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FIRST DIVISION and 03/237/7CK/2, as being dented and broken.

G.R. No. 181163, July 24, 2013 Thereafter, the cargoes were stored for temporary
ASIAN TERMINALS, INC., Petitioner, v. safekeeping inside CFS Warehouse in Pier No. 5.
PHILAM INSURANCE CO., INC. (NOW
CHARTIS PHILIPPINES INSURANCE, INC.), On May 11, 1995, the shipment was withdrawn by
Respondent. R.F. Revilla Customs Brokerage, Inc., the authorized
broker of Universal Motors, and delivered to the
R E S OLUTIO N latters warehouse in Mandaluyong City. Upon the
[G.R. NO. 181262] request7 of Universal Motors, a bad order survey was
conducted on the cargoes and it was found that one
R E S OLUTIO N Frame Axle Sub without LWR was deeply dented on
PHILAM INSURANCE CO., INC. (NOW the buffle plate while six Frame Assembly with Bush
CHARTIS PHILIPPINES INSURANCE, INC.), were deformed and misaligned.8 Owing to the extent
Petitioner, v. WESTWIND SHIPPING of the damage to said cargoes, Universal Motors
CORPORATION AND ASIAN TERMINALS, declared them a total loss.
INC., Respondents.
On August 4, 1995, Universal Motors filed a formal
R E S OLUTIO N claim for damages in the amount of P643,963.84
[G.R. NO. 181319] against Westwind,9 ATI10 and R.F. Revilla Customs
Brokerage, Inc.11 When Universal Motors demands
R E S OLUTIO N remained unheeded, it sought reparation from and
WESTWIND SHIPPING CORPORATION, was compensated in the sum of P633,957.15 by
Petitioner, v. PHILAM INSURANCE CO., INC. Philam. Accordingly, Universal Motors issued a
(NOW CHARTIS PHILIPPINES INSURANCE, Subrogation Receipt12 dated November 15, 1995 in
INC.) AND ASIAN TERMINALS, INC., favor of Philam.
Respondents.
On January 18, 1996, Philam, as subrogee of
DECISION Universal Motors, filed a Complaint13 for damages
VILLARAMA, JR., J.: against Westwind, ATI and R.F. Revilla Customs
Before us are three consolidated petitions for review Brokerage, Inc. before the RTC of Makati City,
on certiorari assailing the Decision1 dated October 15, Branch 148.
2007 and the Resolution2 dated January 11, 2008 of
the Court of Appeals (CA) which affirmed with On September 24, 1999, the RTC rendered judgment
modification the Decision3 of the Regional Trial in favor of Philam and ordered Westwind and ATI to
Court (RTC) of Makati City, Branch 148, in Civil pay Philam, jointly and severally, the sum of
Case No. 96-062. The RTC had ordered Westwind P633,957.15 with interest at the rate of 12% per
Shipping Corporation (Westwind) and Asian annum, P158,989.28 by way of attorneys fees and
Terminals, Inc. (ATI) to pay, jointly and severally, expenses of litigation.
Philam Insurance Co., Inc. (Philam) the sum of
P633,957.15, with interest at 12% per annum from The court a quo ruled that there was sufficient
the date of judicial demand and P158,989.28 as evidence to establish the respective participation of
attorneys fees. Westwind and ATI in the discharge of and consequent
damage to the shipment. It found that the subject
The facts of the case follow:cralavvonlinelawlibrary cargoes were compressed while being hoisted using a
cable that was too short and taut. The trial court
On April 15, 1995, Nichimen Corporation shipped to observed that while the staff of ATI undertook the
Universal Motors Corporation (Universal Motors) physical unloading of the cargoes from the carrying
219 packages containing 120 units of brand new vessel, Westwinds duty officer exercised full
Nissan Pickup Truck Double Cab 4x2 model, without supervision and control throughout the process. It
engine, tires and batteries, on board the vessel S/S held Westwind vicariously liable for failing to prove
Calayan Iris from Japan to Manila. The shipment, that it exercised extraordinary diligence in the
which had a declared value of US$81,368 or supervision of the ATI stevedores who unloaded the
P29,400,000, was insured with Philam against all cargoes from the vessel. However, the court absolved
risks under Marine Policy No. 708-8006717-4.4 R.F. Revilla Customs Brokerage, Inc. from liability in
light of its finding that the cargoes had been damaged
The carrying vessel arrived at the port of Manila on before delivery to the consignee.
April 20, 1995, and when the shipment was unloaded
by the staff of ATI, it was found that the package The trial court acknowledged the subrogation
marked as 03-245-42K/1 was in bad order.5 The Turn between Philam and Universal Motors on the strength
Over Survey of Bad Order Cargoes6 dated April 21, of the Subrogation Receipt dated November 15,
1995 identified two packages, labeled 03-245-42K/1 1995. It likewise upheld Philams claim for the value
Page 1 of 44
of the alleged damaged vehicle parts contained in 11, 2008. Thus, they each filed a petition for review
Case Nos. 03-245-42K/1 and 03-245-51K or on certiorari which were consolidated together by this
specifically for 7 [pieces] of Frame Axle Sub Court considering that all three petitions assail the
Without Lower and Frame Assembly with Bush.14 same CA decision and resolution and involve the
same parties.
Westwind filed a Motion for Reconsideration15 which
was, however, denied in an Order16 dated October 26, Essentially, the issues posed by petitioner ATI in G.R.
2000. No. 181163, petitioner Philam in G.R. No. 181262
and petitioner Westwind in G.R. No. 181319 can be
On appeal, the CA affirmed with modification the summed up into and resolved by addressing three
ruling of the RTC. In a Decision dated October 15, questions: (1) Has Philams action for damages
2007, the appellate court directed Westwind and ATI prescribed? (2) Who between Westwind and ATI
to pay Philam, jointly and severally, the amount of should be held liable for the damaged cargoes? and
P190,684.48 with interest at the rate of 12% per (3) What is the extent of their liability?
annum until fully paid, attorneys fees of P47,671 and
litigation expenses. Petitioners Arguments

The CA stressed that Philam may not modify its


allegations by claiming in its Appellees Brief 17 that G.R. No. 181163
the six pieces of Frame Assembly with Bush, which
were purportedly damaged, were also inside Case No. Petitioner ATI disowns liability for the damage to the
03-245-42K/1. The CA noted that in its Complaint, Frame Axle Sub without Lower inside Case No. 03-
Philam alleged that one (1) pc. FRAME AXLE SUB 245-42K/1. It shifts the blame to Westwind, whom it
W/O LWR from Case No. 03-245-42K/1 [was] charges with negligence in the supervision of the
completely deformed and misaligned, and six (6) stevedores who unloaded the cargoes. ATI admits that
other pcs. of FRAME ASSEMBLY WITH BUSH the damage could have been averted had Westwind
from Case No. 03-245-51K [were] likewise observed extraordinary diligence in handling the
completely deformed and misaligned.18 goods. Even so, ATI suspects that Case No. 03-245-
42K/1 is weak and defective22 considering that it
The appellate court accordingly affirmed Westwind alone sustained damage out of the 219 packages.
and ATIs joint and solidary liability for the damage
to only one (1) unit of Frame Axle Sub without Notwithstanding, petitioner ATI submits that, at most,
Lower inside Case No. 03-245-42K/1. It also noted it can be held liable to pay only P5,000 per package
that when said cargo sustained damage, it was not yet pursuant to its Contract for Cargo Handling Services.
in the custody of the consignee or the person who had ATI maintains that it was not properly notified of the
the right to receive it. The CA pointed out that actual value of the cargoes prior to their discharge
Westwinds duty to observe extraordinary diligence from the vessel.
in the care of the cargoes subsisted during unloading
thereof by ATIs personnel since the former exercised G.R. No. 181262
full control and supervision over the discharging
operation. Petitioner Philam supports the CA in holding both
Westwind and ATI liable for the deformed and
Similarly, the appellate court held ATI liable for the misaligned Frame Axle Sub without Lower inside
negligence of its employees who carried out the Case No. 03-245-42K/1. It, however, faults the
offloading of cargoes from the ship to the pier. As appellate court for disallowing its claim for the value
regards the extent of ATIs liability, the CA ruled that of six Chassis Frame Assembly which were likewise
ATI cannot limit its liability to P5,000 per damaged supposedly inside Case Nos. 03-245-51K and 03-
package. It explained that Section 7.0119 of the 245-42K/1. As to the latter container, Philam anchors
Contract for Cargo Handling Services20 does not its claim on the results of the Inspection/Survey
apply in this case since ATI was not yet in custody Report23 of Chartered Adjusters, Inc., which the court
and control of the cargoes when the Frame Axle Sub received without objection from Westwind and ATI.
without Lower suffered damage. Petitioner believes that with the offer and consequent
admission of evidence to the effect that Case No. 03-
Citing Belgian Overseas Chartering and Shipping 245-42K/1 contains six pieces of dented Chassis
N.V. v. Philippine First Insurance Co., Inc.,21 the Frame Assembly, Philams claim thereon should be
appellate court also held that Philams action for treated, in all respects, as if it has been raised in the
damages had not prescribed notwithstanding the pleadings. Thus, Philam insists on the reinstatement
absence of a notice of claim. of the trial courts award in its favor for the payment
of P633,957.15 plus legal interest, P158,989.28 as
All the parties moved for reconsideration, but their attorneys fees and costs.
motions were denied in a Resolution dated January
Page 2 of 44
G.R. No. 181319 and to what extent. However, the resolution of the
issues raised by the present petitions is predicated on
Petitioner Westwind denies joint liability with ATI for the appreciation of factual issues which is beyond the
the value of the deformed Frame Axle Sub without scope of a petition for review on certiorari under Rule
Lower in Case No. 03-245-42K/1. Westwind argues 45 of the 1997 Rules of Civil Procedure, as amended.
that the evidence shows that ATI was already in It is settled that in petitions for review on certiorari,
actual custody of said case when the Frame Axle Sub only questions of law may be put in issue. Questions
without Lower inside it was misaligned from being of fact cannot be entertained.26
compressed by the tight cable used to unload it.
Accordingly, Westwind ceased to have responsibility There is a question of law if the issue raised is
over the cargoes as provided in paragraph 4 of the capable of being resolved without need of reviewing
Bill of Lading which provides that the responsibility the probative value of the evidence. The resolution of
of the carrier shall cease when the goods are taken the issue must rest solely on what the law provides on
into the custody of the arrastre. the given set of circumstances. Once it is clear that
the issue invites a review of the evidence presented,
Westwind contends that sole liability for the damage the question posed is one of fact. If the query requires
rests on ATI since it was the latters stevedores who a re-evaluation of the credibility of witnesses, or the
operated the ships gear to unload the cargoes. existence or relevance of surrounding circumstances
Westwind reasons that ATI is an independent and their relation to each other, the issue in that query
company, over whose employees and operations it is factual.27
does not exercise control. Moreover, it was ATIs
employees who selected and used the wrong cable to In the present petitions, the resolution of the question
lift the box containing the cargo which was damaged. as to who between Westwind and ATI should be
liable for the damages to the cargo and to what extent
Westwind likewise believes that ATI is bound by its would have this Court pass upon the evidence on
acceptance of the goods in good order despite a record. But while it is not our duty to review,
finding that Case No. 03-245-42K/1 was partly torn examine and evaluate or weigh all over again the
and crumpled on one side. Westwind also notes that probative value of the evidence presented,28 the Court
the discovery that a piece of Frame Axle Sub without may nonetheless resolve questions of fact when the
Lower was completely deformed and misaligned case falls under any of the following
came only on May 12, 1995 or 22 days after the exceptions:cralavvonlinelawlibrary
cargoes were turned over to ATI and after the same
had been hauled by R.F. Revilla Customs Brokerage, (1) when the findings are grounded entirely on
Inc. speculation, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or
Westwind further argues that the CA erred in holding impossible; (3) when there is grave abuse of
it liable considering that Philams cause of action has discretion; (4) when the judgment is based on a
prescribed since the latter filed a formal claim with it misapprehension of facts; (5) when the findings of
only on August 17, 1995 or four months after the fact are conflicting; (6) when in making its findings
cargoes arrived on April 20, 1995. Westwind stresses the Court of Appeals went beyond the issues of the
that according to the provisions of clause 20, case, or its findings are contrary to the admissions of
paragraph 224 of the Bill of Lading as well as Article both the appellant and the appellee; (7) when the
36625 of the Code of Commerce, the consignee had findings are contrary to those of the trial court; (8)
until April 20, 1995 within which to make a claim when the findings are conclusions without citation of
considering the readily apparent nature of the specific evidence on which they are based; (9) when
damage, or until April 27, 1995 at the latest, if it is the facts set forth in the petition as well as in the
assumed that the damage is not readily apparent. petitioners main and reply briefs are not disputed by
the respondent; and (10) when the findings of fact are
Lastly, petitioner Westwind contests the imposition of premised on the supposed absence of evidence and
12% interest on the award of damages to Philam contradicted by the evidence on
reckoned from the time of extrajudicial demand. record.29nadcralavvonlinelawlibrary
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 In the cases at bar, the fifth and seventh exceptions
money. apply. While the CA affirmed the joint liability of ATI
and Westwind, it held them liable only for the value
The Courts Ruling of one unit of Frame Axle Sub without Lower inside
Case No. 03-245-42K/1. The appellate court
The three consolidated petitions before us call for a disallowed the award of damages for the six pieces of
determination of who between ATI and Westwind is Frame Assembly with Bush, which petitioner Philam
liable for the damage suffered by the subject cargo 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 without the intervention of a notary or other person
CA reduced the award of attorneys fees to P47,671. legally authorized by which some disposition or
agreement is proved or set forth. Lacking the official
Foremost, the Court holds that petitioner Philam has or sovereign character of a public document, or the
adequately established the basis of its claim against solemnities prescribed by law, a private document
petitioners ATI and Westwind. Philam, as insurer, was requires authentication35 in the manner prescribed
subrogated to the rights of the consignee, Universal under Section 20, Rule 132 of the
Motors Corporation, pursuant to the Subrogation Rules:cralavvonlinelawlibrary
Receipt executed by the latter in favor of the former.
The right of subrogation accrues simply upon SEC. 20. Proof of private document. Before any
payment by the insurance company of the insurance private document offered as authentic is received in
claim.30 Petitioner Philams action finds support in evidence, its due execution and authenticity must be
Article 2207 of the Civil Code, which provides as proved either:cralavvonlinelawlibrary
follows:cralavvonlinelawlibrary
(a) By anyone who saw the document executed or
Art. 2207. If the plaintiffs property has been insured, written; or
and he has received indemnity from the insurance (b) By evidence of the genuineness of the signature
company for the injury or loss arising out of the or handwriting of the maker.
wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights Any other private document need only be identified
of the insured against the wrongdoer or the person as that which it is claimed to be.
who has violated the contract. x x x.
The requirement of authentication of a private
In their respective comments31 to Philams Formal document is excused only in four instances,
Offer of Evidence,32 petitioners ATI and Westwind specifically: (a) when the document is an ancient one
objected to the admission of Marine Certificate No. within the context of Section 21, 36 Rule 132 of the
708-8006717-4 and the Subrogation Receipt as Rules; (b) when the genuineness and authenticity of
documentary exhibits B and P, respectively. the actionable document have not been specifically
Petitioner Westwind objects to the admission of both denied under oath by the adverse party; (c) when the
documents for being hearsay as they were not genuineness and authenticity of the document have
authenticated by the persons who executed them. For been admitted; or (d) when the document is not being
the same reason, petitioner ATI assails the offered as genuine.37
admissibility of the Subrogation Receipt. As regards
Marine Certificate No. 708-8006717-4, ATI makes Indubitably, Marine Certificate No. 708-8006717-4
issue of the fact that the same was issued only on and the Subrogation Receipt are private documents
April 27, 1995 or 12 days after the shipment was which Philam and the consignee, respectively, issue
loaded on and transported via S/S Calayan Iris. in the pursuit of their business. Since none of the
ATTY. PALACIOS exceptions to the requirement of authentication of a
How were you able to get hold of this subrogation private document obtains in these cases, said
Q documents may not be admitted in evidence for
receipt?
Because I personally delivered the claim check to Philam without being properly authenticated.
A
consignee and have them [receive] the said check.
I see. Therefore, what you are saying is that you Contrary to the contention of petitioners ATI and
personally delivered the claim check of Universal Westwind, however, Philam presented its claims
Q Motors Corporation to that company and you have officer, Ricardo Ongchangco, Jr. to testify on the
the subrogation receipt signed by them execution of the Subrogation Receipt, as
personally? follows:cralavvonlinelawlibrary
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
Page 4 of 44
Indeed, all that the Rules require to establish the insurer of all the remedies that the insured may have
authenticity of a document is the testimony of a against the third party whose negligence or wrongful
person who saw the document executed or written. act caused the loss. The right of subrogation is not
Thus, the trial court did not err in admitting the dependent upon, nor does it grow out of, any privity
Subrogation Receipt in evidence despite petitioners of contract. It accrues simply upon payment by the
ATI and Westwinds objections that it was not insurance company of the insurance claim. The
authenticated by the person who signed it. doctrine of subrogation has its roots in equity. It is
designed to promote and accomplish justice; and is
However, the same cannot be said about Marine the mode that equity adopts to compel the ultimate
Certificate No. 708-8006717-4 which Ongchangcho, payment of a debt by one who, in justice, equity, and
Jr. good conscience, ought to pay.41
ATTY. PALACIOS
Now, I am presenting to you a copy of this Neither do we find support in petitioner Westwinds
marine certificate 708-8006717-4 issued by contention that Philams right of action has
Philam Insurance Company, Inc. to Universal prescribed.
Q
Motors Corporation on April 15, 1995. Will
you tell us what relation does it have to that The Carriage of Goods by Sea Act (COGSA) or
policy risk claim mentioned in that letter? Public Act No. 521 of the 74th US Congress, was
This is a photocopy of the said policy issued accepted to be made applicable to all contracts for the
A by the consignee Universal Motors carriage of goods by sea to and from Philippine ports
Corporation. in foreign trade by virtue of Commonwealth Act
ATTY. PALACIOS (C.A.) No. 65.42 Section 1 of C.A. No. 65
I see. [May] I request, if Your Honor please, states:cralavvonlinelawlibrary
that this marine risk policy of the plaintiff as
submitted by claimant Universal Motors Section 1. That the provisions of Public Act
Corporation be marked as Exhibit B. Numbered Five hundred and twenty-one of the
CO Seventy-fourth Congress of the United States,
UR approved on April sixteenth, nineteen hundred and
T thirty-six, be accepted, as it is hereby accepted to be
Mark it.39 made applicable to all contracts for the carriage of
merely identified in court. There is nothing in goods by sea to and from Philippine ports in foreign
Ongchangco, Jr.s testimony which indicates that he trade: Provided, That nothing in the Act shall be
saw Philams authorized representative sign said construed as repealing any existing provision of the
document, thus:cralavvonlinelawlibrary Code of Commerce which is now in force, or as
limiting its application.

