the passenger filed an
action against the airline arising from an incident
involving the former and the airlines flight attendant
during an international flight resulting to a heated
exchange which included insults and profanity. The
United States Court of Appeals (9th Circuit) held that
the "passenger's action against the airline carrier
arising from alleged confrontational incident between
passenger and flight attendant on international flight
was governed exclusively by the Warsaw
Convention, even though the incident allegedly
involved intentional misconduct by the flight
attendant."41
In Bloom v. Alaska Airlines,42 the passenger brought
nine causes of action against the airline in the state
court, arising from a confrontation with the flight
attendant during an international flight to Mexico.
The United States Court of Appeals (9th Circuit) held
that the "Warsaw Convention governs actions arising
from international air travel and provides the
exclusive remedy for conduct which falls within its
provisions." It further held that the said Convention
"created no exception for an injury suffered as a
result of intentional conduct" 43 which in that case
involved a claim for intentional infliction of
emotional distress.
It is thus settled that allegations of tortious conduct
committed against an airline passenger during the
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course of the international carriage do not bring the
case outside the ambit of the Warsaw Convention.
Respondent, in seeking remedies from the trial court
through special appearance of counsel, is not deemed
to have voluntarily submitted itself to the jurisdiction
of the trial court.
Petitioner argues that respondent has effectively
submitted itself to the jurisdiction of the trial court
when the latter stated in its Comment/Opposition to
the Motion for Reconsideration that "Defendant [is at
a loss] x x x how the plaintiff arrived at her erroneous
impression that it is/was Euro-Philippines Airlines
Services, Inc. that has been making a special
appearance since x x x British Airways x x x has been
clearly specifying in all the pleadings that it has filed
with this Honorable Court that it is the one making a
special appearance."44
In refuting the contention of petitioner, respondent
cited La Naval Drug Corporation v. Court of
Appeals45 where we held that even if a party
"challenges the jurisdiction of the court over his
person, as by reason of absence or defective service
of summons, and he also invokes other grounds for
the dismissal of the action under Rule 16, he is not
deemed to be in estoppel or to have waived his
objection to the jurisdiction over his person."46
This issue has been squarely passed upon in the
recent case of Garcia v. Sandiganbayan,47 where we
reiterated our ruling in La Naval Drug Corporation v.
Court of Appeals48 and elucidated thus:
Special Appearance to Question a Courts Jurisdiction
Is Not
Voluntary Appearance
The second sentence of Sec. 20, Rule 14 of the
Revised Rules of Civil Procedure clearly provides:
Sec. 20. Voluntary appearance. The defendants
voluntary appearance in the action shall be equivalent
to service of summons. The inclusion in a motion to
dismiss of other grounds aside from lack of
jurisdiction over the person of the defendant shall not
be deemed a voluntary appearance.
Thus, a defendant who files a motion to dismiss,
assailing the jurisdiction of the court over his person,
together with other grounds raised therein, is not
deemed to have appeared voluntarily before the court.
What the rule on voluntary appearance the first
sentence of the above-quoted rule means is that the
voluntary appearance of the defendant in court is
without qualification, in which case he is deemed to
have waived his defense of lack of jurisdiction over
his person due to improper service of summons.
The pleadings filed by petitioner in the subject
forfeiture cases, however, do not show that she
voluntarily appeared without qualification. Petitioner
filed the following pleadings in Forfeiture I: (a)
motion to dismiss; (b) motion for reconsideration
and/or to admit answer; (c) second motion for
reconsideration; (d) motion to consolidate forfeiture
case with plunder case; and (e) motion to dismiss
and/or to quash Forfeiture I. And in Forfeiture II: (a)
motion to dismiss and/or to quash Forfeiture II; and
(b) motion for partial reconsideration.
The foregoing pleadings, particularly the motions to
dismiss, were filed by petitioner solely for special
appearance with the purpose of challenging the
jurisdiction of the SB over her person and that of her
three children. Petitioner asserts therein that SB did
not acquire jurisdiction over her person and of her
three children for lack of valid service of summons
through improvident substituted service of summons
in both Forfeiture I and Forfeiture II. This stance the
petitioner never abandoned when she filed her
motions for reconsideration, even with a prayer to
admit their attached Answer Ex Abundante Ad
Cautelam dated January 22, 2005 setting forth
affirmative defenses with a claim for damages. And
the other subsequent pleadings, likewise, did not
abandon her stance and defense of lack of jurisdiction
due to improper substituted services of summons in
the forfeiture cases. Evidently, from the foregoing
Sec. 20, Rule 14 of the 1997 Revised Rules on Civil
Procedure, petitioner and her sons did not voluntarily
appear before the SB constitutive of or equivalent to
service of summons.
Moreover, the leading La Naval Drug Corp. v. Court
of Appeals applies to the instant case. Said case
elucidates the current view in our jurisdiction that a
special appearance before the courtchallenging its
jurisdiction over the person through a motion to
dismiss even if the movant invokes other groundsis
not tantamount to estoppel or a waiver by the movant
of his objection to jurisdiction over his person; and
such is not constitutive of a voluntary submission to
the jurisdiction of the court.1avvphi1
Thus, it cannot be said that petitioner and her three
children voluntarily appeared before the SB to cure
the defective substituted services of summons. They
are, therefore, not estopped from questioning the
jurisdiction of the SB over their persons nor are they
deemed to have waived such defense of lack of
jurisdiction. Consequently, there being no valid
substituted services of summons made, the SB did
not acquire jurisdiction over the persons of petitioner
and her children. And perforce, the proceedings in the
subject forfeiture cases, insofar as petitioner and her
three children are concerned, are null and void for
lack of jurisdiction. (Emphasis supplied)
In this case, the special appearance of the counsel of
respondent in filing the Motion to Dismiss and other
pleadings before the trial court cannot be deemed to
be voluntary submission to the jurisdiction of the said
trial court. We hence disagree with the contention of
the petitioner and rule that there was no voluntary
appearance before the trial court that could constitute
estoppel or a waiver of respondents objection to
jurisdiction over its person.
WHEREFORE, the petition is DENIED. The October
14, 2005 Order of the Regional Trial Court of Makati
City, Branch 132, dismissing the complaint for lack
of jurisdiction, is AFFIRMED.
SO ORDERED.
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