The prescriptive period for filing an action for the


As regards the issuance of Marine Certificate No. loss or damage of the goods under the COGSA is
708-8006717-4 after the fact of loss occurred, suffice found in paragraph (6), Section 3,
it to say that said document simply certifies the thus:cralavvonlinelawlibrary
existence of an open insurance policy in favor of the
consignee. Hence, the reference to an Open Policy (6) Unless notice of loss or damage and the general
Number 9595093 in said certificate. The Court finds nature of such loss or damage be given in writing to
it completely absurd to suppose that any insurance the carrier or his agent at the port of discharge before
company, of sound business practice, would assume a or at the time of the removal of the goods into the
loss that has already been realized, when the custody of the person entitled to delivery thereof
profitability of its business rests precisely on the non- under the contract of carriage, such removal shall be
happening of the risk insured against. prima facie evidence of the delivery by the carrier of
the goods as described in the bill of lading. If the loss
Yet, even with the exclusion of Marine Certificate or damage is not apparent, the notice must be given
No. 708-8006717-4, the Subrogation Receipt, on its within three days of the delivery.
own, is adequate proof that petitioner Philam paid the
consignees claim on the damaged goods. Petitioners Said notice of loss or damage maybe endorsed upon
ATI and Westwind failed to offer any evidence to the receipt for the goods given by the person taking
controvert the same. In Malayan Insurance Co., Inc. delivery thereof.
v. Alberto,40 the Court explained the effect of payment
by the insurer of the insurance claim in this The notice in writing need not be given if the state of
wise:cralavvonlinelawlibrary the goods has at the time of their receipt been the
subject of joint survey or inspection.
We have held that payment by the insurer to the
insured operates as an equitable assignment to the In any event the carrier and the ship shall be
Page 5 of 44
discharged from all liability in respect of loss or fresh in the minds of the persons who took part in the
damage unless suit is brought within one year after transaction and documents are still available.47 Here,
delivery of the goods or the date when the goods Universal Motors filed a request for bad order survey
should have been delivered: Provided, That if a notice on May 12, 1995, even before all the packages could
of loss or damage, either apparent or concealed, is not be unloaded to its warehouse.
given as provided for in this section, that fact shall
not affect or prejudice the right of the shipper to bring Moreover, paragraph (6), Section 3 of the COGSA
suit within one year after the delivery of the goods or clearly states that failure to comply with the notice
the date when the goods should have been delivered. requirement shall not affect or prejudice the right of
the shipper to bring suit within one year after delivery
In the Bill of Lading43 dated April 15, 1995, Rizal of the goods. Petitioner Philam, as subrogee of
Commercial Banking Corporation (RCBC) is Universal Motors, filed the Complaint for damages
indicated as the consignee while Universal Motors is on January 18, 1996, just eight months after all the
listed as the notify party. These designations are in packages were delivered to its possession on May 17,
line with the subject shipment being covered by 1995. Evidently, petitioner Philams action against
Letter of Credit No. I501054, which RCBC issued petitioners Westwind and ATI was seasonably filed.
upon the request of Universal Motors.
This brings us to the question that must be resolved
A letter of credit is a financial device developed by in these consolidated petitions. Who between
merchants as a convenient and relatively safe mode Westwind and ATI should be liable for the damage to
of dealing with sales of goods to satisfy the the cargo?
seemingly irreconcilable interests of a seller, who
refuses to part with his goods before he is paid, and a It is undisputed that Steel Case No. 03-245-42K/1
buyer, who wants to have control of his goods before was partly torn and crumpled on one side while it
paying.44 However, letters of credit are employed by was being unloaded from the carrying vessel. The
the parties desiring to enter into commercial damage to said container was noted in the Bad Order
transactions, not for the benefit of the issuing bank Cargo Receipt48 dated April 20, 1995 and Turn Over
but mainly for the benefit of the parties to the original Survey of Bad Order Cargoes dated April 21, 1995.
transaction,45 in these cases, Nichimen Corporation as The Turn Over Survey of Bad Order Cargoes
the seller and Universal Motors as the buyer. Hence,
ATTY. LLAMAS
the latter, as the buyer of the Nissan CKD parts,
Having been present during the entire
should be regarded as the person entitled to delivery
Q discharging operation, do you remember who
of the goods. Accordingly, for purposes of reckoning
else were present at that time?
when notice of loss or damage should be given to the
Our surveyor and our checker the foreman of
carrier or its agent, the date of delivery to Universal A
ATI.
Motors is controlling.
Q Were there officials of the ship present also?
Yes, sir there was an officer of the vessel on
S/S Calayan Iris arrived at the port of Manila on A
duty at that time.54
April 20, 1995, and the subject cargoes were
x x
discharged to the custody of ATI the next day. The
xx
goods were then withdrawn from the CFS Warehouse
Q Who selected the cable slink to be used?
on May 11, 1995 and the last of the packages
A ATI Operation.
delivered to Universal Motors on May 17, 1995. Prior
Q Are you aware of how they made that selection?
to this, the latter filed a Request for Bad Order
Before the vessel arrived we issued a manifesto
Survey46 on May 12, 1995 following a joint
of the storage plan informing the ATI of what
inspection where it was discovered that six pieces of A
type of cargo and equipment will be utilitized in
Chassis Frame Assembly from two bundles were
discharging the cargo.55
deformed and one Front Axle Sub without Lower
x x
from a steel case was dented. Yet, it was not until
xx
August 4, 1995 that Universal Motors filed a formal
You testified that it was the ATI foremen who
claim for damages against petitioner Westwind.
Q select the cable slink to be used in
discharging, is that correct?
Even so, we have held in Insurance Company of
Yes sir, because they are the one who select the
North America v. Asian Terminals, Inc. that a request
slink and they know the kind of cargoes because
for, and the result of a bad order examination, done A
they inspected it before the discharge of said
within the reglementary period for furnishing notice
cargo.
of loss or damage to the carrier or its agent, serves the
Are you aware that the ship captain is consulted
purpose of a claim. A claim is required to be filed Q
in the selection of the cable sling?
within the reglementary period to afford the carrier or
Because the ship captain knows for a fact the
depositary reasonable opportunity and facilities to
equipment being utilized in the discharge of the
check the validity of the claims while facts are still
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 Report58 of the survey conducted by Phil. Navtech
time of survey and was accepted by the arrastre in Services, Inc. from April 20-21, 1995 reveals that
good order. Meanwhile, the Bad Order Cargo Receipt Case No. 03-245-42K/1 was damaged by ATI
bore a notation B.O. not yet t/over to ATI. On the stevedores due to overtightening of a cable sling hold
basis of these documents, petitioner ATI claims that during discharge from the vessels hatch to the pier.
the contents of Steel Case No. 03-245-42K/1 were Since the damage to the cargo was incurred during
damaged while in the custody of petitioner Westwind. the discharge of the shipment and while under the
supervision of the carrier, the latter is liable for the
We agree. damage caused to the cargo.

Common carriers, from the nature of their business This is not to say, however, that petitioner ATI is
and for reasons of public policy, are bound to observe without liability for the damaged cargo.
extraordinary diligence in the vigilance over the
goods transported by them. Subject to certain The functions of an arrastre operator involve the
exceptions enumerated under Article 173449 of the handling of cargo deposited on the wharf or between
Civil Code, common carriers are responsible for the the establishment of the consignee or shipper and the
loss, destruction, or deterioration of the goods. The ships tackle. Being the custodian of the goods
extraordinary responsibility of the common carrier discharged from a vessel, an arrastre operators duty
lasts from the time the goods are unconditionally is to take good care of the goods and to turn them
placed in the possession of, and received by the over to the party entitled to their possession.59
carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the Handling cargo is mainly the arrastre operators
consignee, or to the person who has a right to receive principal work so its drivers/operators or employees
them.50 should observe the standards and measures necessary
to prevent losses and damage to shipments under its
The court a quo, however, found both petitioners custody.60
Westwind and ATI, jointly and severally, liable for the
damage to the cargo. It observed that while the staff While it is true that an arrastre operator and a carrier
of ATI undertook the physical unloading of the may not be held solidarily liable at all times,61the
cargoes from the carrying vessel, Westwinds duty facts of these cases show that apart from ATIs
officer exercised full supervision and control over the stevedores being directly in charge of the physical
entire process. The appellate court affirmed the unloading of the cargo, its foreman picked the cable
solidary liability of Westwind and ATI, but only for sling that was used to hoist the packages for transfer
the damage to one Frame Axle Sub without Lower. to the dock. Moreover, the fact that 218 of the 219
packages were unloaded with the same sling
Upon a careful review of the records, the Court finds unharmed is telling of the inadequate care with which
no reason to deviate from the finding that petitioners ATIs stevedore handled and discharged Case No. 03-
Westwind and ATI are concurrently accountable for 245-42K/1.
the damage to the content of Steel Case No. 03-245-
42K/1. With respect to petitioners ATI and Westwinds
liability, we agree with the CA that the same should
Section 251 of the COGSA provides that under every be confined to the value of the one piece Frame Axle
contract of carriage of goods by the sea, the carrier in Sub without Lower.
relation to the loading, handling, stowage, carriage,
custody, care and discharge of such goods, shall be In the Bad Order Inspection Report62 prepared by
subject to the responsibilities and liabilities and Universal Motors, the latter referred to Case No. 03-
entitled to the rights and immunities set forth in the 245-42K/1 as the source of said Frame Axle Sub
Act. Section 3 (2)52 thereof then states that among the without Lower which suffered a deep dent on its
carriers responsibilities are to properly load, handle, buffle plate. Yet, it identified Case No. 03-245-51K
stow, carry, keep, care for and discharge the goods as the container which bore the six pieces Frame
carried.53 Assembly with Bush. Thus, in Philams Complaint, it
alleged that the entire shipment showed one (1) pc.
At the trial, Westwinds Operation Assistant, FRAME AXLE SUB W/O LWR from Case No. 03-
Menandro G. Ramirez, testified on the presence of a 245-42K/1 [was] completely deformed and
ship officer to supervise the unloading of the subject misaligned, and six (6) other pcs. of FRAME
cargoes. ASSEMBLY WITH BUSH from Case No. 03-245-
51K [were] likewise completely deformed and
misaligned.63 Philam later claimed in its Appellees
It is settled in maritime law jurisprudence that Brief that the six pieces of Frame Assembly with
cargoes while being unloaded generally remain under Bush were also inside the damaged Case No. 03-245-
the custody of the carrier.57 The Damage Survey 42K/1.
Page 7 of 44
insured with Philam against all risks under the marine
However, there is nothing in the records to show
conclusively that the six Frame Assembly with Bush Policy no. 708-8006717-4.
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 The carrying vessel arrived at the port of manila on
of chassis frame assembly with deformed body April 20, 1995, and when the shipment was unloaded
mounting bracket. However, it merely noted the same
as coming from two bundles with no identifying by the staff of ATI, it was found that the package
marks. marked as 03-245-42K/1 was in bad order. The Turn

Lastly, we agree with petitioner Westwind that the Over Survey of bad order cargoes dated April 21,
CA erred in imposing an interest rate of 12% on the 1995 identified two packages, labelled 03-245-42K/1
award of damages. Under Article 2209 of the Civil
and 03/237/7CK/2, as being dented and broken.
Code, when an obligation not constituting a loan or
forbearance of money is breached, an interest on the Thereafter, the cargoes were stored for temporary
amount of damages awarded may be imposed at the safekeeping inside CFS Warehouse in Pier No. 5.
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., On May 11, 1995, the shipment was withdrawn by
Inc.,65 the Court reduced the rate of interest on the
damages awarded to the carrier therein to 6% from R.F. Revilla Customs Brokerage, Inc., the authorized
the time of the filing of the complaint until the broker of Universal Motors, and delivered to the
finality of the decision.
latters warehouse in Mandaluyong City. Upon the
WHEREFORE, the Court AFFIRMS with request of Universal Motors, a bad order survey was
MODIFICATION the Decision dated October 15,
2007 and the Resolution dated January 11, 2008 of conducted on the cargoes and it was found that one
the Court of Appeals in CA-G.R. CV No. 69284 in Frame Axle Sub without LWR was deeply dented on
that the interest rate on the award of P190,684.48 is
the buffle plate while six Frame Assembly with Bush
reduced to 6% per annum from the date of
extrajudicial demand, until fully paid. were deformed and misaligned. Owing to the extent
of the damage to said cargoes, Universal Motors
With costs against the petitioners in G.R. No. 181163
and G.R. No. 181319, respectively. declared them a total loss.

SO ORDERED.
ASIAN TERMINALS, INC. vs. PHILAM On August 4, 1995, Universal Motors filed a formal
INSURANCE CO., INC claim for damages in the amount of P643,963.84
against Westwind, ATI and R.F. Revilla Customs
July 2, 2014 1 Comment
Brokerage, Inc. When Universal Motors demands
remained unheeded, it sought reparation from and
G.R. Nos. 181163, 181262, and 181319, July 24,
was compensated in the sum of P633,957.15 by
2013 (VILLARAMA, JR., J)
Philam. Accordingly, Universal Motors issued a
Subrogation Receipt dated November 15, 1995 in
FACTS:
favor of Philam.

On April 15, 1995, Nichimen Corporation shipped to


On January 18, 1996, Philam, as subrogee of
Universal Motors Corporation 219 packages
Universal Motors, filed a Complaint for damages
containing 120 units of brand new Nissan Pickup
against Westwind, ATI and R.F. Revilla Customs
Truck Double Cab 42 model, without engine, tires
Brokerage, Inc. before the Regional Trial Court of
and batteries, on board the vessel S/S Calayan Iris
Makati City. The trial court rendered judgment in
from Japan to Manila. The shipment, which had a
favour of Philam which ruling was affirmed by the
declared value of US$81,368 or P29,400,000, was
Court of Appeals modifying the amount to be paid by
Page 8 of 44
Westwind and ATI. 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
ISSUE: the mode that equity adopts to compel the ultimate
payment of a debt by one who, in justice, equity, and
Whether or not Philam may claim against Westwind good conscience, ought to pay
and ATI as a subrogee
G.R. No. 200289 November 25, 2013
WESTWIND SHIPPING CORPORATION,
HELD: Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and
YES. The Court holds that petitioner Philam has ASIAN TERMINALS INC., Respondents.
x-----------------------x
adequately established the basis of its claim against
G.R. No. 200314
petitioners ATI and Westwind. Philam, as insurer, was ORIENT FREIGHT INTERNATIONAL INC.,
subrogated to the rights of the consignee, Universal Petitioner,
vs.
Motors Corporation, pursuant to the Subrogation UCPB GENERAL INSURANCE CO., INC. and
receipt executed by the latter in favour of the former. ASIAN TERMINALS INC., Respondents.
DECISION
The right of subrogation accrues simply upon PERALTA, J.:
payment by the insurance company of the insurance These two consolidated cases challenge, by way of
petition for certiorari under Rule 45 of the 1997
claim. 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,
Petitioner Philams action finds support in Article which reversed and set aside the January 27, 2006
2207 of the Civil Code which provides that if the Decision3 of the Manila City Regional Trial Court
Branch (RTC) 30. The facts, as established by the
plaintiffs property has been insured, and he has
records, are as follows:
received indemnity from the insurance company for On August 23, 1993, Kinsho-Mataichi Corporation
the injury or loss arising out of the wrong or breach shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the
of contract complained of, the insurance company consignee, San Miguel Corporation (SMC). The
shall be subrogated to the rights of the insured against shipment, covered by Bill of Lading No. KBMA-
1074,4 was loaded and received clean on board M/V
the wrongdoer or the person who has violated the Golden Harvest Voyage No. 66, a vessel owned and
contract. operated by Westwind Shipping Corporation
(Westwind).
SMC insured the cargoes against all risks with UCPB
In Malayan Insurance Co., Inc. vs. Alberto, the Court General Insurance Co., Inc. (UCPB) for US Dollars:
One Hundred Eighty-Four Thousand Seven Hundred
explained the effect of payment by the insurer of the Ninety-Eight and Ninety-Seven Centavos
insurance claim in this wise: (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-
We have held that payment by the insurer to the Eight Centavos (P6,209,245.28).
insured operates as an equitable assignment to the The shipment arrived in Manila, Philippines on
August 31, 1993 and was discharged in the custody
insurer of all the remedies that the insured may have of the arrastre operator, Asian Terminals, Inc. (ATI),
against the third party whose negligence or wrongful formerly Marina Port Services, Inc.5 During the
unloading operation, however, six containers/skids
act caused the loss. The right of subrogation is not worth Philippine Pesos: One Hundred Seventeen
dependent upon, nor does it grow out of, any privity 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 January 27, 2006 rendered by the court a quo is
Services, Inc. (OTSI) in centering and shuttling the REVERSED AND SET ASIDE. Appellee Westwind
containers/skids. As a consequence, the local ship Shipping Corporation is hereby ordered to pay to the
agent of the vessel, Baliwag Shipping Agency, Inc., appellant UCPB General Insurance Co., Inc., the
issued two Bad Order Cargo Receipt dated September amount of One Hundred Seventeen Thousand and
1, 1993. Ninety-Three Pesos and Twelve Centavos
On September 7, 1993, Orient Freight International, (Php117,093.12), while Orient Freight International,
Inc. (OFII), the customs broker of SMC, withdrew Inc. is hereby ordered to pay to UCPB the sum of
from ATI the 197 containers/skids, including the six One Hundred Seventy-Five Thousand Six Hundred
in damaged condition, and delivered the same at Thirty-Nine Pesos and Sixty-Eight Centavos
SMCs warehouse in Calamba, Laguna through J.B. (Php175,639.68). Both sums shall bear interest at the
Limcaoco Trucking (JBL). It was discovered upon rate of six (6%) percent per annum, from the filing of
discharge that additional nine containers/skids valued the complaint on August 30, 1994 until the judgment
at Philippine Pesos: One Hundred Seventy-Five becomes final and executory. Thereafter, an interest
Thousand Six Hundred Thirty-Nine and Sixty-Eight rate of twelve (12%) percent per annum shall be
Centavos (P175,639.68) were also damaged due to imposed from the time this decision becomes final
the forklift operations; thus, making the total number and executory until full payment of said amounts.
of 15 containers/skids in bad order. SO ORDERED.10
Almost a year after, on August 15, 1994, SMC filed a While the CA sustained the RTC judgment that the
claim against UCPB, Westwind, ATI, and OFII to claim against ATI already prescribed, it rendered a
recover the amount corresponding to the damaged 15 contrary view as regards the liability of Westwind
containers/skids. When UCPB paid the total sum of and OFII. For the appellate court, Westwind, not ATI,
Philippine Pesos: Two Hundred Ninety-Two is responsible for the six damaged containers/skids at
Thousand Seven Hundred Thirty-Two and Eighty the time of its unloading. In its rationale, which
Centavos (P292,732.80), SMC signed the subrogation substantially followed Philippines First Insurance
receipt. Thereafter, in the exercise of its right of Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it
subrogation, UCPB instituted on August 30, 1994 a concluded that the common carrier, not the arrastre
complaint for damages against Westwind, ATI, and operator, is responsible during the unloading of the
OFII.6 cargoes from the vessel and that it is not relieved
After trial, the RTC dismissed UCPBs complaint and from liability and is still bound to exercise
the counterclaims of Westwind, ATI, and OFII. It extraordinary diligence at the time in order to see to it
ruled that the right, if any, against ATI already that the cargoes under its possession remain in good
prescribed based on the stipulation in the 16 Cargo order and condition. The CA also considered that
Gate Passes issued, as well as the doctrine laid down OFII is liable for the additional nine damaged
in International Container Terminal Services, Inc. v. containers/skids, agreeing with UCPBs contention
Prudential Guarantee & Assurance Co. Inc. 7 that a that OFII is a common carrier bound to observe
claim for reimbursement for damaged goods must be extraordinary diligence and is presumed to be at fault
filed within 15 days from the date of consignees or have acted negligently for such damage. Noting
knowledge. With respect to Westwind, even if the the testimony of OFIIs own witness that the delivery
action against it is not yet barred by prescription, of the shipment to the consignee is part of OFIIs job
conformably with Section 3 (6) of the Carriage of as a cargo forwarder, the appellate court ruled that
Goods by Sea Act (COGSA) and Our rulings in E.E. Article 1732 of the New Civil Code (NCC) does not
Elser, Inc., et al. v. Court of Appeals, et al. 8 and distinguish between one whose principal business
Belgian Overseas Chartering and Shipping N.V. v. activity is the carrying of persons or goods or both
Phil. First Insurance Co., Inc.,9 the court a quo still and one who does so as an ancillary activity. The
opined that Westwind is not liable, since the appellate court further ruled that OFII cannot excuse
discharging of the cargoes were done by ATI itself from liability by insisting that JBL undertook
personnel using forklifts and that there was no the delivery of the cargoes to SMCs warehouse. It
allegation that it (Westwind) had a hand in the opined that the delivery receipts signed by the
conduct of the stevedoring operations. Finally, the inspector of SMC showed that the containers/skids
trial court likewise absolved OFII from any liability, were received from OFII, not JBL. At the most, the
reasoning that it never undertook the operation of the CA said, JBL was engaged by OFII to supply the
forklifts which caused the dents and punctures, and trucks necessary to deliver the shipment, under its
that it merely facilitated the release and delivery of supervision, to SMC.
the shipment as the customs broker and Only Westwind and OFII filed their respective
representative of SMC. motions for reconsideration, which the CA denied;
On appeal by UCPB, the CA reversed and set aside hence, they elevated the case before Us via petitions
the trial court. The fallo of its September 13, 2011 docketed as G.R. Nos. 200289 and 200314,
Decision directed: respectively.
WHEREFORE, premises considered, the instant Westwind argues that it no longer had actual or
appeal is hereby GRANTED. The Decision dated constructive custody of the containers/skids at the
Page 10 of 44
time they were damaged by ATIs forklift operator them.
during the unloading operations. In accordance with For marine vessels, Article 619 of the Code of
the stipulation of the bill of lading, which allegedly Commerce provides that the ship captain is liable for
conforms to Article 1736 of the NCC, it contends that the cargo from the time it is turned over to him at the
its responsibility already ceased from the moment the dock or afloat alongside the vessel at the port of
cargoes were delivered to ATI, which is reckoned loading, until he delivers it on the shore or on the
from the moment the goods were taken into the discharging wharf at the port of unloading, unless
latters custody. Westwind adds that ATI, which is a agreed otherwise. In Standard Oil Co. of New York v.
completely independent entity that had the right to Lopez Castelo, the Court interpreted the ship
receive the goods as exclusive operator of captains liability as ultimately that of the shipowner
stevedoring and arrastre functions in South Harbor, by regarding the captain as the representative of the
Manila, had full control over its employees and shipowner.
stevedores as well as the manner and procedure of the Lastly, Section 2 of the COGSA provides that under
discharging operations. every contract of carriage of goods by sea, the carrier
As for OFII, it maintains that it is not a common in relation to the loading, handling, stowage, carriage,
carrier, but only a customs broker whose participation custody, care, and discharge of such goods, shall be
is limited to facilitating withdrawal of the shipment in subject to the responsibilities and liabilities and
the custody of ATI by overseeing and documenting entitled to the rights and immunities set forth in the
the turnover and counterchecking if the quantity of Act. Section 3 (2) thereof then states that among the
the shipments were in tally with the shipping carriers responsibilities are to properly and carefully
documents at hand, but without participating in the load, handle, stow, carry, keep, care for, and
physical withdrawal and loading of the shipments discharge the goods carried.
into the delivery trucks of JBL. Assuming that it is a xxxx
common carrier, OFII insists that there is no need to On the other hand, the functions of an arrastre
rely on the presumption of the law that, as a operator involve the handling of cargo deposited on
common carrier, it is presumed to have been at fault the wharf or between the establishment of the
or have acted negligently in case of damaged goods consignee or shipper and the ship's tackle. Being the
considering the undisputed fact that the damages to custodian of the goods discharged from a vessel, an
the containers/skids were caused by the forklift arrastre operator's duty is to take good care of the
blades, and that there is no evidence presented to goods and to turn them over to the party entitled to
show that OFII and Westwind were the their possession.
owners/operators of the forklifts. It asserts that the Handling cargo is mainly the arrastre operator's
loading to the trucks were made by way of forklifts principal work so its drivers/operators or employees
owned and operated by ATI and the unloading from should observe the standards and measures necessary
the trucks at the SMC warehouse was done by way of to prevent losses and damage to shipments under its
forklifts owned and operated by SMC employees. custody.
Lastly, OFII avers that neither the undertaking to In Firemans Fund Insurance Co. v. Metro Port
deliver nor the acknowledgment by the consignee of Service, Inc., the Court explained the relationship and
the fact of delivery makes a person or entity a responsibility of an arrastre operator to a consignee of
common carrier, since delivery alone is not the a cargo, to quote:
controlling factor in order to be considered as such. The legal relationship between the consignee and the
Both petitions lack merit. arrastre operator is akin to that of a depositor and
The case of Philippines First Insurance Co., Inc. v. warehouseman. The relationship between the
Wallem Phils. Shipping, Inc.12 applies, as it settled the consignee and the common carrier is similar to that of
query on which between a common carrier and an the consignee and the arrastre operator. Since it is the
arrastre operator should be responsible for damage or duty of the ARRASTRE to take good care of the
loss incurred by the shipment during its unloading. goods that are in its custody and to deliver them in
We elucidated at length: good condition to the consignee, such responsibility
Common carriers, from the nature of their business also devolves upon the CARRIER. Both the
and for reasons of public policy, are bound to observe ARRASTRE and the CARRIER are therefore
extraordinary diligence in the vigilance over the charged with and obligated to deliver the goods in
goods transported by them. Subject to certain good condition to the consignee. (Emphasis supplied)
exceptions enumerated under Article 1734 of the (Citations omitted)
Civil Code, common carriers are responsible for the The liability of the arrastre operator was reiterated in
loss, destruction, or deterioration of the goods. The Eastern Shipping Lines, Inc. v. Court of Appeals with
extraordinary responsibility of the common carrier the clarification that the arrastre operator and the
lasts from the time the goods are unconditionally carrier are not always and necessarily solidarily liable
placed in the possession of, and received by the as the facts of a case may vary the rule.
carrier for transportation until the same are delivered, Thus, in this case, the appellate court is correct
actually or constructively, by the carrier to the insofar as it ruled that an arrastre operator and a
consignee, or to the person who has a right to receive carrier may not be held solidarily liable at all times.
Page 11 of 44
But the precise question is which entity had custody to Caltex at the time it entered the shore tank holds
of the shipment during its unloading from the vessel? no water. It had been settled that the subject cargo
The aforementioned Section 3 (2) of the COGSA was still in the custody of Delsan because the
states that among the carriers responsibilities are to discharging thereof has not yet been finished when
properly and carefully load, care for and discharge the backflow occurred. Since the discharging of the
the goods carried. The bill of lading covering the cargo into the depot has not yet been completed at the
subject shipment likewise stipulates that the carriers time of the spillage when the backflow occurred,
liability for loss or damage to the goods ceases after there is no reason to imply that there was actual
its discharge from the vessel. Article 619 of the Code delivery of the cargo to the consignee. Delsan is
of Commerce holds a ship captain liable for the cargo straining the issue by insisting that when the diesel
from the time it is turned over to him until its oil entered into the tank of Caltex on shore, there was
delivery at the port of unloading. legally, at that moment, a complete delivery thereof
In a case decided by a U.S. Circuit Court, Nichimen to Caltex. To be sure, the extraordinary responsibility
Company v. M/V Farland, it was ruled that like the of common carrier lasts from the time the goods are
duty of seaworthiness, the duty of care of the cargo is unconditionally placed in the possession of, and
non-delegable, and the carrier is accordingly received by, the carrier for transportation until the
responsible for the acts of the master, the crew, the same are delivered, actually or constructively, by the
stevedore, and his other agents. It has also been held carrier to the consignee, or to a person who has the
that it is ordinarily the duty of the master of a vessel right to receive them. The discharging of oil products
to unload the cargo and place it in readiness for to Caltex Bulk Depot has not yet been finished,
delivery to the consignee, and there is an implied Delsan still has the duty to guard and to preserve the
obligation that this shall be accomplished with sound cargo. The carrier still has in it the responsibility to
machinery, competent hands, and in such manner that guard and preserve the goods, a duty incident to its
no unnecessary injury shall be done thereto. And the having the goods transported.
fact that a consignee is required to furnish persons to To recapitulate, common carriers, from the nature of
assist in unloading a shipment may not relieve the their business and for reasons of public policy, are
carrier of its duty as to such unloading. bound to observe extraordinary diligence in vigilance
xxxx over the goods and for the safety of the passengers
It is settled in maritime law jurisprudence that transported by them, according to all the
cargoes while being unloaded generally remain under circumstances of each case. The mere proof of
the custody of the carrier x x x.13 delivery of goods in good order to the carrier, and
In Regional Container Lines (RCL) of Singapore v. their arrival in the place of destination in bad order,
The Netherlands Insurance Co. (Philippines), Inc.14 make out a prima facie case against the carrier, so
and Asian Terminals, Inc. v. Philam Insurance Co., that if no explanation is given as to how the injury
Inc.,15 the Court echoed the doctrine that cargoes, occurred, the carrier must be held responsible. It is
while being unloaded, generally remain under the incumbent upon the carrier to prove that the loss was
custody of the carrier. We cannot agree with due to accident or some other circumstances
Westwinds disputation that "the carrier in Wallem inconsistent with its liability.18
clearly exercised supervision during the discharge of The contention of OFII is likewise untenable. A
the shipment and that is why it was faulted and held customs broker has been regarded as a common
liable for the damage incurred by the shipment during carrier because transportation of goods is an integral
such time." What Westwind failed to realize is that part of its business.19 In Schmitz Transport &
the extraordinary responsibility of the common Brokerage Corporation v. Transport Venture, Inc.,20
carrier lasts until the time the goods are actually or the Court already reiterated: It is settled that under a
constructively delivered by the carrier to the given set of facts, a customs broker may be regarded
consignee or to the person who has a right to receive as a common carrier.1wphi1 Thus, this Court, in
them. There is actual delivery in contracts for the A.F. Sanchez Brokerage, Inc. v. The Honorable Court
transport of goods when possession has been turned of Appeals held:
over to the consignee or to his duly authorized agent The appellate court did not err in finding petitioner, a
and a reasonable time is given him to remove the customs broker, to be also a common carrier, as
goods.16 In this case, since the discharging of the defined under Article 1732 of the Civil Code, to wit,
containers/skids, which were covered by only one bill Art. 1732. Common carriers are persons,
of lading, had not yet been completed at the time the corporations, firms or associations engaged in the
damage occurred, there is no reason to imply that business of carrying or transporting passengers or
there was already delivery, actual or constructive, of goods or both, by land, water, or air, for
the cargoes to ATI. Indeed, the earlier case of Delsan compensation, offering their services to the public.
Transport Lines, Inc. v. American Home Assurance xxxx
Corp.17serves as a useful guide, thus: Article 1732 does not distinguish between one whose
Delsans argument that it should not be held liable for principal business activity is the carrying of goods
the loss of diesel oil due to backflow because the and one who does such carrying only as an ancillary
same had already been actually and legally delivered activity. The contention, therefore, of petitioner that it
Page 12 of 44
is not a common carrier but a customs broker whose 666 SCRA 226
principal function is to prepare the correct customs
declaration and proper shipping documents as Ponente: Peralta, J.
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., DOCTRINE:
this Court held that as the transportation of goods is
an integral part of a customs broker, the customs The term carriage of goods in the Carriage of
broker is also a common carrier. For to declare Goods by Sea Act (COGSA) covers the period from
otherwise "would be to deprive those with whom [it] the time the goods are loaded to the vessel to the time
contracts the protection which the law affords them they are discharged therefrom.
notwithstanding the fact that the obligation to carry
goods for [its] customers, is part and parcel of The carrier and the ship shall be discharged from
petitioners business."21 all liability in respect of loss or damage unless suit is
That OFII is a common carrier is buttressed by the brought within one year after delivery of the goods or
testimony of its own witness, Mr. Loveric the date when the goods should have been delivered.
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 FACTS:
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 On November 9, 2002, Macro-Lito Corporation,
corporation holds itself to the public for the purpose through M/V DIMI P vessel, 185 packages of
of transporting goods as a business, it is already electrolytic tin free steel, complete and in good
considered a common carrier regardless of whether it condition.
owns the vehicle to be used or has to actually hire The goods are covered by a bill of lading, had a
one. declared value of $169,850.35 and was insured with
As a common carrier, OFII is mandated to observe, the Insuracne Company of North America
under Article 1733 of the Civil Code,23 extraordinary (Petitioner) against all risk.
diligence in the vigilance over the goods24 it The carrying vessel arrived at the port of Manila
transports according to the peculiar circumstances of on November 19, 2002, and when the shipment was
each case. In the event that the goods are lost, discharged therefrom, it was noted that 7 of the
destroyed or deteriorated, it is presumed to have been packages were damaged and in bad condition.
at fault or to have acted negligently unless it proves On Novermber 21, 2002, the shipment was then
that it observed extraordinary diligence.25 In the case turned over to the custody of Asian Terminals. Inc.
at bar it was established that except for the six (Respondent) for storage and safekeeping pending its
containers/skids already damaged OFII received the withrawal by the consignee.
cargoes from ATI in good order and condition; and On November 29, 2002, prior to the withrawal of
that upon its delivery to SMC additional nine the shipment, a joint inspection of the said cargo was
containers/skids were found to be in bad order as conducted. The examination report showed that an
noted in the Delivery Receipts issued by OFII and as additional 5 packages were found to be damaged and
indicated in the Report of Cares Marine Cargo in bad order.
Surveyors. Instead of merely excusing itself from On January 6, 2003, the consignee, San Miguel
liability by putting the blame to ATI and SMC it is Corporation filed separate claims against both the
incumbent upon OFII to prove that it actively took Petioner and the Respondent for the damage caused
care of the goods by exercising extraordinary to the packages.
diligence in the carriage thereof. It failed to do so. The Petitioner then paid San Miguel Corporation
Hence its presumed negligence under Article 1735 of the amound of PhP 431,592.14 which is based on a
the Civil Code remains unrebutted. report of its independent adjuster.
WHEREFORE, premises considered the petitions of The Petitioner then formally demanded reparation
Westwind and OFII in G.R. Nos. 200289 and 200314 against the Respondent for the amount it paid San
respectively are DENIED. The September 13 2011 Miguel Corporation.
Decision and January 19 2012 Resolution of the For the failure of the Respondent to satisfy the
Court of Appeals in CA-G.R. CV No. 86752 which demand of the Petitioner, the Petitioner filed for an
reversed and set aside the January 27 2006 Decision action for damages with the RTC of Makati.
of the Manila City Regional Trial Court Branch 30 The trial court found that indeed, the shipment
are AFFIRMED. suffered additional damage under the custody of the
SO ORDERED. 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 packages that were damaged while in the custody of
between the Philippine Ports Authority and the the respondent was not fortright in its claim, as it
Respondent. Under the contract, the Respondents knew that the damages it sought, based on the report
liability for damage to cargoes in its custody is of its adjuster covered 9 packages. Based on the
limited to PhP5,000 for each package, unless the report, only four of the nine packages were damaged
value of the cargo shipment is otherwise specified or in the custody of the Respondent. The Petitioner can
manifested in writing together with the declared Bill be granted only the amount of damages that is due to
of Lading. The trial Court found that the shipper and it.
consignee with the said requirements.
However, the trial court dismissed the complaint THIRD DIVISION
on the ground that the Petitioners claim was barred
by the statute of limitations. It held that the Carriage x------------------------------------
of Goods by Sea Act (COGSA), embodied in -------------x
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 DECISION
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 PERALTA, J.:
petition for review on certiorari assailing the trial
courts order of dismissal.
This is a petition for review on certiorari[1] of
the Decision of the Regional Trial Court (RTC) of
ISSUE/S: Makati City, Branch 138 (trial court) in Civil Case
No. 05-809 and its Order dated December 4, 2007 on
1.) Whether or not the trial court committed an the ground that the trial court committed reversible
error in dismissing the complaint of the petitioner error of law.
based on the one-year prescriptive period for filing a
suit under the COGSA to an arrastre operator? YES.
The trial court dismissed petitioners
complaint for actual damages on the ground of
2.) Whether or not the Petitioner is entitled to prescription under the Carriage of Goods by Sea Act
recover actual damages against the Respondent?
(COGSA).
YES, but only PhP164,428.76
The facts are as follows:

HELD: On November 9, 2002, Macro-Lite Korea


Corporation shipped to San Miguel Corporation,
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 five (185) packages (231,000 sheets) of electrolytic
when they are discharged from the ship. Thus, it can tin free steel, complete and in good order condition
be inferred that the period of time when the goods
and covered by Bill of Lading No.
have been discharged from the ship and given to the [2]
custody of the arrastre operator is not covered by the POBUPOHMAN20638. The shipment had a
COGSA. declared value of US$169,850.35[3] and was insured
with petitioner Insurance Company of North America
The Petitioner, who filed the present action for the against all risks under Marine Policy No. MOPA-
5 INSURANCE G.R. No. 180784 06310.[4]
COMPANY OF
NORTH Present: The carrying vessel arrived at the port of
AMERICA,
Petitioner, CARPIO, * J., Manila on November 19, 2002, and when the
PERALTA, Acting shipment was discharged therefrom, it was noted that
Chairperson, seven (7) packages thereof were damaged and in bad
- versus - ABAD,
order.[5] The shipment was then turned over to the
PEREZ, ** and
MENDOZA, JJ. custody of respondent Asian Terminals, Inc. (ATI) on
November 21, 2002 for storage and safekeeping
Promulgated: pending its withdrawal by the consignee's authorized
ASIAN February 15, 2012 Page 14 of 44
TERMINALS,
INC.,
Respondent.
customs broker, R.V. Marzan Brokerage Corp. additional damages. The Request for
Bad Order Survey No. 56422 shows
(Marzan). that prior to the turn over of the
shipment from the custody of ATI to
On November 22, 23 and 29, 2002, the the consignee, aside from the seven
(7) packages which were already
subject shipment was withdrawn by Marzan from the
damaged upon arrival at the port of
custody of respondent. On November 29, 2002, prior Manila, five (5) more packages were
to the last withdrawal of the shipment, a joint found with "dent, cut and crumple"
while in the custody of ATI. This
inspection of the said cargo was conducted per the
document was issued by ATI and was
Request for Bad Order Survey[6] dated November 29, jointly executed by the representatives
2002, and the examination report, which was written of ATI, consignee and customs, and
on the same request, showed that an additional five the Shed Supervisor. Thus, ATI is now
estopped from claiming that there was
(5) packages were found to be damaged and in bad no additional damage suffered by the
order. shipment. It is, therefore, only logical
to conclude that the damage was
caused solely by the negligence of
On January 6, 2003, the consignee, San defendant ATI. This evidence of the
Miguel Corporation, filed separate claims[7] against plaintiff was refuted by the defendant
respondent and petitioner for the damage to 11,200 by merely alleging that "the damage to
the 5 Tin Plates is only in its external
sheets of electrolytic tin free steel.
packaging. However, the fact remains
that the consignee has rejected the
Petitioner engaged the services of an same as total loss for not being
independent adjuster/surveyor, BA McLarens Phils., suitable for their intended purpose. In
addition, the photographs presented by
Inc., to conduct an investigation and evaluation on the plaintiff show that the shipment
the claim and to prepare the necessary report.[8] BA also suffered severe dents and some
McLarens Phils., Inc. submitted to petitioner an packages were even critically
[11]
crumpled.
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) As to the extent of liability, ATI invoked the
damaged skids, nine (9) of them were rejected and Contract for Cargo Handling Services executed
three (3) skids were accepted by the consignees between the Philippine Ports Authority and Marina
representative as good order. BA McLarens Phils., Ports Services, Inc. (now Asian Terminals, Inc.).
Inc. evaluated the total cost of damage to the nine (9) Under the said contract, ATI's liability for damage to
rejected skids (11,200 sheets of electrolytic tin free cargoes in its custody is limited to P5,000.00 for
steel) to be P431,592.14. each package, unless the value of the cargo shipment
is otherwise specified or manifested or
The petitioner, as insurer of the said cargo, communicated in writing, together with the declared
paid the consignee the amount of P431,592.14 for the Bill of Lading value and supported by a certified
damage caused to the shipment, as evidenced by the packing list to the contractor by the interested party
Subrogation Receipt dated January 8, 2004. or parties before the discharge or lading unto vessel
Thereafter, petitioner, formally demanded reparation of the goods.
against respondent. As respondent failed to satisfy its
demand, petitioner filed an action for damages with The trial court found that there was
the RTC of Makati City. compliance by the shipper and consignee with the
above requirement. The Bill of Lading, together with
The trial court found, thus: the corresponding invoice and packing list, was
shown to ATI prior to the discharge of the goods
The Court finds that the
subject shipment indeed suffered from the vessel. Since the shipment was released

Page 15 of 44
from the custody of ATI, the trial court found that the of McLarens as early as January 2003.
The assured/consignee had only until
same was declared for tax purposes as well as for the November of 2003 within which to
assessment of arrastre charges and other fees. For the file a suit against the defendant.
purpose, the presentation of the invoice, packing list However, the instant case was filed
only on September 7, 2005 or almost
and other shipping documents to ATI for the proper
three (3) years from the date the
assessment of the arrastre charges and other fees subject shipment was delivered to the
satisfied the condition of declaration of the actual consignee. The plaintiff, as insurer of
the shipment which has paid the claim
invoices of the value of the goods to overcome the
of the insured, is subrogated to all the
limitation of liability of the arrastre operator.[12] rights of the said insured in relation to
the reimbursement of such claim. As
Further, the trial court found that there was a such, the plaintiff cannot acquire
better rights than that of the insured.
valid subrogation between the petitioner and the Thus, the plaintiff has no one but itself
assured/consignee San Miguel Corporation. The to blame for having acted
respondent admitted the existence of Global Marine lackadaisically on San Miguel's claim.
Policy No. MOPA-06310 with San Miguel WHEREFORE, the complaint and
Corporation and Marine Risk Note No. 3445,[13] counterclaim are hereby DISMISSED.
[16]
which showed that the cargo was indeed insured with
petitioner. The trial court held that petitioners claim
is compensable because the Subrogation Receipt,16
Petitioners motion for reconsideration was
which was admitted as to its existence by respondent,
denied by the trial court in the Order[17] dated
was sufficient to establish not only the relationship of
December 4, 2007.
the insurer and the assured, but also the amount paid
to settle the insurance claim.[14]
Petitioner filed this petition under Rule 45 of
the Rules of Court directly before this Court, alleging
However, the trial court dismissed the
that it is raising a pure question of law:
complaint on the ground that the petitioners claim
was already barred by the statute of limitations. It
held that COGSA, embodied in Commonwealth Act THE TRIAL COURT
COMMITTED A PURE AND
(CA) No. 65, applies to this case, since the goods SERIOUS ERROR OF LAW IN
were shipped from a foreign port to the Philippines. APPLYING THE ONE-YEAR
The trial court stated that under the said law, PRESCRIPTIVE PERIOD FOR
FILING A SUIT UNDER THE
particularly paragraph 4, Section 3 (6)[15] thereof, the CARRIAGE OF GOODS BY SEA
shipper has the right to bring a suit within one year ACT (COGSA) TO AN ARRASTRE
after the delivery of the goods or the date when the OPERATOR.[18]
goods should have been delivered, in respect of loss
or damage thereto.
Petitioner states that while it is in full accord
with the trial court in finding respondent liable for the
The trial court held:
damaged shipment, it submits that the trial courts
dismissal of the complaint on the ground of
In the case at bar, the records prescription under the COGSA is legally erroneous. It
show that the shipment was delivered
to the consignee on 22, 23 and 29 of contends that the one-year limitation period for
November 2002. The plaintiff took bringing a suit in court under the COGSA is not
almost a year to approve and pay the applicable to this case, because the prescriptive
claim of its assured, San Miguel,
despite the fact that it had initially period applies only to the carrier and the ship. It
received the latter's claim as well as argues that respondent, which is engaged in
the inspection report and survey report warehousing, arrastre and stevedoring business, is not
Page 16 of 44
a carrier as defined by the COGSA, because it is not determining the true nature and extent
of the distinction is sometimes
engaged in the business of transportation of goods by problematic. For example, it is
sea in international trade as a common carrier. incorrect to presume that all cases
Petitioner asserts that since the complaint was filed where the facts are not in dispute
automatically involve purely questions
against respondent arrastre operator only, without
of law.
impleading the carrier, the prescriptive period under
the COGSA is not applicable to this case. There is a question of law if the issue
raised is capable of being resolved
without need of reviewing the
Moreover, petitioner contends that the term probative value of the evidence. The
carriage of goods in the COGSA covers the period resolution of the issue must rest solely
from the time the goods are loaded to the vessel to on what the law provides on the given
set of circumstances. Once it is clear
the time they are discharged therefrom. It points out that the issue invites a review of the
that it sued respondent only for the additional five (5) evidence presented, the question posed
packages of the subject shipment that were found is one of fact. If the query requires a re-
evaluation of the credibility of
damaged while in respondents custody, long after the witnesses, or the existence or relevance
shipment was discharged from the vessel. The said of surrounding circumstances and their
damage was confirmed by the trial court and proved relation to each other, the issue in that
query is factual. x x x[21]
by the Request for Bad Order Survey No. 56422.[19]

Petitioner prays that the decision of the trial In this case, although petitioner alleged that it
court be reversed and set aside and a new judgment is merely raising a question of law, that is, whether or
be promulgated granting its prayer for actual not the prescriptive period under the COGSA applies
damages. to an action for damages against respondent arrastre
operator, yet petitioner prays for the reversal of the
The main issues are: (1) whether or not the decision of the trial court and that it be granted the
one-year prescriptive period for filing a suit under the relief sought, which is the award of actual damages in
COGSA applies to this action for damages against the amount of P431,592.14. For a question to be one
respondent arrastre operator; and (2) whether or not of law, it must not involve an examination of the
petitioner is entitled to recover actual damages in the probative value of the evidence presented by the
amount of P431,592.14 from respondent. litigants or any of them.[22] However, to resolve the
issue of whether or not petitioner is entitled to
To reiterate, petitioner came straight to this recover actual damages from respondent requires the
Court to appeal from the decision of the trial court Court to evaluate the evidence on record; hence,
under Rule 45 of the Rules of Court on the ground petitioner is also raising a question of fact.
that it is raising only a question of law.

Under Section 1, Rule 45, providing for


Microsoft Corporation v. Maxicorp, Inc.[20]
appeals by certiorari before the Supreme Court, it is
explains the difference between questions of law and
clearly enunciated that only questions of law may be
questions of fact, thus: set forth.[23] The Court may resolve questions of fact
only when the case falls under the following
The distinction between
questions of law and questions of fact exceptions:
is settled. A question of law exists
when the doubt or difference centers on
what the law is on a certain state of
(1) when the findings are grounded
facts. A question of fact exists if the
entirely on speculation, surmises, or
doubt centers on the truth or falsity of
conjectures; (2) when the inference
the alleged facts. Though this
made is manifestly mistaken, absurd, or
delineation seems simple,
Page 17 of 44
impossible; (3) when there is grave Section 1, Title I of CA No. 65 defines the
abuse of discretion; (4) when the relevant terms in Carriage of Goods by Sea, thus:
judgment is based on a
misapprehension of facts; (5) when
the findings of fact are conflicting; (6) Section 1. When used in this Act -
when in making its findings the Court
of Appeals went beyond the issues of (a) The term "carrier" includes
the case, or its findings are contrary to the owner or the charterer who enters
the admissions of both the appellant into a contract of carriage with a
and the appellee; (7) when the findings shipper.
are contrary to those of the trial court; (b) The term "contract of
(8) when the findings are conclusions carriage" applies only to contracts of
without citation of specific evidence on carriage covered by a bill of lading or
which they are based; (9) when the any similar document of title, insofar as
facts set forth in the petition as well as such document relates to the carriage of
in the petitioner's main and reply briefs goods by sea, including any bill of
are not disputed by the respondent; and lading or any similar document as
(10) when the findings of fact are aforesaid issued under or pursuant to a
premised on the supposed absence of charter party from the moment at which
evidence and contradicted by the such bill of lading or similar document
evidence on record.[24] of title regulates the relations between a
carrier and a holder of the same.
(c) The term "goods" includes
In this case, the fourth exception cited above goods, wares, merchandise, and articles
applies, as the trial court rendered judgment based on of every kind whatsoever, except live
animals and cargo which by the
a misapprehension of facts.
contract of carriage is stated as being
carried on deck and is so carried.
We first resolve the issue on whether or not (d) The term "ship" means any
the one-year prescriptive period for filing a suit under vessel used for the carriage of goods by
the COGSA applies to respondent arrastre operator. sea.
(e) The term "carriage of
goods" covers the period from the
The Carriage of Goods by Sea Act (COGSA), time when the goods are loaded to
Public Act No. 521 of the 74th US Congress, was the time when they are discharged
accepted to be made applicable to all contracts for the from the ship.[25]
carriage of goods by sea to and from Philippine ports
in foreign trade by virtue of CA No. 65. It is noted that the term carriage of goods
covers the period from the time when the goods are
Section 1 of CA No. 65 states: loaded to the time when they are discharged from the
ship; thus, it can be inferred that the period of time
Section 1. That the provisions when the goods have been discharged from the ship
of Public Act Numbered Five hundred and given to the custody of the arrastre operator is not
and twenty-one of the Seventy-fourth covered by the COGSA.
Congress of the United States,
approved on April sixteenth, nineteen
The prescriptive period for filing an action for
hundred and thirty-six, be accepted, as
it is hereby accepted to be made the loss or damage of the goods under the COGSA is
applicable to all contracts for the found in paragraph (6), Section 3, thus:
carriage of goods by sea to and from
Philippine ports in foreign trade: 6) Unless notice of loss or
Provided, That nothing in the Act shall damage and the general nature of such
be construed as repealing any existing loss or damage be given in writing to
provision of the Code of Commerce the carrier or his agent at the port of
which is now in force, or as limiting discharge before or at the time of the
its application. 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 merchandise in all work undertaken by
of the goods as described in the bill of it hereunder, diligently and in a
lading. If the loss or damage is not skillful, workman-like and efficient
apparent, the notice must be given manner. The CONTRACTOR shall
within three days of the delivery. be solely responsible as an
independent contractor, and hereby
agrees to accept liability and to pay
Said notice of loss or damage to the shipping company,
maybe endorsed upon the receipt for consignees, consignors or other
the goods given by the person taking interested party or parties for the
delivery thereof. loss, damage or non-delivery of
cargoes in its custody and control to
The notice in writing need not the extent of the actual invoice value
be given if the state of the goods has at of each package which in no case
the time of their receipt been the shall be more than FIVE
subject of joint survey or inspection. THOUSAND PESOS (P5,000.00)
each, unless the value of the cargo
In any event the carrier and shipment is otherwise specified or
the ship shall be discharged from all manifested or communicated in
liability in respect of loss or damage writing together with the declared
unless suit is brought within one Bill of Lading value and supported
year after delivery of the goods or by a certified packing list to the
the date when the goods should have CONTRACTOR by the interested
been delivered: Provided, That if a party or parties before the discharge
notice of loss or damage, either or loading unto vessel of the goods.
apparent or concealed, is not given as This amount of Five Thousand Pesos
provided for in this section, that fact (P5,000.00) per package may be
shall not affect or prejudice the right reviewed and adjusted by the
of the shipper to bring suit within one AUTHORITY from time to time. The
year after the delivery of the goods or CONTRACTOR shall not be
the date when the goods should have responsible for the condition or the
been delivered.[26] contents of any package received, nor
for the weight nor for any loss, injury
or damage to the said cargo before or
From the provision above, the carrier and the while the goods are being received or
ship may put up the defense of prescription if the remains in the piers, sheds,
action for damages is not brought within one year warehouses or facility, if the loss,
injury or damage is caused by force
after the delivery of the goods or the date when the
majeure or other causes beyond the
goods should have been delivered. It has been held CONTRACTOR's control or capacity
that not only the shipper, but also the consignee or to prevent or remedy; PROVIDED,
legal holder of the bill may invoke the prescriptive that a formal claim together with
period.[27] However, the COGSA does not mention the necessary copies of Bill of
Lading, Invoice, Certified Packing
that an arrastre operator may invoke the prescriptive
List and Computation arrived at
period of one year; hence, it does not cover the covering the loss, injury or damage
arrastre operator. or non-delivery of such goods shall
have been filed with the
Respondent arrastre operators responsibility CONTRACTOR within fifteen (15)
and liability for losses and damages are set forth in days from day of issuance by the
CONTRACTOR of a certificate of
Section 7.01 of the Contract for Cargo Handling non-delivery; PROVIDED, however,
Services executed between the Philippine Ports that if said CONTRACTOR fails to
Authority and Marina Ports Services, Inc. (now issue such certification within
fifteen (15) days from receipt of a
Asian Terminals, Inc.), thus: written request by the
shipper/consignee or his duly
Section 7.01 Responsibility authorized representative or any
and Liability for Losses and Damages; interested party, said certification
Exceptions - The CONTRACTOR shall be deemed to have been issued,
shall, at its own expense, handle all and thereafter, the fifteen (15) day
Page 19 of 44
period within which to file the claim To elaborate, New Zealand Insurance
commences; PROVIDED, finally, Company, Ltd. v. Navarro held:
that the request for certification of
loss shall be made within thirty (30) We took special note of the
days from the date of delivery of the above pronouncement six (6) years
package to the consignee.[28] later in Firemans Fund Insurance
Co. v. Manila Port Service Co., et al.
There, fifteen (15) cases of nylon
Based on the Contract above, the consignee merchandise had been discharged
has a period of thirty (30) days from the date of from the carrying vessel and received
delivery of the package to the consignee within which by defendant Manila Port Service Co.,
to request a certificate of loss from the arrastre the arrastre operator, on 7 July 1961.
Out of those fifteen (15) cases,
operator. From the date of the request for a certificate however, only twelve (12) had been
of loss, the arrastre operator has a period of fifteen delivered to the consignee in good
(15) days within which to issue a certificate of non- condition. Consequently, on 20 July
delivery/loss either actually or constructively. 1961, the consignee's broker requested
Moreover, from the date of issuance of a certificate of a bad order examination of the
shipment, which was later certified by
non-delivery/loss, the consignee has fifteen (15) days defendant's own inspector to be short
within which to file a formal claim covering the loss, of three (3) cases. On 15 August 1961,
injury, damage or non-delivery of such goods with all a formal claim for indemnity was then
accompanying documentation against the arrastre filed by the consignee, who was later
operator. replaced in the action by plaintiff
Fireman's Fund Insurance Co., the
insurer of the goods. Defendant,
Petitioner clarified that it sued respondent however, refused to honor the claim,
only for the additional five (5) packages of the arguing that the same had not been
filed within fifteen (15) days from the
subject shipment that were found damaged while in
date of discharge of the shipment from
respondents custody, which fact of damage was the carrying vessel, as required under
sustained by the trial court and proved by the Request the arrastre Management Contract then
for Bad Order Survey No. 56422.[29] in force between itself and the Bureau
of Customs. The trial court upheld this
argument and hence dismissed the
Petitioner pointed out the importance of the complaint. On appeal by the
Request for Bad Order Survey by citing New consignee, this Court, speaking
through Mr. Justice J.B.L. Reyes,
Zealand Insurance Company Limited v. Navarro.[30] reversed the trial court and found the
In the said case, the Court ruled that the request for, defendant arrastre operator liable for
and the result of, the bad order examination, which the value of the lost cargo, explaining
as follows:
were filed and done within fifteen days from the
haulage of the goods from the vessel, served the However, the trial court has
purpose of a claim, which is to afford the carrier or overlooked the significance of the
depositary reasonable opportunity and facilities to request for, and the result of, the bad
order examination, which were filed
check the validity of the claims while facts are still and done within fifteen days from the
fresh in the minds of the persons who took part in the haulage of the goods from the vessel.
transaction and documents are still available. Hence, Said request and result, in effect,
served the purpose of a claim, which
even if the consignee therein filed a formal claim is
beyond the stipulated period of 15 days, the arrastre
operator was not relieved of liability as the purpose to afford the
carrier or depositary
of a formal claim had already been satisfied by the
reasonable
consignees timely request for the bad order opportunity and
examination of the goods shipped and the result of facilities to check the
validity of the claims
the said bad order examination.
while facts are still
Page 20 of 44
fresh in the minds of "certificate of loss confirmed that out
the persons who took of the 5,974 bags of soybean meal
part in the transaction loaded on board the M/S
and documents are "Zamboanga" and shipped to Manila,
still available. 173 bags had been damaged in
(Consunji vs. Manila transitu while an additional 111 bags
Port Service, L-15551, had been damaged after the entire
29 November 1960) shipment had been discharged from
the vessel and placed in the custody of
Indeed, the examination undertaken respondent Razon. Hence, as early as
by the defendant's own inspector not 9 July 1974 (the date of last delivery
only gave the defendant an to the consignee's warehouse),
opportunity to check the goods but is respondent Razon had been able to
itself a verification of its own liability verify and ascertain for itself not
x x x. only the existence of its liability to
the consignee but, more
In other words, what the Court significantly, the exact amount
considered as the crucial factor in thereof - i.e., P5,746.61, representing
declaring the defendant arrastre the value of 111 bags of soybean meal.
operator liable for the loss occasioned, We note further that such verification
in the Fireman's Fund case, was the and ascertainment of liability on the
fact that defendant, by virtue of the part of respondent Razon, had been
consignee's request for a bad order accomplished "within thirty (30)
examination, had been able formally days from the date of delivery of last
to verify the existence and extent of its package to the consignee, broker or
liability within fifteen (15) days from importer" as well as "within fifteen
the date of discharge of the shipment (15) days from the date of issuance
from the carrying vessel -- i.e., within by the Contractor [respondent
the same period stipulated under the Razon] of a certificate of loss,
Management Contract for the damage or injury or certificate of
consignee to file a formal claim. That non-delivery" the periods prescribed
a formal claim had been filed by the under Article VI, Section 1 of the
consignee beyond the stipulated Management Contract here involved,
period of fifteen (15) days neither within which a request for certificate
relieved defendant of liability nor of loss and a formal claim,
excused payment thereof, the respectively, must be filed by the
purpose of a formal claim, as consignee or his agent. Evidently,
contemplated in Consunji, having therefore, the rule laid down by the
already been fully served and Court in Fireman's Fund finds
satisfied by the consignee's timely appropriate application in the case at
request for, and the eventual result bar.[31]
of, the bad order examination of the
nylon merchandise shipped.
In this case, the records show that the goods
Relating the doctrine of were deposited with the arrastre operator on
Fireman's Fund to the case at bar, the
record shows that delivery to the November 21, 2002. The goods were withdrawn from
warehouse of consignee Monterey the arrastre operator on November 22, 23 and 29,
Farms Corporation of the 5,974 bags 2002. Prior to the withdrawal on November 29, 2002,
of soybean meal, had been completed the broker of the importer, Marzan, requested for a
by respondent Razon (arrastre bad order survey in the presence of a Customs
operator) on 9 July 1974. On that
representative and other parties concerned. The joint
same day, a bad order examination of
the goods delivered was requested by inspection of cargo was conducted and it was found
the consignee and was, in fact, that an additional five (5) packages were found in bad
conducted by respondent Razon's own order as evidenced by the document entitled Request
inspector, in the presence of for Bad Order Survey[32] dated November 29, 2002,
representatives of both the Bureau of
which document also contained the examination
Customs and the consignee. The
ensuing bad order examination report report, signed by the Customs representative,
what the trial court considered a 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
PRODUCT NOS. PRODUCTS
CIRCUMSTANCES OF LOSS NAMED NO. OF SHEETS NET WT.
PER PACKING LIST
As reported, the shipment consisting of 2HD803763 Electrolytic Tin Free 1,200 1,908
185 packages (344.982 MT) Steel JISG3315
Electrolytic Tin Free Steel, JISG 2HD803783 -do- 1,200 1,908
3315SPTFS, MRT-4CA, Matte Finish 2HD803784 -do- 1,200 1,908
arrived Manila via Ocean Vessel, M/V 2HD804460 -do- 1,400 1,698
DIMI P V-075 on November 9, 2002 2HD803765 -do- 1,200 1,908
and subsequently docked alongside Pier 2HD804522 -do- 1,200 1,987
No. 9, South Harbor, Manila. The 2HD804461 -do- 1,400 1,698
cargo of Electrolyic Tin Free Steel 2HD804540 -do- 1,200 1,987
was discharged ex-vessel complete 2HD804549 -do- 1,200 1,987
with seven (7) skidsnoted in bad 9 SKIDS TOTAL 11,200 16,989 kgs.

Page 22 of 44
P9,878,547.58 P478,959.88 by Bad Order Cargo Receipt Nos. 3704, 3706, 3707
------------------ = 42.7643 x 11,200 and 3709,[42] which claim should have been filed with
231,000
Less: Deductible 0.50% based on sum insured the shipping company. Petitioner must have realized
49,392.74 that the claim for the said five (5) skids was already
Total P429,567.14 barred under COGSA; hence, petitioner filed the claim
Add: Surveyors Fee 2,025.00 for actual damages only against respondent arrastre
Sub-Total P431,592.14 operator.
As regards the four (4) skids that were
Note: Above evaluation is Assureds
tentative liability as the salvage damaged in the custody of the arrastre operator,
proceeds on the damaged stocks has yet petitioner is still entitled to recover from respondent.
to be determined. 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
RECOVERY ASPECT November 29, 2002. Hence, even if the formal claim
was filed beyond the 15-day period stipulated in the
Prospect of recovery would be feasible
against the shipping company and Contract, respondent was not prejudiced thereby, since
the Arrastre operator considering the it already knew of the number of skids damaged in its
copies of Bad Order Tally Receipts possession per the examination report on the request
and Bad Order Certificate issued by for bad order survey.
the subject parties.[37]
Remand of the case to the trial court for the
To clarify, based on the Evaluation Report, determination of the liability of respondent to
seven (7) skids were damaged upon arrival of the petitioner is not necessary as the Court can resolve the
vessel per the Bad Order Cargo Receipts [38] issued by same based on the records before it.[43] The Court
the shipping company, and an additional five (5) notes that petitioner, who filed this action for damages
skids were damaged in the custody of the arrastre for the five (5) skids that were damaged while in the
operator per the Bad Order Certificate/Examination custody of respondent, was not forthright in its claim,
Report[39] issued by the arrastre contractor. The as it knew that the damages it sought in the amount of
Evaluation Report states that out of the reported P431,592.14, which was based on the Evaluation
twelve damaged skids, only nine were rejected, and Report of its adjuster/surveyor, BA McLarens Phils.,
three were accepted as good order by the consignees Inc., covered nine (9) skids. Based on the same
representative. Out of the nine skids that were Evaluation Report, only four of the nine skids were
rejected, five skids were damaged upon arrival of damaged in the custody of respondent. Petitioner
the vessel as shown by the product numbers in the should have been straightforward about its exact
Evaluation Report, which product numbers matched claim, which is borne out by the evidence on record,
those in the Bad Order Cargo Receipts[40] issued by the as petitioner can be granted only the amount of
shipping company. It can then be safely inferred that damages that is due to it.
the four remaining rejected skids were damaged in
the custody of the arrastre operator, as the Bad Based on the Evaluation Report[44] of BA
Order Certificate/Examination Report did not indicate McLarens Phils., Inc., dated May 5, 2003, the four (4)
the product numbers thereof. skids damaged while in the custody of the arrastre
operator and the amount of actual damages therefore
Hence, it should be pointed out that the are as follows:
Evaluation Report shows that the claim for actual
damages in the amount of P431,592.14 covers five
PRODUCT NOS. PRODUCTS
(5)[41] out of the seven (7) skids that were found to
NAMED NO. OF SHEETS NET WT.
be damaged upon arrival of the vessel and covered 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 on the following issues for
reconsideration of the assailed decision but it was resolution:rbl r l l
denied by the CA in its Resolution dated August 28, lbrr
2008.15rll 1) Whether Reputable is a private carrier;
Hence, this petition. 2) Whether Reputable is strictly bound by the
Malayan insists that the CA failed to properly resolve stipulations in its contract of carriage with Wyeth,
the issue on the "statutory limitations on the liability such that it should be liable for any risk of loss or
of common carriers" and the "difference between an damage, for any cause whatsoever, including that due
other insurance clause and an over insurance clause ." to theft or robbery and other force majeure;
Malayan also contends that the CA erred when it held 3) Whether the RTC and CA erred in rendering
that Reputable is a private carrier and should be "nugatory" Sections 5 and Section 12 of the SR
bound by the contractual stipulations in the contract Policy; andcralawlibrary
of carriage. This argument is based on its assertion 4) Whether Reputable should be held solidarily liable
that Philippines First judicially admitted in its with Malayan for the amount of P998,000.00 due to
complaint that Reputable is a common carrier and as Philippines First.
such, Reputable should not be held liable pursuant to chanrobles virtual law libraryThe Court s Ruling
Article 1745(6) of the Civil Code.16Necessarily, if On the first issue Reputable is a private carrier.
Reputable is not liable for the loss, then there is no The Court agrees with the RTC and CA that
reason to hold Malayan liable to Reputable. Reputable is a private carrier. Well-entrenched in
Further, Malayan posits that there resulted in an jurisprudence is the rule that factual findings of the
impairment of contract when the CA failed to apply trial court, especially when affirmed by the appellate
the express provisions of Section 5 (referred to by court, are accorded the highest degree of respect and
Malayan as over insurance clause) and Section 12 considered conclusive between the parties, save for
(referred to by Malayan as other insurance clause) of certain exceptional and meritorious circumstances,
its SR Policy as these provisions could have been none of which are present in this case.18rll
read together there being no actual conflict between Malayan relies on the alleged judicial admission of
them. Philippines First in its complaint that Reputable is a
Reputable, meanwhile, contends that it is exempt common carrier.19 Invoking Section 4, Rule 129 of
from liability for acts committed by thieves/robbers the Rules on Evidence that "an admission verbal or
who act with grave or irresistible threat whether it is a written, made by a party in the course of the
common carrier or a private/special carrier. It, proceeding in the same case, does not require proof,"
however, maintains the correctness of the CA ruling it is Malayan s position that the RTC and CA should
that Malayan is liable to Philippines First for the full have ruled that
amount of its policy coverage and not merely a Reputable is a common carrier. Consequently,
ratable portion thereof under Section 12 of the SR pursuant to Article 1745(6) of the Civil Code, the
Policy. liability of Reputable for the loss of Wyeth s goods
Finally, Philippines First contends that the factual should be dispensed with, or at least diminished.
finding that Reputable is a private carrier should be It is true that judicial admissions, such as matters
accorded the highest degree of respect and must be alleged in the pleadings do not require proof, and
considered conclusive between the parties, and that a need not be offered to be considered by the court.
review of such finding by the Court is not warranted "The court, for the proper decision of the case, may
under the circumstances. As to its alleged judicial and should consider, without the introduction of
admission that Reputable is a common carrier, evidence, the facts admitted by the parties."20The rule
Philippines First proffered the declaration made by on judicial admission, however, also states that such
Reputable that it is a private carrier. Said declaration allegation, statement, or admission is conclusive as
was allegedly reiterated by Reputable in its third against the pleader,21 and that the facts alleged in the
party complaint, which in turn was duly admitted by complaint are deemed admissions of the plaintiff and
Malayan in its answer to the said third-party binding upon him.22 In this case, the pleader or the
complaint. In addition, Reputable even presented plaintiff who alleged that Reputable is a common
evidence to prove that it is a private carrier. carrier was Philippines First. It cannot, by any stretch
As to the applicability of Sections 5 and 12 in the SR of imagination, be made conclusive as against
Policy, Philippines First reiterated the ruling of the Reputable whose nature of business is in question.
CA. Philippines First, however, prayed for a slight It should be stressed that Philippines First is not privy
modification of the assailed decision, praying that to the SR Policy between Wyeth and Reputable;
Reputable and Malayan be rendered solidarily liable rather, it is a mere subrogee to the right of Wyeth to
to it in the amount of P998,000.00, which represents collect from Reputable under the terms of the
the balance from the P1,000.000.00 coverage of the contract of carriage. Philippines First is not in any
SR Policy after deducting P2,000.00 under Section position to make any admission, much more a
10 of the said SR Policy.17rll definitive pronouncement, as to the nature of
Issues Reputable s business and there appears no other
The liability of Malayan under the SR Policy hinges connection between Philippines First and Reputable
Page 26 of 44
which suggests mutual familiarity between them. robbery and other force majeure while the
Moreover, records show that the alleged judicial goods/products are in transit and until actual delivery
admission of Philippines First was essentially to Wyeth s customers, salesmen and dealers.31rll
disputed by Reputable when it stated in paragraphs 2, On the third issue other insurance vis- -vis over
4, and 11 of its answer that it is actually a private or insurance.
special carrier.23 In addition, Reputable stated in Malayan refers to Section 5 of its SR Policy as an
paragraph 2 of its third-party complaint that it is "a "over insurance clause" and to Section 12 as a
private carrier engaged in the carriage of goods."24 "modified other insurance clause".32 In rendering
Such allegation was, in turn, admitted by Malayan in inapplicable said provisions in the SR Policy, the CA
paragraph 2 of its answer to the third-party ruled in this wise:rl
complaint.25 There is also nothing in the records Since Sec. 5 calls for Malayan s complete absolution
which show that Philippines First persistently in case the other insurance would be sufficient to
maintained its stance that Reputable is a common cover the entire amount of the loss, it is in direct
carrier or that it even contested or proved otherwise conflict with Sec. 12 which provides only for a pro-
Reputable s position that it is a private or special rated contribution between the two insurers. Being
carrier. the later provision, and pursuant to the rules on
Hence, in the face of Reputable s contrary admission interpretation of contracts, Sec. 12 should therefore
as to the nature of its own business, what was stated prevail.
by Philippines First in its complaint is reduced to x x x
nothing more than mere allegation, which must be x x x The intention of both Reputable and Malayan
proved for it to be given any weight or value. The should be given effect as against the wordings of Sec.
settled rule is that mere allegation is not 12 of their contract, as it was intended by the parties
proof.26rll to operate only in case of double insurance, or where
More importantly, the finding of the RTC and CA that the benefits of the policies of both plaintiff-appellee
Reputable is a special or private carrier is warranted and Malayan should pertain to Reputable alone. But
by the evidence on record, primarily, the unrebutted since the court a quo correctly ruled that there is no
testimony of Reputable s Vice President and General double insurance in this case inasmuch as Reputable
Manager, Mr. William Ang Lian Suan, who expressly was not privy thereto, and therefore did not stand to
stated in open court that Reputable serves only one benefit from the policy issued by plaintiff-appellee in
customer, Wyeth.27rll favor of Wyeth, then Malayan s stand should be
Under Article 1732 of the Civil Code, common rejected.
carriers are persons, corporations, firms, or To rule that Sec. 12 operates even in the absence of
associations engaged in the business of carrying or double insurance would work injustice to Reputable
transporting passenger or goods, or both by land, which, despite paying premiums for a P1,000,000.00
water or air for compensation, offering their services insurance coverage, would not be entitled to recover
to the public. On the other hand, a private carrier is said amount for the simple reason that the same
one wherein the carriage is generally undertaken by property is covered by another insurance policy, a
special agreement and it does not hold itself out to policy to which it was not a party to and much less,
carry goods for the general public.28 A common from which it did not stand to benefit. Plainly, this
carrier becomes a private carrier when it undertakes unfair situation could not have been the intention of
to carry a special cargo or chartered to a special both Reputable and Malayan in signing the insurance
person only.29 For all intents and purposes, therefore, contract in question.33rll
Reputable operated as a private/special carrier with In questioning said ruling, Malayan posits that
regard to its contract of carriage with Wyeth. Sections 5 and 12 are separate provisions applicable
On the second issue Reputable is bound by the terms under distinct circumstances. Malayan argues that "it
of the contract of carriage. will not be completely absolved under Section 5 of its
The extent of a private carrier s obligation is dictated policy if it were the assured itself who obtained
by the stipulations of a contract it entered into, additional insurance coverage on the same property
provided its stipulations, clauses, terms and and the loss incurred by Wyeth s cargo was more than
conditions are not contrary to law, morals, good that insured by Philippines First s marine policy. On
customs, public order, or public policy. "The Civil the other hand, Section 12 will not completely
Code provisions on common carriers should not be absolve Malayan if additional insurance coverage on
applied where the carrier is not acting as such but as a the same cargo were obtained by someone besides
private carrier. Public policy governing common Reputable, in which case Malayan s SR policy will
carriers has no force where the public at large is not contribute or share ratable proportion of a covered
involved."30rll cargo loss."34rll
Thus, being a private carrier, the extent of Reputable Malayan s position cannot be countenanced.
s liability is fully governed by the stipulations of the Section 5 is actually the other insurance clause (also
contract of carriage, one of which is that it shall be called "additional insurance" and "double
liable to Wyeth for the loss of the goods/products due insurance"), one akin to Condition No. 3 in issue in
to any and all causes whatsoever, including theft, Geagonia v. CA,35 which validity was upheld by the
Page 27 of 44
Court as a warranty that no other insurance exists. i.e. goods belonging to Wyeth, and both covered the
The Court ruled that Condition No. 3 36 is a condition same peril insured against, it is, however, beyond
which is not proscribed by law as its incorporation in cavil that the said policies were issued to two
the policy is allowed by Section 75 of the Insurance different persons or entities. It is undisputed that
Code. It was also the Court s finding that unlike the Wyeth is the recognized insured of Philippines First
other insurance clauses, Condition No. 3 does not under its Marine Policy, while Reputable is the
absolutely declare void any violation thereof but recognized insured of Malayan under the SR Policy.
expressly provides that the condition "shall not apply The fact that Reputable procured Malayan s SR
when the total insurance or insurances in force at the Policy over the goods of Wyeth pursuant merely to
time of the loss or damage is not more than the stipulated requirement under its contract of
P200,000.00." carriage with the latter does not make Reputable a
In this case, similar to Condition No. 3 in Geagonia, mere agent of Wyeth in obtaining the said SR Policy.
Section 5 does not provide for the nullity of the SR The interest of Wyeth over the property subject
Policy but simply limits the liability of Malayan only matter of both insurance contracts is also different
up to the excess of the amount that was not covered and distinct from that of Reputable s. The policy
by the other insurance policy. In interpreting the issued by Philippines First was in consideration of
"other insurance clause" in Geagonia, the Court ruled the legal and/or equitable interest of Wyeth over its
that the prohibition applies only in case of double own goods. On the other hand, what was issued by
insurance. The Court ruled that in order to constitute Malayan to Reputable was over the latter s insurable
a violation of the clause, the other insurance must be interest over the safety of the goods, which may
upon same subject matter, the same interest therein, become the basis of the latter s liability in case of loss
and the same risk. Thus, even though the multiple or damage to the property and falls within the
insurance policies involved were all issued in the contemplation of Section 15 of the Insurance
name of the same assured, over the same subject Code.39rll
matter and covering the same risk, it was ruled that Therefore, even though the two concerned insurance
there was no violation of the "other insurance clause" policies were issued over the same goods and cover
since there was no double insurance. the same risk, there arises no double insurance since
Section 12 of the SR Policy, on the other hand, is the they were issued to two different persons/entities
over insurance clause. More particularly, it covers the having distinct insurable interests. Necessarily, over
situation where there is over insurance due to double insurance by double insurance cannot likewise exist.
insurance. In such case, Section 15 provides that Hence, as correctly ruled by the RTC and CA, neither
Malayan shall "not be liable to pay or contribute Section 5 nor Section 12 of the SR Policy can be
more than its ratable proportion of such loss or applied.
damage." This is in accord with the principle of Apart from the foregoing, the Court is also wont to
contribution provided under Section 94(e) of the strictly construe the controversial provisions of the
Insurance Code,37 which states that "where the SR Policy against Malayan. This is in keeping with
insured is over insured by double insurance, each the rule that:rl
insurer is bound, as between himself and the other "Indemnity and liability insurance policies are
insurers, to contribute ratably to the loss in proportion construed in accordance with the general rule of
to the amount for which he is liable under his resolving any ambiguity therein in favor of the
contract." insured, where the contract or policy is prepared by
Clearly, both Sections 5 and 12 presuppose the the insurer. A contract of insurance, being a contract
existence of a double insurance. The pivotal question of adhesion, par excellence, any ambiguity therein
that now arises is whether there is double insurance should be resolved against the insurer; in other
in this case such that either Section 5 or Section 12 of words, it should be construed liberally in favor of the
the SR Policy may be applied. insured and strictly against the insurer. Limitations of
By the express provision of Section 93 of the liability should be regarded with extreme jealousy
Insurance Code, double insurance exists where the and must be construed in such a way as to preclude
same person is insured by several insurers separately the insurer from noncompliance with its
in respect to the same subject and interest. The obligations."40rll
requisites in order for double insurance to arise are as Moreover, the CA correctly ruled that:rl
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; which, despite paying premiums for a P1,000,000.00
2. Two or more insurers insuring separately; insurance coverage, would not be entitled to recover
3. There is identity of subject matter; said amount for the simple reason that the same
4. There is identity of interest insured; and property is covered by another insurance policy, a
5. There is identity of the risk or peril insured against. policy to which it was not a party to and much less,
chanrobles virtual law libraryIn the present case, from which it did not stand to benefit. x x x41rll
while it is true that the Marine Policy and the SR On the fourth issue Reputable is not solidarily liable
Policy were both issued over the same subject matter, with Malayan.
Page 28 of 44
There is solidary liability only when the obligation MENDOZA, J.:
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 This is a petition for review on certiorari under Rule
Where the insurance contract provides for indemnity 45 of the Revised Rules of Court assailing the August
against liability to third persons, the liability of the 24, 2007 Decision[1] of the Court of Appeals (CA) in
insurer is direct and such third persons can directly
CA-G.R. CV No. 82822, entitled R&B Insurance
sue the insurer. The direct liability of the insurer
under indemnity contracts against third Corporation v. Glodel Brokerage Corporation and
party[-]liability does not mean, however, that the Loadmasters Customs Services, Inc., which held
insurer can be held solidarily liable with the insured petitioner Loadmasters Customs Services, Inc.
and/or the other parties found at fault, since they are
being held liable under different obligations. The (Loadmasters) liable to respondent Glodel Brokerage
liability of the insured carrier or vehicle owner is Corporation (Glodel) in the amount of P1,896,789.62
based on tort, in accordance with the provisions of representing the insurance indemnity which R&B
the Civil Code; while that of the insurer arises from
contract, particularly, the insurance policy:43 (Citation Insurance Corporation (R&B Insurance) paid to the
omitted and emphasis supplied) insured-consignee, Columbia Wire and Cable
Suffice it to say that Malayan's and Reputable's Corporation (Columbia).
respective liabilities arose from different obligations-
Malayan's is based on the SR Policy while
Reputable's is based on the contract of carriage. THE FACTS:
All told, the Court finds no reversible error in the
judgment sought to be reviewed.
WHEREFORE, premises considered, the petition is
On August 28, 2001, R&B Insurance issued Marine
DENIED. The Decision dated February 29, 2008 and
Resolution dated August 28, 2008 of the Court of Policy No. MN-00105/2001 in favor of Columbia to
Appeals in CA-G.R. CV No. 71204 are hereby insure the shipment of 132 bundles of electric copper
AFFIRMED.
cathodes against All Risks. On August 28, 2001, the
Cost against petitioner Malayan Insurance Co., Inc.
SO ORDERED. cargoes were shipped on board the vessel Richard
SECOND DIVISION Rey from Isabela, Leyte, to Pier 10, North Harbor,
Manila. They arrived on the same date.
LOADMASTERS G.R. No. 179446
CUSTOMS
SERVICES, INC., Present: Columbia engaged the services of Glodel for
Petitioner,
CARPIO, J., the release and withdrawal of the cargoes from the
Chairperson, pier and the subsequent delivery to its
NACHURA, warehouses/plants. Glodel, in turn, engaged the
PERALTA,
- versus - ABAD, and services of Loadmasters for the use of its delivery
MENDOZA, JJ. 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
Loadmasters because it was not prevented from
presenting evidence to prove its position even
Hence, Loadmasters filed the present petition
without amending its Answer. As to the relationship
for review on certiorari before this Court presenting
between Loadmasters and Glodel, it contends that a
the following
contract of agency existed between the two
ISSUES corporations.[8]

1. Can Petitioner Loadmasters be Subrogation is the substitution of one person


held liable to Respondent Glodel in
in the place of another with reference to a lawful
spite of the fact that the latter
respondent Glodel did not file a claim or right, so that he who is substituted succeeds
cross-claim against it to the rights of the other in relation to a debt or claim,
(Loadmasters)? including its remedies or securities.[9] Doubtless,
2. Under the set of facts established R&B Insurance is subrogated to the rights of the
and undisputed in the case, can insured to the extent of the amount it paid the
petitioner Loadmasters be legally consignee under the marine insurance, as provided
considered as an Agent of
respondent Glodel?[6] under Article 2207 of the Civil Code, which reads:

ART. 2207. If the plaintiffs


property has been insured, and he has
To totally exculpate itself from responsibility received indemnity from the insurance
for the lost goods, Loadmasters argues that it cannot company for the injury or loss arising
out of the wrong or breach of contract
be considered an agent of Glodel because it never complained of, the insurance company
represented the latter in its dealings with the shall be subrogated to the rights of the
consignee. At any rate, it further contends that Glodel insured against the wrong-doer or the
person who has violated the contract.
has no recourse against it for its (Glodels) failure to
If the amount paid by the insurance
file a cross-claim pursuant to Section 2, Rule 9 of the company does not fully cover the
1997 Rules of Civil Procedure. injury or loss, the aggrieved party
shall be entitled to recover the
deficiency from the person causing the
Glodel, in its Comment,[7] counters that Loadmasters loss or injury.
is liable to it under its cross-claim because the latter
was grossly negligent in the transportation of the
As subrogee of the rights and interest of the
subject cargo. With respect to Loadmasters claim that
consignee, R&B Insurance has the right to seek
it is already estopped from filing a cross-claim,
reimbursement from either Loadmasters or Glodel or
Glodel insists that it can still do so even for the first
both for breach of contract and/or tort.
time on appeal because there is no rule that provides
otherwise. Finally, Glodel argues that its relationship
The issue now is who, between Glodel and
with Loadmasters is that of Charter wherein the
Loadmasters, is liable to pay R&B Insurance for the
transporter (Loadmasters) is only hired for the
amount of the indemnity it paid Columbia.
specific job of delivering the merchandise. Thus, the
diligence required in this case is merely ordinary
At the outset, it is well to resolve the issue of whether
diligence or that of a good father of the family, not
Loadmasters and Glodel are common carriers to
the extraordinary diligence required of common
determine their liability for the loss of the subject
carriers.
cargo. Under Article 1732 of the Civil Code, common
carriers are persons, corporations, firms, or
R&B Insurance, for its part, claims that Glodel is associations engaged in the business of carrying or
deemed to have interposed a cross-claim against transporting passenger or goods, or both by land,
Page 31 of 44
water or air for compensation, offering their services and circumspection observe for securing and
to the public. preserving their own property or rights.[15] This
exacting standard imposed on common carriers in a
Based on the aforecited definition, contract of carriage of goods is intended to tilt the
Loadmasters is a common carrier because it is scales in favor of the shipper who is at the mercy of
engaged in the business of transporting goods by the common carrier once the goods have been lodged
land, through its trucking service. It is a common for shipment.[16] Thus, in case of loss of the goods, the
carrier as distinguished from a private carrier common carrier is presumed to have been at fault or
wherein the carriage is generally undertaken by to have acted negligently.[17] This presumption of fault
special agreement and it does not hold itself out to or negligence, however, may be rebutted by proof
carry goods for the general public.[10] The distinction that the common carrier has observed extraordinary
is significant in the sense that the rights and diligence over the goods.
obligations of the parties to a contract of private
carriage are governed principally by their With respect to the time frame of this
stipulations, not by the law on common carriers.[11] extraordinary responsibility, the Civil Code provides
that the exercise of extraordinary diligence lasts from
In the present case, there is no indication that the time the goods are unconditionally placed in the
the undertaking in the contract between Loadmasters possession of, and received by, the carrier for
and Glodel was private in character. There is no transportation until the same are delivered, actually or
showing that Loadmasters solely and exclusively constructively, by the carrier to the consignee, or to
rendered services to Glodel. the person who has a right to receive them.[18]

In fact, Loadmasters admitted that it is a Premises considered, the Court is of the view
common carrier.[12] that both Loadmasters and Glodel are jointly and
severally liable to R & B Insurance for the loss of the
In the same vein, Glodel is also considered a subject cargo. Under Article 2194 of the New Civil
common carrier within the context of Article 1732. In Code, the responsibility of two or more persons who
its Memorandum,[13] it states that it is a corporation are liable for a quasi-delict is solidary.
duly organized and existing under the laws of the
Republic of the Philippines and is engaged in the Loadmasters claim that it was never privy to
business of customs brokering. It cannot be the contract entered into by Glodel with the
considered otherwise because as held by this Court in consignee Columbia or R&B Insurance as subrogee,
Schmitz Transport & Brokerage Corporation v. is not a valid defense. It may not have a direct
Transport Venture, Inc.,[14] a customs broker is also contractual relation with Columbia, but it is liable for
regarded as a common carrier, the transportation of tort under the provisions of Article 2176 of the Civil
goods being an integral part of its business. Code on quasi-delicts which expressly provide:

ART. 2176. Whoever by act or


Loadmasters and Glodel, being both common omission causes damage to another,
carriers, are mandated from the nature of their there being fault or negligence, is
business and for reasons of public policy, to observe obliged to pay for the damage done.
Such fault or negligence, if there is no
the extraordinary diligence in the vigilance over the pre-existing contractual relation
goods transported by them according to all the between the parties, is called a quasi-
circumstances of such case, as required by Article delict and is governed by the
provisions of this Chapter.
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
Page 32 of 44
Pertinent is the ruling enunciated in the case the damages caused by their
employees and household helpers
of Mindanao Terminal and Brokerage Service, Inc. v. acting within the scope of their
Phoenix Assurance Company of New York,/McGee & assigned tasks, even though the former
Co., Inc.[19] where this Court held that a tort may arise are not engaged in any business or
industry.
despite the absence of a contractual relationship, to
wit:
It is not disputed that the subject cargo was
We agree with the Court of Appeals
that the complaint filed by Phoenix lost while in the custody of Loadmasters whose
and McGee against Mindanao employees (truck driver and helper) were
Terminal, from which the present case instrumental in the hijacking or robbery of the
has arisen, states a cause of action.
The present action is based on quasi- shipment. As employer, Loadmasters should be made
delict, arising from the negligent and answerable for the damages caused by its employees
careless loading and stowing of the who acted within the scope of their assigned task of
cargoes belonging to Del Monte
Produce. Even assuming that both delivering the goods safely to the warehouse.
Phoenix and McGee have only been
subrogated in the rights of Del Monte Whenever an employees negligence causes
Produce, who is not a party to the
damage or injury to another, there instantly arises a
contract of service between Mindanao
Terminal and Del Monte, still the presumption juris tantum that the employer failed to
insurance carriers may have a cause of exercise diligentissimi patris families in the selection
action in light of the Courts consistent (culpa in eligiendo) or supervision (culpa in
ruling that the act that breaks the
contract may be also a tort. In fine, a vigilando) of its employees.[20] To avoid liability for a
liability for tort may arise even under quasi-delict committed by its employee, an employer
a contract, where tort is that which must overcome the presumption by presenting
breaches the contract. In the present
case, Phoenix and McGee are not convincing proof that he exercised the care and
suing for damages for injuries diligence of a good father of a family in the selection
arising from the breach of the and supervision of his employee.[21] In this regard,
contract of service but from the
Loadmasters failed.
alleged negligent manner by which
Mindanao Terminal handled the
cargoes belonging to Del Monte Glodel is also liable because of its failure to
Produce. Despite the absence of
exercise extraordinary diligence. It failed to ensure
contractual relationship between Del
Monte Produce and Mindanao that Loadmasters would fully comply with the
Terminal, the allegation of negligence undertaking to safely transport the subject cargo to
on the part of the defendant should be the designated destination. It should have been more
sufficient to establish a cause of action
arising from quasi-delict. [Emphases prudent in entrusting the goods to Loadmasters by
supplied] taking precautionary measures, such as providing
escorts to accompany the trucks in delivering the
cargoes. Glodel should, therefore, be held liable with
In connection therewith, Article 2180
Loadmasters. Its defense of force majeure is
provides:
unavailing.
ART. 2180. The obligation
imposed by Article 2176 is At this juncture, the Court clarifies that there
demandable not only for ones own
exists no principal-agent relationship between Glodel
acts or omissions, but also for those of
persons for whom one is responsible. and Loadmasters, as erroneously found by the CA.
Article 1868 of the Civil Code provides: By the
xxxx contract of agency a person binds himself to render
Employers shall be liable for some service or to do something in representation or
Page 33 of 44
on behalf of another, with the consent or authority of them to the injured person was not the
same. No actor's negligence ceases to
the latter. The elements of a contract of agency are: be a proximate cause merely because
(1) consent, express or implied, of the parties to it does not exceed the negligence of
establish the relationship; (2) the object is the other actors. Each wrongdoer is
responsible for the entire result and is
execution of a juridical act in relation to a third
liable as though his acts were the sole
person; (3) the agent acts as a representative and not cause of the injury.
for himself; (4) the agent acts within the scope of his There is no contribution
authority.[22] between joint tortfeasors whose
liability is solidary since both of them
are liable for the total damage. Where
Accordingly, there can be no contract of the concurrent or successive negligent
agency between the parties. Loadmasters never acts or omissions of two or more
represented Glodel. Neither was it ever authorized to persons, although acting
independently, are in combination the
make such representation. It is a settled rule that the direct and proximate cause of a single
basis for agency is representation, that is, the agent injury to a third person, it is
acts for and on behalf of the principal on matters impossible to determine in what
proportion each contributed to the
within the scope of his authority and said acts have
injury and either of them is
the same legal effect as if they were personally responsible for the whole injury.
executed by the principal. On the part of the Where their concurring negligence
principal, there must be an actual intention to appoint resulted in injury or damage to a third
party, they become joint tortfeasors
or an intention naturally inferable from his words or and are solidarily liable for the
actions, while on the part of the agent, there must be resulting damage under Article 2194
an intention to accept the appointment and act on it. of the Civil Code. [Emphasis
[23]
supplied]
Such mutual intent is not obtaining in this case.

What then is the extent of the respective The Court now resolves the issue of whether
liabilities of Loadmasters and Glodel? Each Glodel can collect from Loadmasters, it having failed
wrongdoer is liable for the total damage suffered by to file a cross-claim against the latter.
R&B Insurance. Where there are several causes for
the resulting damages, a party is not relieved from Undoubtedly, Glodel has a definite cause of
liability, even partially. It is sufficient that the action against Loadmasters for breach of contract of
negligence of a party is an efficient cause without service as the latter is primarily liable for the loss of
which the damage would not have resulted. It is no the subject cargo. In this case, however, it cannot
defense to one of the concurrent tortfeasors that the succeed in seeking judicial sanction against
damage would not have resulted from his negligence Loadmasters because the records disclose that it did
alone, without the negligence or wrongful acts of the not properly interpose a cross-claim against the latter.
other concurrent tortfeasor. As stated in the case of Glodel did not even pray that Loadmasters be liable
Far Eastern Shipping v. Court of Appeals,[24] for any and all claims that it may be adjudged liable
in favor of R&B Insurance. Under the Rules, a
X x x. Where several causes compulsory counterclaim, or a cross-claim, not set
producing an injury are concurrent and up shall be barred.[25] Thus, a cross-claim cannot be
each is an efficient cause without
which the injury would not have set up for the first time on appeal.
happened, the injury may be attributed
to all or any of the causes and For the consequence, Glodel has no one to
recovery may be had against any or all
blame but itself. The Court cannot come to its aid on
of the responsible persons although
under the circumstances of the case, it equitable grounds. Equity, which has been aptly
may appear that one of them was more described as a justice outside legality, is applied only
culpable, and that the duty owed by 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 Federal Builders (the project contractor) and
Industries, Inc. (Advatech) three emergency generator surveyors of petitioner New Worlds insurer,
sets worth US$721,500.00. SeaboardEastern Insurance Company (Seaboard),
revealed that all three sets suffered extensive damage
DMT shipped the generator sets by truck from and could no longer be repaired. For these reasons,
Wisconsin, United States, to LEP Profit International, New World demanded recompense for its loss from
Inc. (LEP Profit) in Chicago, Illinois. From there, the respondents NYK, DMT, Advatech, LEP Profit, LEP
shipment went by train to Oakland, California, where International Philippines, Inc. (LEP), Marina, and
it was loaded on S/S California Luna V59, owned and Serbros. While LEP and NYK acknowledged receipt
operated by NYK Fil-Japan Shipping Corporation of the demand, both denied liability for the loss.
(NYK) for delivery to petitioner New World in
Manila. NYK issued a bill of lading, declaring that it Since Seaboard covered the goods with a marine
received the goods in good condition. insurance policy, petitioner New World sent it a
formal claim dated November 16, 1993. Replying on
NYK unloaded the shipment in Hong Kong and February 14, 1994, Seaboard required petitioner New
transshipped it to S/S ACX Ruby V/72 that it also World to submit to it an itemized list of the damaged
owned and operated. On its journey to Manila, units, parts, and accessories, with corresponding
however, ACX Ruby encountered typhoon Kadiang values, for the processing of the claim. But petitioner
whose captain filed a sea protest on arrival at the New World did not submit what was required of it,
Manila South Harbor on October 5, 1993 respecting insisting that the insurance policy did not include the
the loss and damage that the goods on board his submission of such a list in connection with an
vessel suffered. insurance claim. Reacting to this, Seaboard refused to
process the claim.
Marina Port Services, Inc. (Marina), the Manila
South Harbor arrastre or cargo-handling operator, On October 11, 1994 petitioner New World
received the shipment on October 7, 1993. Upon filed an action for specific performance and damages
inspection of the three container vans separately against all the respondents before the Regional Trial
carrying the generator sets, two vans bore signs of Court (RTC) of Makati City, Branch 62, in Civil Case
external damage while the third van appeared 94-2770.
unscathed. The shipment remained at Pier 3s
Container Yard under Marinas care pending clearance On August 16, 2001 the RTC rendered a decision
from the Bureau of Customs. Eventually, on October absolving the various respondents from liability with
20, 1993 customs authorities allowed petitioners the exception of NYK. The RTC found that the
customs broker, Serbros Carrier Corporation generator sets were damaged during transit while in
(Serbros), to withdraw the shipment and deliver the the care of NYKs vessel, ACX Ruby. The latter
same to petitioner New Worlds job site in Makati failed, according to the RTC, to exercise the degree
City. of diligence required of it in the face of a foretold
raging typhoon in its path.
An examination of the three generator sets in the
presence of petitioner New Worlds representatives, The RTC ruled, however, that petitioner New World
Page 36 of 44
filed its claim against the vessel owner NYK beyond that the one-year prescriptive period for maritime
the one year provided under the Carriage of Goods by claims applied to Seaboard, as insurer and subrogee
Sea Act (COGSA). New World filed its complaint on of New Worlds right against the vessel owner. New
October 11, 1994 when the deadline for filing the Worlds failure to comply promptly with what was
action (on or before October 7, 1994) had already required of it prejudiced such right.
lapsed. The RTC held that the one-year period should
be counted from the date the goods were delivered to Instead of filing a motion for reconsideration,
the arrastre operator and not from the date they were petitioner instituted a second petition for review
delivered to petitioners job site.[1] before the Court in G.R. 174241, assailing the CAs
amended decision.
As regards petitioner New Worlds claim against
Seaboard, its insurer, the RTC held that the latter The Issues Presented
cannot be faulted for denying the claim against it
since New World refused to submit the itemized list The issues presented in this case are as follows:
that Seaboard needed for assessing the damage to the
shipment. Likewise, the belated filing of the a) In G.R. 171468, whether or not the CA
complaint prejudiced Seaboards right to pursue a erred in affirming the RTCs release from liability of
claim against NYK in the event of subrogation. respondents DMT, Advatech, LEP, LEP Profit,
Marina, and Serbros who were at one time or another
On appeal, the Court of Appeals (CA) rendered involved in handling the shipment; and
judgment on January 31, 2006,[2] affirming the RTCs
rulings except with respect to Seaboards liability. The b) In G.R. 174241, 1) whether or not the CA erred in
CA held that petitioner New World can still recoup its ruling that Seaboards request from petitioner New
loss from Seaboards marine insurance policy, World for an itemized list is a reasonable imposition
considering a) that the submission of the itemized and did not violate the insurance contract between
listing is an unreasonable imposition and b) that the them; and 2) whether or not the CA erred in failing to
one-year prescriptive period under the COGSA did rule that the one-year COGSA prescriptive period for
not affect New Worlds right under the insurance marine claims does not apply to petitioner New
policy since it was the Insurance Code that governed Worlds prosecution of its claim against Seaboard, its
the relation between the insurer and the insured. insurer.

Although petitioner New World promptly filed a The Courts Rulings


petition for review of the CA decision before the
Court in G.R. 171468, Seaboard chose to file a In G.R. 171468 --
motion for reconsideration of that decision. On
August 17, 2006 the CA rendered an amended Petitioner New World asserts that the roles of
decision, reversing itself as regards the claim against respondents DMT, Advatech, LEP, LEP Profit,
Seaboard. The CA held that the submission of the Marina and Serbros in handling and transporting its
itemized listing was a reasonable requirement that shipment from Wisconsinto Manila collectively
Seaboard asked of New World. Further, the CA held resulted in the damage to the same, rendering such
Page 37 of 44
respondents solidarily liable with NYK, the vessel loss or damage was due to fraud or intentional
owner. misconduct committed by the insured. The policy
covered all losses during the voyage whether or not
But the issue regarding which of the parties to arising from a marine peril.[5]
a dispute incurred negligence is factual and is not a
proper subject of a petition for review on certiorari. Here, the policy enumerated certain
And petitioner New World has been unable to make exceptions like unsuitable packaging, inherent vice,
out an exception to this rule.[3] Consequently, the delay in voyage, or vessels unseaworthiness, among
Court will not disturb the finding of the RTC, others.[6] But Seaboard had been unable to show that
affirmed by the CA, that the generator sets were petitioner New Worlds loss or damage fell within
totally damaged during the typhoon which beset the some or one of the enumerated exceptions.
vessels voyage from Hong Kong to Manila and that it
was her negligence in continuing with that journey What is more, Seaboard had been unable to
despite the adverse condition which caused petitioner explain how it could not verify the damage that New
New Worlds loss. Worlds goods suffered going by the documents that it
already submitted, namely, (1) copy of the Suppliers
That the loss was occasioned by a typhoon, an Invoice KL2504; (2) copy of the Packing List; (3)
exempting cause under Article 1734 of the Civil copy of the Bill of Lading 01130E93004458; (4) the
Code, does not automatically relieve the common Delivery of Waybill Receipts 1135, 1222, and 1224;
carrier of liability. The latter had the burden of (5) original copy of Marine Insurance Policy MA-
proving that the typhoon was the proximate and only HO-000266; (6) copies of Damage Report from
cause of loss and that it exercised due diligence to Supplier and Insurance Adjusters; (7) Consumption
prevent or minimize such loss before, during, and Report from the Customs Examiner; and (8) Copies
after the disastrous typhoon.[4] As found by the RTC of Received Formal Claim from the following: a)
and the CA, NYK failed to discharge this burden. LEP International Philippines, Inc.; b) Marina Port
Services, Inc.; and c) Serbros Carrier Corporation.[7]
In G.R. 174241 -- Notably, Seaboards own marine surveyor attended
the inspection of the generator sets.
One. The Court does not regard as substantial
the question of reasonableness of Seaboards Seaboard cannot pretend that the above
additional requirement of an itemized listing of the documents are inadequate since they were precisely
damage that the generator sets suffered. The record the documents listed in its insurance policy.[8] Being a
shows that petitioner New World complied with the contract of adhesion, an insurance policy is construed
documentary requirements evidencing damage to its strongly against the insurer who prepared it. The
generator sets. Court cannot read a requirement in the policy that
was not there.
The marine open policy that Seaboard issued
to New World was an all-risk policy. Such a policy Further, it appears from the exchanges of
insured against all causes of conceivable loss or communications between Seaboard and Advatech
damage except when otherwise excluded or when the that submission of the requested itemized listing was
Page 38 of 44
incumbent on the latter as the seller DMTs local and formally rejected it. That would have at least
agent. Petitioner New World should not be made to given petitioner New World a clear signal that it
suffer for Advatechs shortcomings. needed to promptly file its suit directly against NYK
and the others. Ultimately, the fault for the delayed
Two. Regarding prescription of claims, court suit could be brought to Seaboards doorstep.
Section 3(6) of the COGSA provides that the carrier
and the ship shall be discharged from all liability in Section 241 of the Insurance Code provides
case of loss or damage unless the suit is brought that no insurance company doing business in the
within one year after delivery of the goods or the date Philippines shall refuse without just cause to pay or
when the goods should have been delivered. settle claims arising under coverages provided by its
policies. And, under Section 243, the insurer has 30
But whose fault was it that the suit against days after proof of loss is received and ascertainment
NYK, the common carrier, was not brought to court of the loss or damage within which to pay the claim.
on time? The last day for filing such a suit fell on If such ascertainment is not had within 60 days from
October 7, 1994. The record shows that petitioner receipt of evidence of loss, the insurer has 90 days to
New World filed its formal claim for its loss with pay or settle the claim. And, in case the insurer
Seaboard, its insurer, a remedy it had the right to refuses or fails to pay within the prescribed time, the
take, as early as November 16, 1993 or about 11 insured shall be entitled to interest on the proceeds of
months before the suit against NYK would have the policy for the duration of delay at the rate of
fallen due. twice the ceiling prescribed by the Monetary Board.

In the ordinary course, if Seaboard had Notably, Seaboard already incurred delay
processed that claim and paid the same, Seaboard when it failed to settle petitioner New Worlds claim
would have been subrogated to petitioner New as Section 243 required. Under Section 244, a prima
Worlds right to recover from NYK. And it could have facie evidence of unreasonable delay in payment of
then filed the suit as a subrogee. But, as discussed the claim is created by the failure of the insurer to
above, Seaboard made an unreasonable demand on pay the claim within the time fixed in Section 243.
February 14, 1994 for an itemized list of the damaged
units, parts, and accessories, with corresponding Consequently, Seaboard should pay interest
values when it appeared settled that New Worlds loss on the proceeds of the policy for the duration of the
was total and when the insurance policy did not delay until the claim is fully satisfied at the rate of
require the production of such a list in the event of a twice the ceiling prescribed by the Monetary Board.
claim. The term ceiling prescribed by the Monetary Board
means the legal rate of interest of 12% per annum
Besides, when petitioner New World declined provided in Central Bank Circular 416, pursuant to
to comply with the demand for the list, Seaboard Presidential Decree 116.[9] Section 244 of the
against whom a formal claim was pending should not Insurance Code also provides for an award of
have remained obstinate in refusing to process that attorneys fees and other expenses incurred by the
claim. It should have examined the same, found it assured due to the unreasonable withholding of
unsubstantiated by documents if that were the case, payment of his claim.
Page 39 of 44
from finality of judgment, a 12% interest per annum
In Prudential Guarantee and Assurance, Inc. on the total amount due to petitioner until its full
v. Trans-Asia Shipping Lines, Inc.,[10] the Court satisfaction.
regarded as proper an award of 10% of the insurance
proceeds as attorneys fees. Such amount is fair SO ORDERED.
SECOND DIVISION
considering the length of time that has passed in
G.R. No. 171092 March 15, 2010
prosecuting the claim.[11] Pursuant to the Courts ruling EDNA DIAGO LHUILLIER, Petitioner,
vs.
in Eastern Shipping Lines, Inc. v. Court of Appeals,[12]
BRITISH AIRWAYS, Respondent.
a 12% interest per annum from the finality of DECISION
DEL CASTILLO, J.:
judgment until full satisfaction of the claim should Jurisdictio est potestas de publico introducta cum
likewise be imposed, the interim period equivalent to necessitate juris dicendi. Jurisdiction is a power
introduced for the public good, on account of the
a forbearance of credit. necessity of dispensing justice.1
Factual Antecedents
On April 28, 2005, petitioner Edna Diago Lhuillier
Petitioner New World is entitled to the value filed a Complaint2 for damages against respondent
stated in the policy which is commensurate to the British Airways before the Regional Trial Court
(RTC) of Makati City. She alleged that on February
value of the three emergency generator sets or 28, 2005, she took respondents flight 548 from
US$721,500.00 with double interest plus attorneys London, United Kingdom to Rome, Italy. Once on
board, she allegedly requested Julian Halliday
fees as discussed above. (Halliday), one of the respondents flight attendants,
to assist her in placing her hand-carried luggage in
the overhead bin. However, Halliday allegedly
WHEREFORE, the Court DENIES the refused to help and assist her, and even sarcastically
petition in G.R. 171468 and AFFIRMS the Court of remarked that "If I were to help all 300 passengers in
this flight, I would have a broken back!"
Appeals decision of January 31, 2006 insofar as Petitioner further alleged that when the plane was
petitioner New World International Development about to land in Rome, Italy, another flight attendant,
Nickolas Kerrigan (Kerrigan), singled her out from
(Phils.), Inc. is not allowed to recover against among all the passengers in the business class section
respondents DMT Corporation, Advatech Industries, to lecture on plane safety. Allegedly, Kerrigan made
her appear to the other passengers to be ignorant,
Inc., LEP International Philippines, Inc., LEP Profit uneducated, stupid, and in need of lecturing on the
safety rules and regulations of the plane. Affronted,
International, Inc., Marina Port Services, Inc. and
petitioner assured Kerrigan that she knew the planes
Serbros Carrier Corporation. safety regulations being a frequent traveler.
Thereupon, Kerrigan allegedly thrust his face a mere
few centimeters away from that of the petitioner and
With respect to G.R. 174241, the Court menacingly told her that "We dont like your
attitude."
GRANTS the petition and REVERSES and SETS
Upon arrival in Rome, petitioner complained to
ASIDE the Court of Appeals Amended Decision of respondents ground manager and demanded an
apology. However, the latter declared that the flight
August 17, 2006. The Court DIRECTS Seaboard- stewards were "only doing their job."
Eastern Insurance Company, Inc. to pay petitioner Thus, petitioner filed the complaint for damages,
praying that respondent be ordered to pay P5 million
New World International Development (Phils.), Inc. as moral damages, P2 million as nominal damages,
US$721,500.00 under Policy MA-HO-000266, with P1 million as exemplary damages, P300,000.00 as
attorneys fees, P200,000.00 as litigation expenses,
24% interest per annum for the duration of delay in and cost of the suit.
accordance with Sections 243 and 244 of the On May 16, 2005, summons, together with a copy of
the complaint, was served on the respondent through
Insurance Code and attorneys fees equivalent to 10% Violeta Echevarria, General Manager of Euro-
of the insurance proceeds. Seaboard shall also pay, Philippine Airline Services, Inc.3
Page 40 of 44
On May 30, 2005, respondent, by way of special effected through proper denunciation as enunciated in
appearance through counsel, filed a Motion to the Santos case (ibid). Since the Philippines is not the
Dismiss4 on grounds of lack of jurisdiction over the place of domicile of the defendant nor is it the
case and over the person of the respondent. principal place of business, our courts are thus
Respondent alleged that only the courts of London, divested of jurisdiction over cases for damages.
United Kingdom or Rome, Italy, have jurisdiction Neither was plaintiffs ticket issued in this country
over the complaint for damages pursuant to the nor was her destination Manila but Rome in Italy. It
Warsaw Convention,5 Article 28(1) of which bears stressing however, that referral to the court of
provides: proper jurisdiction does not constitute constructive
An action for damages must be brought at the option denial of plaintiffs right to have access to our courts
of the plaintiff, either before the court of domicile of since the Warsaw Convention itself provided for
the carrier or his principal place of business, or where jurisdiction over cases arising from international
he has a place of business through which the contract transportation. Said treaty stipulations must be
has been made, or before the court of the place of complied with in good faith following the time
destination. honored principle of pacta sunt servanda.
Thus, since a) respondent is domiciled in London; b) The resolution of the propriety of service of
respondents principal place of business is in London; summons is rendered moot by the Courts want of
c) petitioner bought her ticket in Italy (through jurisdiction over the instant case.
Jeepney Travel S.A.S, in Rome);6 and d) Rome, Italy WHEREFORE, premises considered, the present
is petitioners place of destination, then it follows that Motion to Dismiss is hereby GRANTED and this
the complaint should only be filed in the proper case is hereby ordered DISMISSED.
courts of London, United Kingdom or Rome, Italy. Petitioner filed a Motion for Reconsideration but the
Likewise, it was alleged that the case must be motion was denied in an Order11 dated January 4,
dismissed for lack of jurisdiction over the person of 2006.
the respondent because the summons was erroneously Petitioner now comes directly before us on a Petition
served on Euro-Philippine Airline Services, Inc. for Review on Certiorari on pure questions of law,
which is not its resident agent in the Philippines. raising the following issues:
On June 3, 2005, the trial court issued an Order Issues
requiring herein petitioner to file her I. WHETHER X X X PHILIPPINE COURTs HAVE
Comment/Opposition on the Motion to Dismiss JURISDICTION OVER A TORTIOUS CONDUCT
within 10 days from notice thereof, and for COMMITTED AGAINST A FILIPINO CITIZEN
respondent to file a Reply thereon.7 Instead of filing a AND RESIDENT BY AIRLINE PERSONNEL OF A
Comment/Opposition, petitioner filed on June 27, FOREIGN CARRIER TRAVELLING BEYOND
2005, an Urgent Ex-Parte Motion to Admit Formal THE TERRITORIAL LIMIT OF ANY FOREIGN
Amendment to the Complaint and Issuance of Alias COUNTRY; AND THUS IS OUTSIDE THE AMBIT
Summons.8 Petitioner alleged that upon verification OF THE WARSAW CONVENTION.
with the Securities and Exchange Commission, she II. WHETHER x x x RESPONDENT AIR CARRIER
found out that the resident agent of respondent in the OF PASSENGERS, IN FILING ITS MOTION TO
Philippines is Alonzo Q. Ancheta. Subsequently, on DISMISS BASED ON LACK OF JURISDICTION
September 9, 2005, petitioner filed a Motion to OVER THE SUBJECT MATTER OF THE CASE
Resolve Pending Incident and Opposition to Motion AND OVER ITS PERSON MAY BE DEEMED AS
to Dismiss.9 HAVING IN FACT AND IN LAW SUBMITTED
Ruling of the Regional Trial Court ITSELF TO THE JURISDICTION OF THE LOWER
On October 14, 2005, the RTC of Makati City, COURT, ESPECIALLY SO, WHEN THE VERY
Branch 132, issued an Order10 granting respondents LAWYER ARGUING FOR IT IS HIMSELF THE
Motion to Dismiss. It ruled that: RESIDENT AGENT OF THE CARRIER.
The Court sympathizes with the alleged ill-treatment Petitioners Arguments
suffered by the plaintiff. However, our Courts have to Petitioner argues that her cause of action arose not
apply the principles of international law, and are from the contract of carriage, but from the tortious
bound by treaty stipulations entered into by the conduct committed by airline personnel of respondent
Philippines which form part of the law of the land. in violation of the provisions of the Civil Code on
One of this is the Warsaw Convention. Being a Human Relations. Since her cause of action was not
signatory thereto, the Philippines adheres to its predicated on the contract of carriage, petitioner
stipulations and is bound by its provisions including asserts that she has the option to pursue this case in
the place where actions involving damages to this jurisdiction pursuant to Philippine laws.
plaintiff is to be instituted, as provided for under Respondents Arguments
Article 28(1) thereof. The Court finds no justifiable In contrast, respondent maintains that petitioners
reason to deviate from the indicated limitations as it claim for damages fell within the ambit of Article
will only run counter to the provisions of the Warsaw 28(1) of the Warsaw Convention. As such, the same
Convention. Said adherence is in consonance with the can only be filed before the courts of London, United
comity of nations and deviation from it can only be Kingdom or Rome, Italy.
Page 41 of 44
Our Ruling which subsequently adhered to it.14
The petition is without merit. In the case at bench, petitioners place of departure
The Warsaw Convention has the force and effect of was London, United Kingdom while her place of
law in this country. destination was Rome, Italy.15 Both the United
It is settled that the Warsaw Convention has the force Kingdom16 and Italy17 signed and ratified the Warsaw
and effect of law in this country. In Santos III v. Convention. As such, the transport of the petitioner is
Northwest Orient Airlines,12 we held that: deemed to be an "international carriage" within the
The Republic of the Philippines is a party to the contemplation of the Warsaw Convention.
Convention for the Unification of Certain Rules Since the Warsaw Convention applies in the instant
Relating to International Transportation by Air, case, then the jurisdiction over the subject matter of
otherwise known as the Warsaw Convention. It took the action is governed by the provisions of the
effect on February 13, 1933. The Convention was Warsaw Convention.
concurred in by the Senate, through its Resolution Under Article 28(1) of the Warsaw Convention, the
No. 19, on May 16, 1950. The Philippine instrument plaintiff may bring the action for damages before
of accession was signed by President Elpidio Quirino 1. the court where the carrier is domiciled;
on October 13, 1950, and was deposited with the 2. the court where the carrier has its principal place of
Polish government on November 9, 1950. The business;
Convention became applicable to the Philippines on 3. the court where the carrier has an establishment by
February 9, 1951. On September 23, 1955, President which the contract has been made; or
Ramon Magsaysay issued Proclamation No. 201, 4. the court of the place of destination.
declaring our formal adherence thereto, "to the end In this case, it is not disputed that respondent is a
that the same and every article and clause thereof British corporation domiciled in London, United
may be observed and fulfilled in good faith by the Kingdom with London as its principal place of
Republic of the Philippines and the citizens thereof." business. Hence, under the first and second
The Convention is thus a treaty commitment jurisdictional rules, the petitioner may bring her case
voluntarily assumed by the Philippine government before the courts of London in the United Kingdom.
and, as such, has the force and effect of law in this In the passenger ticket and baggage check presented
country.13 by both the petitioner and respondent, it appears that
The Warsaw Convention applies because the air the ticket was issued in Rome, Italy. Consequently,
travel, where the alleged tortious conduct occurred, under the third jurisdictional rule, the petitioner has
was between the United Kingdom and Italy, which the option to bring her case before the courts of Rome
are both signatories to the Warsaw Convention. in Italy. Finally, both the petitioner and respondent
Article 1 of the Warsaw Convention provides: aver that the place of destination is Rome, Italy,
1. This Convention applies to all international which is properly designated given the routing
carriage of persons, luggage or goods performed by presented in the said passenger ticket and baggage
aircraft for reward. It applies equally to gratuitous check. Accordingly, petitioner may bring her action
carriage by aircraft performed by an air transport before the courts of Rome, Italy. We thus find that the
undertaking. RTC of Makati correctly ruled that it does not have
2. For the purposes of this Convention the expression jurisdiction over the case filed by the petitioner.
"international carriage" means any carriage in which, Santos III v. Northwest Orient Airlines18 applies in
according to the contract made by the parties, the this case.
place of departure and the place of destination, Petitioner contends that Santos III v. Northwest
whether or not there be a break in the carriage or a Orient Airlines19 cited by the trial court is
transhipment, are situated either within the territories inapplicable to the present controversy since the facts
of two High Contracting Parties, or within the thereof are not similar with the instant case.
territory of a single High Contracting Party, if there is We are not persuaded.
an agreed stopping place within a territory subject to In Santos III v. Northwest Orient Airlines,20 Augusto
the sovereignty, suzerainty, mandate or authority of Santos III, a resident of the Philippines, purchased a
another Power, even though that Power is not a party ticket from Northwest Orient Airlines in San
to this Convention. A carriage without such an agreed Francisco, for transport between San Francisco and
stopping place between territories subject to the Manila via Tokyo and back to San Francisco. He was
sovereignty, suzerainty, mandate or authority of the wait-listed in the Tokyo to Manila segment of his
same High Contracting Party is not deemed to be ticket, despite his prior reservation. Contending that
international for the purposes of this Convention. Northwest Orient Airlines acted in bad faith and
(Emphasis supplied) discriminated against him when it canceled his
Thus, when the place of departure and the place of confirmed reservation and gave his seat to someone
destination in a contract of carriage are situated who had no better right to it, Augusto Santos III sued
within the territories of two High Contracting Parties, the carrier for damages before the RTC. Northwest
said carriage is deemed an "international carriage". Orient Airlines moved to dismiss the complaint on
The High Contracting Parties referred to herein were ground of lack of jurisdiction citing Article 28(1) of
the signatories to the Warsaw Convention and those the Warsaw Convention. The trial court granted the
Page 42 of 44
motion which ruling was affirmed by the Court of Petitioner contends that in Santos III v. Northwest
Appeals. When the case was brought before us, we Orient Airlines,33 the cause of action was based on a
denied the petition holding that under Article 28(1) of breach of contract while her cause of action arose
the Warsaw Convention, Augusto Santos III must from the tortious conduct of the airline personnel and
prosecute his claim in the United States, that place violation of the Civil Code provisions on Human
being the (1) domicile of the Northwest Orient Relations.34 In addition, she claims that our
Airlines; (2) principal office of the carrier; (3) place pronouncement in Santos III v. Northwest Orient
where contract had been made (San Francisco); and Airlines35 that "the allegation of willful misconduct
(4) place of destination (San Francisco).21 resulting in a tort is insufficient to exclude the case
We further held that Article 28(1) of the Warsaw from the comprehension of the Warsaw Convention,"
Convention is jurisdictional in character. Thus: is more of an obiter dictum rather than the ratio
A number of reasons tends to support the decidendi.36 She maintains that the fact that said acts
characterization of Article 28(1) as a jurisdiction and occurred aboard a plane is merely incidental, if not
not a venue provision. First, the wording of Article irrelevant.37
32, which indicates the places where the action for We disagree with the position taken by the petitioner.
damages "must" be brought, underscores the Black defines obiter dictum as "an opinion entirely
mandatory nature of Article 28(1). Second, this unnecessary for the decision of the case" and thus
characterization is consistent with one of the "are not binding as precedent."38 In Santos III v.
objectives of the Convention, which is to "regulate in Northwest Orient Airlines,39 Augusto Santos III
a uniform manner the conditions of international categorically put in issue the applicability of Article
transportation by air." Third, the Convention does not 28(1) of the Warsaw Convention if the action is based
contain any provision prescribing rules of jurisdiction on tort.
other than Article 28(1), which means that the phrase In the said case, we held that the allegation of willful
"rules as to jurisdiction" used in Article 32 must refer misconduct resulting in a tort is insufficient to
only to Article 28(1). In fact, the last sentence of exclude the case from the realm of the Warsaw
Article 32 specifically deals with the exclusive Convention. In fact, our ruling that a cause of action
enumeration in Article 28(1) as "jurisdictions," based on tort did not bring the case outside the sphere
which, as such, cannot be left to the will of the parties of the Warsaw Convention was our ratio decidendi in
regardless of the time when the damage occurred. disposing of the specific issue presented by Augusto
xxxx Santos III. Clearly, the contention of the herein
In other words, where the matter is governed by the petitioner that the said ruling is an obiter dictum is
Warsaw Convention, jurisdiction takes on a dual without basis.
concept. Jurisdiction in the international sense must Relevant to this particular issue is the case of Carey
be established in accordance with Article 28(1) of the v. United Airlines,40 where the passenger filed an
Warsaw Convention, following which the jurisdiction action against the airline arising from an incident
of a particular court must be established pursuant to involving the former and the airlines flight attendant
the applicable domestic law. Only after the question during an international flight resulting to a heated
of which court has jurisdiction is determined will the exchange which included insults and profanity. The
issue of venue be taken up. This second question United States Court of Appeals (9th Circuit) held that
shall be governed by the law of the court to which the the "passenger's action against the airline carrier
case is submitted.22 arising from alleged confrontational incident between
Contrary to the contention of petitioner, Santos III v. passenger and flight attendant on international flight
Northwest Orient Airlines23 is analogous to the instant was governed exclusively by the Warsaw
case because (1) the domicile of respondent is Convention, even though the incident allegedly
London, United Kingdom;24 (2) the principal office of involved intentional misconduct by the flight
respondent airline is likewise in London, United attendant."41
Kingdom;25 (3) the ticket was purchased in Rome, In Bloom v. Alaska Airlines,42 the passenger brought
Italy;26 and (4) the place of destination is Rome, nine causes of action against the airline in the state
Italy.27 In addition, petitioner based her complaint on court, arising from a confrontation with the flight
Article 217628 of the Civil Code on quasi-delict and attendant during an international flight to Mexico.
Articles 1929 and 2130 of the Civil Code on Human The United States Court of Appeals (9th Circuit) held
Relations. In Santos III v. Northwest Orient that the "Warsaw Convention governs actions arising
Airlines,31 Augusto Santos III similarly posited that from international air travel and provides the
Article 28 (1) of the Warsaw Convention did not exclusive remedy for conduct which falls within its
apply if the action is based on tort. Hence, contrary to provisions." It further held that the said Convention
the contention of the petitioner, the factual setting of "created no exception for an injury suffered as a
Santos III v. Northwest Orient Airlines32 and the result of intentional conduct" 43 which in that case
instant case are parallel on the material points. involved a claim for intentional infliction of
Tortious conduct as ground for the petitioners emotional distress.
complaint is within the purview of the Warsaw It is thus settled that allegations of tortious conduct
Convention. committed against an airline passenger during the
Page 43 of 44
course of the international carriage do not bring the (b) motion for partial reconsideration.
case outside the ambit of the Warsaw Convention. The foregoing pleadings, particularly the motions to
Respondent, in seeking remedies from the trial court dismiss, were filed by petitioner solely for special
through special appearance of counsel, is not deemed appearance with the purpose of challenging the
to have voluntarily submitted itself to the jurisdiction jurisdiction of the SB over her person and that of her
of the trial court. three children. Petitioner asserts therein that SB did
Petitioner argues that respondent has effectively not acquire jurisdiction over her person and of her
submitted itself to the jurisdiction of the trial court three children for lack of valid service of summons
when the latter stated in its Comment/Opposition to through improvident substituted service of summons
the Motion for Reconsideration that "Defendant [is at in both Forfeiture I and Forfeiture II. This stance the
a loss] x x x how the plaintiff arrived at her erroneous petitioner never abandoned when she filed her
impression that it is/was Euro-Philippines Airlines motions for reconsideration, even with a prayer to
Services, Inc. that has been making a special admit their attached Answer Ex Abundante Ad
appearance since x x x British Airways x x x has been Cautelam dated January 22, 2005 setting forth
clearly specifying in all the pleadings that it has filed affirmative defenses with a claim for damages. And
with this Honorable Court that it is the one making a the other subsequent pleadings, likewise, did not
special appearance."44 abandon her stance and defense of lack of jurisdiction
In refuting the contention of petitioner, respondent due to improper substituted services of summons in
cited La Naval Drug Corporation v. Court of the forfeiture cases. Evidently, from the foregoing
Appeals45 where we held that even if a party Sec. 20, Rule 14 of the 1997 Revised Rules on Civil
"challenges the jurisdiction of the court over his Procedure, petitioner and her sons did not voluntarily
person, as by reason of absence or defective service appear before the SB constitutive of or equivalent to
of summons, and he also invokes other grounds for service of summons.
the dismissal of the action under Rule 16, he is not Moreover, the leading La Naval Drug Corp. v. Court
deemed to be in estoppel or to have waived his of Appeals applies to the instant case. Said case
objection to the jurisdiction over his person."46 elucidates the current view in our jurisdiction that a
This issue has been squarely passed upon in the special appearance before the courtchallenging its
recent case of Garcia v. Sandiganbayan,47 where we jurisdiction over the person through a motion to
reiterated our ruling in La Naval Drug Corporation v. dismiss even if the movant invokes other groundsis
Court of Appeals48 and elucidated thus: not tantamount to estoppel or a waiver by the movant
Special Appearance to Question a Courts Jurisdiction of his objection to jurisdiction over his person; and
Is Not such is not constitutive of a voluntary submission to
Voluntary Appearance the jurisdiction of the court.1avvphi1
The second sentence of Sec. 20, Rule 14 of the Thus, it cannot be said that petitioner and her three
Revised Rules of Civil Procedure clearly provides: children voluntarily appeared before the SB to cure
Sec. 20. Voluntary appearance. The defendants the defective substituted services of summons. They
voluntary appearance in the action shall be equivalent are, therefore, not estopped from questioning the
to service of summons. The inclusion in a motion to jurisdiction of the SB over their persons nor are they
dismiss of other grounds aside from lack of deemed to have waived such defense of lack of
jurisdiction over the person of the defendant shall not jurisdiction. Consequently, there being no valid
be deemed a voluntary appearance. substituted services of summons made, the SB did
Thus, a defendant who files a motion to dismiss, not acquire jurisdiction over the persons of petitioner
assailing the jurisdiction of the court over his person, and her children. And perforce, the proceedings in the
together with other grounds raised therein, is not subject forfeiture cases, insofar as petitioner and her
deemed to have appeared voluntarily before the court. three children are concerned, are null and void for
What the rule on voluntary appearance the first lack of jurisdiction. (Emphasis supplied)
sentence of the above-quoted rule means is that the In this case, the special appearance of the counsel of
voluntary appearance of the defendant in court is respondent in filing the Motion to Dismiss and other
without qualification, in which case he is deemed to pleadings before the trial court cannot be deemed to
have waived his defense of lack of jurisdiction over be voluntary submission to the jurisdiction of the said
his person due to improper service of summons. trial court. We hence disagree with the contention of
The pleadings filed by petitioner in the subject the petitioner and rule that there was no voluntary
forfeiture cases, however, do not show that she appearance before the trial court that could constitute
voluntarily appeared without qualification. Petitioner estoppel or a waiver of respondents objection to
filed the following pleadings in Forfeiture I: (a) jurisdiction over its person.
motion to dismiss; (b) motion for reconsideration WHEREFORE, the petition is DENIED. The October
and/or to admit answer; (c) second motion for 14, 2005 Order of the Regional Trial Court of Makati
reconsideration; (d) motion to consolidate forfeiture City, Branch 132, dismissing the complaint for lack
case with plunder case; and (e) motion to dismiss of jurisdiction, is AFFIRMED.
and/or to quash Forfeiture I. And in Forfeiture II: (a) SO ORDERED.
motion to dismiss and/or to quash Forfeiture II; and
Page 44 of 44